Yesterday’s QNHS (Q3 2009) release provides a timely update on trends in the immigrant workforce. In the period from the third quarter of 2008 the number of non-Irish nationals in employment fell by 61,600. This is equals half the fall in the employment of Irish nationals (123,200), even though non-nationals represented only 13.6 percent of the workforce in Q3 2008.
It is also evident that many immigrants are returning home, with the total population of non-nationals (15 and over) falling by 41,000 over the year. This might be welcomed in the short run if it limits the rise in unemployment. But returnees also ease the downward pressure on wages. Over the medium term, it is not a bad rule of thumb to view a country’s equilibrium unemployment rate as independent of the size of its labour force.
Looking to the longer term, the return to net emigration is a worrying development. As is often observed, Ireland’s high degree of factor mobility makes the economy operate more like a regional than a typical national economy. An expanding skilled workforce gives the economy the scale, diversity and connections to support innovation-intensive growth. Indeed, the empirical regional/city growth literature points to initial human capital as a strong predictor of subsequent growth (see here). A truly smart “smart economy strategy” will recognise the value of getting–and keeping—talented people here.