3.4.3.2 The Economic Impact of Job Losses and Emigration

(This is a current page, from the Patterns of Power Edition 3 book contents.  An archived copy of this page is held at http://www.patternsofpower.org/edition03/3432.htm)

In some places, the local economy is unable to provide sufficient jobs for the population, as described in the previous sub-section (3.4.3.1).  People may wish to migrate to a place where they can find jobs, but their emigration has adverse economic consequences for the region that they are leaving:

  • Other businesses in the area will thereby lose customers, and this may further increase the job losses.
  • Governments lose tax revenue when jobs are lost. They receive less tax from businesses and from their employees.  This can have a detrimental impact on public services and/or result in higher taxes elsewhere in the economy.
  • There might be an associated dip in property prices, due to reduced demand for housing. A reduction in property prices is beneficial for first-time buyers, but it has a dampening effect on the economy as a whole: it reduces people’s wealth, their ability to borrow more money and hence their appetite for consumer spending.
  • People of working age may have scarce skills. If they leave a country in search of a better life they take their skills with them.
  • A country’s economic capacity is reduced if it loses people of working age. This might not be a serious problem however, if it is unable to employ them gainfully.

For some poorer economies, though, there is a positive aspect to emigration: money sent back home by migrants can be beneficial, as described for example in a paper entitled The Macroeconomic Impact of Remittances In The Philippines.  And those who leave may benefit the region they go to – as described in the next sub-section (3.4.3.3).

If people choose to stay in an area despite a shortage of work, perhaps for family reasons, they may become a drag on the economy: requiring unemployment benefits for example.  If globalisation has caused job losses in a particular area (3.4.2), it may also have made the country as a whole wealthier and more able to pay for the unemployment benefits.

Unemployment is also a political problem, causing dissatisfaction with the government, so politicians sometimes resort to tactical economic interventions (3.3.7.1) to protect local businesses and avoid job losses – even though this may harm the economy as a whole.  As discussed later, though, some kind of political response is essential (6.7.8).

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