Urban migration is a powerful force in the economic landscape of Latin America and the Caribbean. As we highlight in “Rethinking Urban Migration,” urban migrants play an important role in the economic vitality of the cities they move to, contributing productive labor, creating jobs, paying taxes, and stimulating local economic growth.
For that reason, understanding how migrants perform in urban labor markets and how their presence influences the economic fortunes of non-migrants is crucial to fully grasping the economic implications of urban migration. Moreover, by identifying which types of migrants integrate most successfully, policymakers can uncover opportunities to further stimulate local economies through more effective migrant integration.
Urban Migrants Actively Contribute to Local Economies
Our research shows that migrants, on average, tend to perform well in the labor markets of their destination cities. As illustrated in Figure 1, which uses data from nearly 500 cities in Brazil and Mexico, migrants are more likely to be employed in the formal sector and to earn higher wages—as indicated by the data points above the 45° line. This success can be attributed, in part, to the higher average educational attainment of urban migrants relative to the residents in their host cities. And while many receiving communities understandably worry that migrants’ economic integration may come at the expense of lower job opportunities and wage growth for residents, a large number of studies shows that this is generally not the case. Migration into cities on average tends to have small or non-existent economic effects on the economic outcomes of local people.
Figure 1. Labor Market Outcomes in Brazilian and Mexican Cities by Migratory Status
Notes: Each point in the figure represents an urban area of at least 300,000 people, of which there are 330 in Brazil and 161 in Mexico. The 45-degree line shows the points at which the value for migrants would be the same as it is for residents.
Despite this good news, many of the potential contributions that urban migrants can make to the economy of their destination cities appear to still go unrealized. Figure 1 also reveals that migrants tend to have higher rates of labor force participation than local residents — meaning they are either employed or actively looking for work. At the same time, migrants have similar levels of actual employment as residents. This means that while more of them actively seek work, not all are successful in getting jobs. Female migrants and those displaced by violence or extreme weather events, for example, often experience worse outcomes in the labor market. This creates opportunities for public policy to help local economies capitalize on the migration dividend.
Unlocking the Still Unrealized Dividends of Urban Migration
Well-designed public policies, including public employment services, can facilitate migrants’ search for jobs, helping to compensate for their lack of local networks or connections. Public employment services, like job fairs, job placement assistance, and other efforts to supply labor market information can help to improve employment outcomes, especially in the short run. Certification, validation, accreditation, and skill development services may also play an important role while ensuring that employers get a workforce tailored to their needs. In Sweden, for example, a fast-track system for placing migrants in sectors with significant skill gaps and offering incentives, like wage subsidies and training bonuses, has proved an innovative and effective way of speeding migrants productively into the labor market.
The economic integration of female migrants, in turn, would greatly benefit from childcare assistance. In line with traditional gender roles, women often have the primary responsibility for care in their families, and they often lack the network of extended family members, like grandmothers, to help look after their children while they are at work. Public policy can make a key contribution in this regard by offering affordable public daycare or subsidies for private daycare. Providing public transportation to daycare centers or schools can similarly promote gender equality and help bring migrant women into the workforce.
International migrants have their own set of challenges, especially those who crossed the border illegally, entered the country legally but without work authorization, or overstayed the duration of their visas or work permits. In such cases, programs to regularize migrants’ residency status and certify their professional credentials can unlock their potential contribution to their new local economies. In August 2018, for example, the Colombian government offered amnesty and work permits to about 500,000 undocumented Venezuelan migrants, boosting their economic integration with minimal effects on the formal employment of Colombian natives, and no impact on their wages, hours worked, or labor force participation.
Spreading the Benefits Widely
While urban migration tends on average to have minimal or zero effects on local residents’ labor situation, it is important to note that certain sectors of the local population can be negatively impacted, especially less educated and informal workers, and, in particular, women in those groups. Many of the same policies that would help with the integration of migrants to the local economy are also important for vulnerable residents. They can help ensure that the overall positive contribution of urban migration in terms of innovation, growth and overall dynamism is inclusive and widely shared.
