Dr Roger Ho­sein

There are sev­er­al pos­si­ble changes in an econ­o­my on ac­count of an in­flow of mi­grants.

There is a drift to­wards the non-trad­able sec­tor. Specif­i­cal­ly, any in­dus­try which us­es the im­mi­grant labour in­ten­sive­ly (ex­am­ple bars and pubs) will re­alise an in­crease in their out­put. This will draw some labour and cap­i­tal out of the non-pe­tro­le­um ex­portable sec­tor. This type of move would oc­cur nat­u­ral­ly on ac­count of mar­ket forces and is a type of mar­ket fail­ure as it has a neg­a­tive ex­ter­nal­i­ty im­pact on the cur­rent ac­count bal­ance.

Sec­ond­ly, firms will change the in­ten­si­ty of their skills to ab­sorb the Venezue­lan im­mi­grants. Un­for­tu­nate­ly, be­cause of the lan­guage bar­ri­er, many of these im­mi­grants will fall in­to the clas­si­fi­ca­tion of un­skilled work­ers. In such a con­text, firms tend to adapt by us­ing more un­skilled labour and per­haps even chang­ing the mode of pro­duc­tion to a more labour in­ten­sive for­mat. This can com­pro­mise learn­ing by do­ing.

To sup­port this, ref­er­ence is made to the work of Gio­van­ni Peri (2012) in The Ef­fect of Im­mi­gra­tion on Pro­duc­tiv­i­ty: Ev­i­dence from the USA.

Peri found that the im­mi­grants pro­mot­ed the adop­tion of un­skilled-ef­fi­cient tech­nolo­gies. In an­oth­er re­search ef­fort, Gon­salez and Or­te­ga (2009) in How Do Very Open Economies Ad­just to Large Im­mi­gra­tion Flows: Re­cent Ev­i­dence from Span­ish Re­gions stud­ied the labour mar­ket ef­fects of a large in­flow of im­mi­grants in­to Spain be­tween 2001 and 2006.

This study found that the growth of un­skilled labour led to a change of skill in­ten­si­ty at the in­dus­try lev­el.

The key in­dus­tries ab­sorb­ing the un­skilled labour were re­tail, con­struc­tion, ho­tels and restau­rants, and do­mes­tic ser­vices. This is al­so sim­i­lar to the find­ing of Ethan Lewis (2009) who in Lo­cal Open Economies with­in the US: How do In­dus­tries re­spond to im­mi­gra­tion found that cities in the USA which re­ceived more of a par­tic­u­lar type of labour in­creased their rel­a­tive em­ploy­ment of that type of labour in the av­er­age in­dus­try by 80 per cent as much as the city-wide sup­ply in­crease.

It is very pos­si­ble that mi­grant work­ers can be will­ing to ac­cept a low­er wage rate than na­tion­als in or­der to be able to ob­tain em­ploy­ment and this is re­flect­ed in the di­a­gram.

The fall in wages from W0 to W1 and the rise in em­ploy­ment from L0 to L1 as­so­ci­at­ed with an in­flow of mi­grants is key as it in­creas­es the re­turn to cap­i­tal and gen­er­ates an im­mi­grant sur­plus.

In this re­gard by im­prov­ing the re­turn to cap­i­tal, im­mi­gra­tion pro­vides an in­cen­tive to cap­i­tal: ei­ther from do­mes­tic or from for­eign sources.

In the long run, as the cap­i­tal stock in­creas­es the K/L ra­tio im­proves and the ini­tial de­cline in wages can be mit­i­gat­ed.

The great con­cern is the di­rec­tion in which cap­i­tal will flow. The state will have to guide this process care­ful­ly. If the state does not in­ter­vene and leaves the labour mar­ket pol­i­cy in its cur­rent for­mat, then the ser­vices and per­son­al care sec­tors will con­tin­ue to grow, and this can re­sult in bal­ance of pay­ment prob­lems as the econ­o­my moves for­ward.

The Ta­ble shows a com­par­a­tive as­sess­ment of the nat­ur­al gas fac­tor boom and the labour mar­ket fac­tor boom brought on by the in­flow of Venezue­lans (40,000 is as­sumed here).

With the nat­ur­al gas fac­tor boom, wages in the econ­o­my rose be­cause of the re­source move­ment ef­fort and the spend­ing ef­fect. Im­ports in­to the econ­o­my in­creased as the re­al ef­fec­tive ex­change rate ap­pre­ci­at­ed.

With 40,000 im­mi­grant Venezue­lan work­ers, there is al­so a rise in im­ports as Venezue­lans buy goods to send back to their home coun­try. Some of these goods will no doubt be im­port­ed in­to T&T be­fore it is re­mit­ted to Venezuela by the im­mi­grants.

With the nat­ur­al gas boom, there was an in­crease in the out­put of the goods that in­ten­sive­ly used nat­ur­al gas. Thus, am­mo­nia pro­duc­tion in­creased from 3,253,000 tonnes in 2000 to 5,532,000 tonnes in 2010.

Sim­i­lar­ly, methanol pro­duc­tion in­creased from 2,480,000 to 5,932,200 tonnes across the same time pe­ri­od. How­ev­er, oth­er non-boom­ing trad­able ex­ports fell. In the TT econ­o­my case, there was a de­cline in non-min­er­al ex­ports from $50.2 bn in 2012 to $28.3 bn in 2019.

With an im­mi­grant “fac­tor boom” if the pro­duc­tion of non-trad­able goods in­creas­es and pulls com­ple­men­tary skilled work­ers and/or cap­i­tal out of man­u­fac­tur­ing and oth­er ex­port-ori­ent­ed sec­tors then this can com­pro­mise the non-pe­tro­le­um ex­port lev­el of the econ­o­my. These trends in im­ports and ex­ports can in turn com­pro­mise the over­all cur­rent ac­count bal­ance.

Mi­grant work­ers tend to re­mit part of their in­come to their home coun­try in the form of goods or in the form of US dol­lars.

This in­creas­es the de­mand for for­eign ex­change in T&T and re­duces the al­ready de­creas­ing stock of re­serves housed at the Cen­tral Bank.

Some con­sid­er­a­tions to help man­age the mi­grant sit­u­a­tion

As a start, we need to pay more at­ten­tion to the mi­nors of refugees. If this process drags on for three to four years, we may have a bunch of il­lit­er­ate Venezue­lan boys and girls as teenagers mov­ing about T&T. This can make the man­age­ment of the so­cial fall­out from the pres­ence of these im­mi­grants in our coun­try much low­er in the fu­ture.

Per­haps the state and UN­HCR can work to­geth­er with the Catholic church to pro­vide some ba­sic amount of ed­u­ca­tion­al sup­port when the COVID-19 sit­u­a­tion im­proves?

There is a need to pro­mote Eng­lish as a For­eign Lan­guage (EFL) train­ing. This will help to en­sure that those im­mi­grants that are for­mal­ly reg­is­tered to work in T&T can bet­ter in­te­grate in­to the econ­o­my. This may re­quire them ob­tain­ing a very ba­sic Eng­lish as a for­eign lan­guage per­mit to be able to work, sim­i­lar to the PLEA (Point Lisas En­er­gy As­so­ci­a­tion) pass­port that the En­er­gy Cham­ber pro­motes.

It is al­so nec­es­sary to ex­tend COVID-19 test­ing to im­mi­grants whether they are here il­le­gal­ly or not, as fail­ure to do so may cause a spike with­in the coun­try once again, should some­one among the il­le­gal Venezue­lan com­mu­ni­ty in this coun­try, have the virus.