Venezuelan migrants are boosting economic growth in South America, says research :: InvestMacro

By Jose Caballero, International Institute for Management Development (IMD) 

Venezuela is engulfed in a political and economic crisis, which has forced over 6 million people – some 20% of the population – to flee the country since 2015. The mass exodus began when Venezuela’s economy collapsed, giving rise to rampant inflation, political turmoil and pervasive violence.

Over 80% of those who have left Venezuela have set up a new life in 17 countries across Latin America and the Caribbean. According to a recent report, these displaced migrants are having a positive effect on the economies of their host countries.

Between 2017 and 2030, migrant workers will boost the economies of their host countries by 0.10%–0.25% on average each year. The report, which was published by several leading international financial institutions and the UN Agency for Refugees, focuses on Venezuelan migrants but also covers Cubans and Salvadorans, among others.

The economic impact of migrants in Latin America is significant. But their integration into local job markets and society is poor. The economic benefits derived from migrants across Latin America could be even greater if they are given better access to jobs.

Boosting economic growth

Migration has clear economic benefits for local economies. It leads to an expansion of the workforce, thereby alleviating labour shortages and enhancing economic output.

Migrants bring a diverse range of skills and specialised knowledge to their host countries, which can improve the overall skill level of the local workforce. Their productive capabilities bridge skill gaps in local labour markets and heighten overall productivity.

Most migrant workers will also pay income tax, which increases government revenues. In Colombia, for instance, the income tax contribution of Venezuelan migrants in 2019 was approximately US$38.7 million (£30.1 million), equivalent to 0.01% of Colombia’s GDP.

And when migrants gain employment, they will spend their wages in the host country and create new demand in various other sectors. Greater demand leads to higher growth, which in turn attracts more investment and increases employment opportunities both for local people and migrants.

Underemployed

However, xenophobia and discrimination prevent many migrants from finding jobs in Latin America and integrating into society. According to the report, roughly 30% of the migrants residing in Chile, Colombia and Peru experience discrimination because of their nationality.

Thus, many migrants are forced to take jobs within the informal sector. Over 50% of migrants in Latin America work informally compared to 44.5% of locals.

Migrant workers also often earn lower wages than their local counterparts. In Colombia, the average monthly salary of locals with post-secondary school education is US$1,140. Venezuelan migrants with the same level of education earn just US$644 per month.

Despite this, immigrants still outperform the native-born population in their labour force participation and employment rates. Yet many of the migrants who are in formal employment are overqualified for their roles. In Chile, for instance, 34% of highly educated locals are overqualified for their jobs, compared to over 60% of migrants.

Migrants are often mistakenly assumed to be exclusively low-skilled workers. But the Venezuelan migrant crisis has seen many highly skilled people flee the country too. For example, 65% of the Venezuelans living in Chile and 48% residing in Ecuador have post-secondary school education.

However, most Venezuelans have not officially validated their academic credentials in their host countries. In fact, only 10% of those residing in Chile have completed the certification process.

Many migrants are unaware of the process so lack sufficient documentation about their qualifications. And the complexity of the process also demands investment that many migrants may not have the resources to cover.

To further enhance productivity in Latin America, it is essential to integrate migrant workers into professions that allow them to use their skills.

Access to services

Several other factors hinder the integration of migrants into society across Latin America. The report indicates that migrant workers have significantly lower access to health insurance relative to the native-born population. In Colombia, for example, 96% of local workers have access to health insurance, compared to just 40% of migrants.

Similarly, there are often barriers limiting access to education for migrants. Foreign-born residents and their family members have the right to access public primary and secondary education in the majority of South American countries. But school attendance rates are lower among displaced children than among native children, while the propensity for dropping out of school early appears to be significantly higher among migrant children.

Some people argue that immigration comes with costs, such as the perceived notion that migrants deprive locals of jobs. Nevertheless, the contribution of migrants to Latin American economies underscores the potential benefits. Improving their access to labour markets is thus a crucial tool for fostering long-term growth in Latin American economies.

About the Author:

Jose Caballero, Senior Economist, IMD World Competitiveness Center, International Institute for Management Development (IMD)

This article is republished from The Conversation under a Creative Commons license. Read the original article.