3.4.3.2 The Economic Impact of Job Losses and Emigration
Job losses and emigration cause an economy to shrink and can destabilise it; this is a challenge which needs careful management.
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).
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/3432.htm.