Immigration is not just about commerce

Policies that place a strong emphasis on integration and avoid previous mistakes associated with asylum-seekers are crucial, writes Robert Watt

The recent slowdown in economic growth has led to a re-appraisal of policy in a number of areas. This is particularly evident in relation to public finances. The era of large surpluses, tax cuts and significant improvements in public services is over.

As the opening shots of the election campaign reveal, real choices are being debated. Normal politics has resumed.

This pause in economic growth also provides an opportunity to re-examine the wider goals of economic policy.

For most of the history of the State, maximising employment was the central aim. Addressing unemployment and involuntary emigration were constant goals. While the approaches changed dramatically, the overall objectives remained unchanged.

The dramatic turnaround in the labour market alters this perspective. Unemployment is down to unprecedented levels and, despite the economic shock of the last year, remains below 5 per cent. Emigration has been reversed and has been replaced by significant net immigration.

It could be argued that policy was slow to respond to these changes. Rapid growth relative to available capacity led to emerging labour shortages and growing price pressures. But maximising economic growth remained the central goal of policy.

Tax cuts were introduced in successive budgets to increase the supply of labour and support growth.

Policy towards immigration was motivated by similar concerns. In line with their remit, the job-creating agencies, IDA and Enterprise Ireland, were generating employment in the Republic, while other agencies of the State were travelling abroad to find people to fill these jobs.

In essence, there was not enough debate about the appropriate goals of policy. Should we aim to maximise growth in total income/GNP or focus more on raising the living standards of the existing population?

These questions are crucially important for industrial policy, infrastructure planning and development, spatial planning and, of course, for future immigration policy.

In this context, the change in recent migratory flows is worth noting. The available data from the Central Statistics Office suggest there were about 46,000 new immigrants in the year to April 2001, which is similar to the inflows for each year since 1997. Indeed, the level of immigration remained fairly constant over this period of the boom.

But the composition of this is changing. Up to 1999, returning Irish emigrants and arrivals from Britain and other EU countries accounted for most of the annual inflow. In 1999, they made up about 85 per cent of the total. However, in the year to April 2001 non-EU citizens from the US and the rest of the world amounted to 15,000 or more than 30 per cent of the total inflow.

This is also reflected in the trends in the number of applicants for work permits. Under the scheme operated by the Department of Enterprise Trade and Employment, suitably qualified persons from non-European Economic Area countries can attain a permit to work in areas where labour shortages are acute.

In 1997 there were fewer less than 4,000 work permits issued but this increased to 18,000 in 2000 and 36,000 in 2001. For certain areas such as IT, construction and nursing a streamlined system operates, under which an additional 3,000 permits were issued in 2001.

In addition, the number of asylum seekers has increased from 3,800 in 1997 to 10,300 in 2001.

Contrary to the views from some quarters, as a proportion of the total labour force of 1.8 million, these numbers are insignificant. But it is clear that our attractive labour market is acting as a strong magnet for potential emigrants from less-developed regions.

Notwithstanding periods of slower economic performance, the Republic, in common with other parts of the EU, must now expect to attract inflows from other parts of the world for the foreseeable future.

How should we respond to these changed circumstances?

Firstly, immigration policy should be determined by more than economic considerations. Ethical and moral considerations need to be guiding principles. Given our history and our position as a relatively rich and prosperous country we have responsibilities.

Secondly, we need to debate the wider goals of policies that should underpin our view on immigration. We need to establish some notion of what population levels may be desirable.

We also need to establish whether the goal of economic policy is to increase our overall level of income or increase productivity or GNP per head.

Thirdly, trying to micro-manage the economic cycle through adjustments to immigration policies can lead to problems. Two years ago, in response to growing labour market shortages, a view formed that a certain level of immigration would be required to deliver the investment outlined under the National Development Plan.

Last year, at the first sign of job losses, there were calls for restrictions to be placed on the number of permits issued. Clearly, it is not possible to project the prospective supply and demand for certain occupations.

Finally, there is a limit to what each country can absorb. In the Republic's case this is not determined by space considerations as suggested by some - the population is still less than half the level of the 1840s - but by concerns about the costs and tensions that may be associated with higher immigration.

Of course, these can be reduced by policy action, particularly if new arrivals are allowed to work and contribute to society as quickly as possible. Thus, policies that place a strong emphasis on integration and avoid the previous mistakes associated with asylum-seekers are crucial. The provision of resources to facilitate this integration is also critical.

One possible approach is to consider an annual quota based on a realistic assessment of our responsibilities and needs. In the context of building our much-desired world-class infrastructure, who is going build it is as important as how it will be funded.

Robert Watt is a senior economic consultant with Indecon International Economic Consultants. The views expressed are made in a personal capacity and are not necessarily the views of Indecon.