14.2 Economic impacts on source and destination countries

Migration profoundly impacts economies worldwide. For source countries, it can lead to brain drain and labor shortages, but also brings remittances and potential skill transfers. Destination countries often benefit from increased labor supply and innovation.

Immigrants contribute to economic growth by filling job gaps and stimulating demand. While there may be short-term wage pressures, long-term impacts are generally positive. Immigrants also pay taxes, potentially offsetting public service costs and supporting aging populations.

Economic Impacts of Migration on Source and Destination Countries

Economic impacts of immigration

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• Increased labor supply helps address labor shortages in specific sectors (healthcare, technology) and promotes economic growth by filling essential jobs
• Skill complementarity occurs when immigrants possess skills that complement the native workforce leading to increased productivity and innovation
• Increased domestic demand as immigrants consume goods and services, stimulating economic activity
• Potential short-term wage suppression due to increased labor supply may put downward pressure on wages, particularly for low-skilled workers, but effect is usually small and diminishes over time as the economy adjusts
• Possible short-term displacement of native workers as some may face increased competition for jobs, but research suggests that the long-term impact on employment is minimal
• Increased demand for public services (education, healthcare) as immigrants may require access, but cost is often offset by immigrants' tax contributions and economic participation

Emigration effects on source countries

• Reduced labor supply leads to a decrease in the available workforce resulting in labor shortages in certain sectors and can put upward pressure on wages in the short-term
• Brain drain occurs with the emigration of highly skilled and educated workers leading to a loss of human capital and expertise in source countries and may hinder innovation and economic development
• Remittances sent by emigrants back to their home countries provides a source of income for families, stimulates economic activity, helps alleviate poverty and supports local economies
• Potential for skill acquisition and knowledge transfer as emigrants may acquire new skills and knowledge abroad, bring these back to their home countries contributing to economic development, and may also facilitate trade and investment through their international networks

Fiscal contributions of immigrants

• Immigrants pay various taxes (income tax, sales tax, property tax) contributing to government revenue and helping fund public services with studies suggesting immigrants often have a net positive fiscal impact over their lifetime
• Use of public services by immigrants (education, healthcare) can be a significant cost in the short-term, but long-term fiscal impact depends on immigrants' economic integration and success
• Many immigrants arrive at working age tending to contribute more in taxes than they consume in public services and can help support aging populations in destination countries
• Highly skilled immigrants tend to have higher incomes, pay more in taxes, and often have a more positive fiscal impact compared to low-skilled immigrants emphasizing the importance of policies that promote economic integration and success

Immigrants and labor market needs

• Immigrants fill gaps in the labor market, particularly in sectors with high demand (healthcare, technology, agriculture), helping maintain economic growth and competitiveness
• Immigrants bring diverse perspectives and ideas stimulating creativity, leading to new innovations with studies showing immigrants are more likely to start businesses and file patents
• Countries that welcome skilled immigrants benefit from their expertise helping create a vibrant and innovative economy
• Immigrants often have skills that complement those of native workers leading to increased productivity, economic growth, and promoting the efficient allocation of labor and resources
• Immigrants help mitigate the economic impact of demographic shifts in many developed countries facing aging populations and shrinking workforces by providing a source of younger workers to support social security systems and maintain economic dynamism