Wednesday, February 12, 2014

Why In the World Would Switzerland Impose Immigration Quotas?

On February 9, the Swiss narrowly passed a referendum to put a quota on immigration. The proponents, particularly those of the Schweizerische Volkspartei (SVP), for the referendum were worried about the 1.8 million immigrants that have entered the Swiss nation over the past thirty years and how the exploding rate of immigration has adversely affected Switzerland.   The opponents were worried about the effects they have on the economy. Aside from violating the Swiss-EU agreement of free movement of persons, what is the issue with this referendum?

A quota is a government-imposed limitation on the amount of goods and services. In the context of immigration, the quota limits the number of non-citizens that can become citizens. The economic effects of an immigration quota on the labor market are illustrated below, which is a net deadweight loss (C+D) in economic welfare.

This is a more simplistic depiction of immigration quotas, but the overall effect is the same: immigration restrictions are harmful. As I pointed out last year, keeping borders more open is an economically sound policy. Plus, developed countries like Israel, New Zealand, and Luxembourg, have comparable percents of foreign-born populations and handle the influx of labor. The reason why immigration is relatively high in the first place is because the Swiss are trying to fill a demand for skilled labor. I also find it interesting that the labor participation rate  hasn't decreased because of the flux of immigration, and the same goes with increased unemployment rate. If anything, immigration has decreased unemployment in Switzerland (Basten and Sigenthaler, 2013).

Considering the European Union's rigidities in the labor market, being overly punitive with the Swiss would be calling the kettle black. Regardless, Switzerland has just shot itself in the foot in terms of liberalized labor markets. I know that Switzerland has historically been a neutral power to prevent foreign powers from invading, but it's disappointing to see a country with a good amount of economic freedom pass a referendum that prevents economic prosperity will ultimately be a disservice to the Swiss people.

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