It is my Friday Lay Day blog and it is going to be relatively quick. There was an article in the Wall Street Journal (December 23, 2015) – Economists Say ‘Bah! Humbug!’ to Christmas Presents – that says a lot about how my profession struggles to appreciate reality in all its dimensions. Every year, it…
Its my Friday lay day blog and I am catching up on things that I put to one side while I was away in Finland. But I have been doing some research on the impacts of the massive refugee flows into Northern Europe from the military conflicts in the Middle East. A more detailed analysis will appear later. The very difficult problem facing Europe, in particular, at present, and the World, in general is how to cope with the millions of people that are being displaced from their homelands by war, terrorism and/or environmental degradation. It is no easy task to deal with. The seemingly unending flow of refugees into Turkey and then greater Europe is challenging the archaic decision-making processes of the European Union. Once again it brings into relief the need for a ‘federal’ European government that can make binding decisions across the Member State space and provide fiscal backup to ensure those decisions are viable from a resource perspective. There was a Reuters report (October 15, 2015) – Refugee spending will drive our economy, Germany says – which noted that the refugee flows could underpin an economic boom in Germany, the first nation to announce it would settle large numbers of the asylum seekers. Here is part of the framework I am developing to consider this issue.
The Reuters article reports that:
The German government is banking on the refugees arriving in its cities by the thousands each day to help turbocharge its economy and offset the effects of weaker demand from China.
The German government has certainly shown a strong humanitarian bias in its decision to accept huge numbers of people from the Middle East who have arrived on its doorstep in recent months.
It has announced it will spend more than €10 billion “on accommodating the new arrivals, integrating them and finding them jobs.”
The German Economy Minister (Sigmar Gabriel) said that:
When it comes to refugees, the billions of euros we are planning to invest in education, kindergartens and schools will of course have an effect like a small stimulus package … The country’s aid in the refugee crisis was an investment in Germany’s future given its ageing population …
The German growth forecasts have been downgraded in recent months as a result of the slowdown in China. The Chinese fiscal expansion in 2009 saved that nation from the GFC and its on-going strong growth provided a safety valve for Germany (and the Eurozone in general) to divert exports to China.
The Chinese slowdown is now bringing the domestic austerity in Germany into relief. It is clear that it cannot go on suppressing domestic demand and relying on strong net exports growth to drive its overall real GDP rate.
An expansion of domestic demand in Germany, despite what the boss of the Bundesbank has said on a number of occasions, would also provide some assistance to beleagured economies such as Finland, which relies on German imports to help it grow.
The German government is now demonstrating that fiscal policy matters. It has revised its forecasts “for government spending to an increase of 2.3 per cent this year and a gain of 2 per cent next year, mainly due to higher spending for refugees.”
But what sort of impact will this refugee flow have in Germany? I will write further about this question – for Europe as a whole – in subsequent blogs but today I was reading a book I first purchased in 1979.
The book was written by Michael Piore – Birds of Passage: Migrant Labor and Industrial Societies – and was published in 1979 by Cambridge University Press.
It analysed immigration flows in terms of the dual or segmented labour market theory, which Piore had helped develop in the late 1960s and early 1970s.
He considered the impact of migration to advanced urban industrial nations from less developed rural societies.
His thesis was that in most economies there are jobs that the locals do not particularly want to do. These are secondary labour market jobs that pay poorly, are precarious and are typically boring, dangerous, dirty or in some other way, unattractive.
Firms might struggle to attract local labour and in that regard, “migration seems to be an almost perfect solution … The migrants want the jobs; national workers do not. What makes such migration a perfect solution, however, is its temporary character, and migrations of this kind virtually never remain temporary”.
But the problem facing nations who used guest workers soon discovered was neatly summarised by the Swiss author Max Frisch in his 1967 book Öffentlichkeit als Partner:
Man hat Arbeitskräfte gerufen, und es kommen Menschen (translation: We asked for workers. We got people instead).
Frisch was reflecting on the experience of guest workers in Switzerland in the development boom that followed World War 2. The employers were only interested in attaining labour and forgot that they were dealing with human aspiration.
This is particularly the case in the current situation where the refugees are unlikely to return to their place of origin.
The problem then becomes how the settled communities that evolve.
Piore’s analysis, although in the context of pull-factors (employers seeking workers) rather than push-factors (refugees fleeing unviable situations), was prescient.
He said that:
Many migrants stay longer than originally intended, develop permanent attachments, have children, or bring their families. Once permanent communities develop, the mi-grants are no longer satisfied with the jobs for whicb they were originally recruited. They instead aspire to the same kinds of employment opportunities as nationals, but there is nothing in the process that assures that there will be enough of these other employment opportunities to go around. In fact, history suggests that second-generation migrant communities bave difficulty meeting tbeir aspirations, eitber because the jobs to which they aspire are limited or because the workers are not trained to move into them.
This assessment reminded me of a report I read a few years ago which I dug up this morning from my archives. The Report – The Labour Market Integration of Immigrants in Germany – was written by Thomas Liebig and traced the fortunes of migrants in the German labour market.
[Reference: Liebig, T. (2007) ‘The Labour Market Integration of Immigrants in Germany’, OECD Social, Employment and Migration Working Papers, No. 47, OECD Publishing, Paris].
Germany has a tradition since the 1950s of large-scale net immigration. Immigration into Germany was initially concentrated on “low-skilled foreign labour” and many “of these ‘guestw orker’ immigrants settled and were joined by their foreign spouses, which has given rise to a second generation of persons with an immigrant background”.
Subsequently, (from late 1980s), “Germany received massive immigration flows of ethnic Germans from Eastern Europe”, partly due to reunification.
Data from the German federal statistics office (DeStatis) for Migration from the 1950s was used to produce this graph, which shows the annual flows of net migration and the cumulative effect of those flows.
The humanitarian flows are considerably less
The Report found that, even though these workers had “low educational attainment … the the labour market integration of immigrant men is relatively favourable in international comparison. However, immigrant women, and particularly those of Turkish origin, have very low employment rates”.
But the problems emerge when the “second generation” of these workers are considered. They children of the first generation migrants are found to have:
… very low educational outcomes. This hampers their access to vocational training, which appears to have an even stronger impact on their employment prospects than on those of natives. The low educational attainment of the second generation seems to be at least partly attributable to structural features in the German education system, such as the early streaming which puts migrants’ children in a lower track. Especially problematic is the relatively late starting age for kindergarten and the prevalence of half-day education in kindergarten and school, which limits exposure to the German language at a crucial age. Immigrants’ access to self- employment is hampered by legal obstacles and a lack of information and subsequent access to financial credits.
The Report found that when German was not spoken at home, the second-generation were more disadvantaged – “it seems that the language spoken at homehas a much stronger impact on the second generation’s educational outcomes than in other countries.”
The overall conclusion is that “the second generation does not reach the same attainment as natives, not even as those with a similar socio-economic background, contrary to what is observed in other OECD countries.”
This is consistent with Michael Piore’s conjecture in his 1979 book.
Dual Labour Market theory – or Segmented Labour Market theory which was pioneered by Piore and others provides a reasonable description of the structure of labour markets in most countries.
SLM theory argues that the labour market is segmented into two separate labour markets each with different processes for allocation and reward. These segments resist transitions from each other.
The most basic demarcation is between the Primary Labour Market (PLM) and the Secondary Labour Market (SLM). PLM workers are typically employed in a tight internal labour market structure which provides for career advancement and tend to search for jobs within the firm while already employed. The jobs are secure and relatively well-paid.
The SLM is characterised by low-paid, insecure ‘dead-end’ jobs which have high turnover rates. The jobs do not have well-defined career ladders and offer very little training for higher productivity.
While the PLM worker searches for new ways in which to climb the career ladder, the SLM worker usually searches to avoid being sacked.
Given the lack of mobility between the ‘segments’, a SLM worker will typically not make the transition into the PLM. Workers thus become ‘trapped’ in poor jobs with spells of unemployment intervening periods of low paid work.
This is especially so in Germany after the Hartz changes (I no longer call them reforms) which created the so-called Minijobs.
The Hartz process accelerated the casualisation of the labour market and the precariousness of work increased. Hartz II introduced new types of employment the ‘mini-job’ and the ‘midi-job’ and there was a sharp fall in regular employment after the introduction of the Hartz reforms.
Mini-jobs provide marginal employment (no security or entitlements) and allow worker to earn up to 450€ per month without paying taxes, while the on-costs for employers are significantly lower.
The no tax obligations also mean that the worker receives no social security protection or pension entitlements.
The official line is that during the Eurozone years, Germany underwent a ‘jobwunder’, or jobs miracle. However the speedy increase in employment from the low of 2003 was driven by the mini-job boom.
The neo-liberal apologists claim the minijobs satisfy the preferences of workers for flexible casual work. But the reality is different.
They become just another rationing device when aggregate demand is too low and lead to rising inequality and diminished investment in human capital.
A joint workshop on transitions from marginal employment in 2010, organised by the Institut Arbeit und Qualifikation (IAQ) at the Universität Duisburg-Essen and der Uni und dem Wirtschafts- und Sozialwissenschaftlichen Institut (WSI) at the Hans-Böckler-Stiftung (Hans-Böckler Foundation), found that while employers are increasingly splitting regular jobs into low-paid and insecure ‘mini-jobs’, there was no evidence of large-scale worker transition from ‘mini-jobs’ to other, more regular work.
There were more than 7 million such jobs in June 2015.
The question is how will these workers be absorbed into a labour market that has been fairly flat for a decade or so and where growth has been pronounced in this casualised segment of the labour force.
These changes tend to suggest that the dynamics that delivered the results reported in the OECD Report discussed above in relation to first-generation migrants will no longer necessarily hold.
They also suggest that the degree of alienation felt by the second-generation will increase. If all they have to look forward to is a minijob and that is not even an assured opportunity, then life will be harder than it was 20 years ago for the incoming migrants.
But I applaud the German generosity in even offering these people a state to live in. There is some security in that after all.
Music – The Heathen
This is what I have been listening to this morning while I have been working. It is from Jamaican jazz/reggae pianist – Monty Alexander – playing Bob Marley’s song – The Heathen.
The album is Harlem-Kingston Express (Live at Dizzy’s Club Coca-Cola, NYC) which was released in 2011.
Here is a 2011 NPR article about the recording – Monty Alexander: Jazz-Flavored Reggae.
One of my favourite albums in fact. But then I have a lot in that class.
My band – Pressure Drop – is playing this Sunday afternoon at the Workers’ Club, which is on the corner of Gertrude and Brunswick Streets, Fitzroy in Melbourne.
The support (Johnny Long Shot – a ska band) starts around 13:00 and Pressure Drop will play from 15:00 to 17:00.
Should be a big afternoon at this great inner Melbourne venue. Entrance is $5.
The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:
That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.