Profit and loss – effects of migration processes on the budget of the RM

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Taken from: http://romalitico.wordpress.com/


Introduction

In the previous analysis of Romalitico, the visa liberalization was reviewed from an international political and economic aspect. It was mentioned on several occasions that the free movement of people and capital in a time of a financial crisis is followed with an increased inflow of asylum seekers in the economically wealthier members of the European Union. It is obvious that this trend results in revisions of the travelling rules and a possible establishment of new measures related to the visa regime. Still, we must remember that the migrations and asylum seeking are not a new and unknown phenomena for Macedonia and for the other countries in the region. The migrations (and lately – asylum seeking) are known as one of the possibilities for a way out from poverty, or a search for better life conditions and adjustment to the same (economically, socially and politically). Because the quest for an exit from poverty forces the people to migrate, similar to the actions made in Middle East, Africa and Asia.

Migrations exist since the beginning of mankind, because in the mankind history it is known that the people travelled night and day for a long period of time looking for better and safer living conditions. Still, the migrations from Macedonia are recorded since the beginning of the XX century, due to various reasons. For example: during the Ottoman Empire the migrations were driven by political unrest and search for wealth in the New World. Also, after the Second World War, the search for employment, the politically opposed position with the Yugoslav Communism and the devastating earthquake in 1963 repeatedly caused the migration of the population.[1]

Various economic and security shocks caused migration both in the past and today, and the continued migration to the European countries or to countries where there are better conditions for a safe life, social and economic well-being and justice. According to the report from the European Commission (April 2012), after the visa liberalization, the number of asylum seekers in 44 industrialized countries increased to 6351 people in 2009, out of which 5773 claims were filed in the EU27.

As a result of the visa liberalization, which was made ​​possible in 2009, a mass migration of people occurred from the Western Balkans to the EU who, in search for a better life and stable socio-economic living conditions, are more and more demanding an asylum as a solution as taught by the examples of the people who came from the Middle East, Africa, Asia, which had a lack of basic democracy and secure life.

This analysis analyses the gains and the expenses (losses) of the state through the illustration of specific assumptions and calculations which offer a ground to create a COST-BENEFIT long-term analysis for this phenomena. We will analyze the different groups who left Macedonia in the last two decades.

Economic situation in the Republic of Macedonia

The Republic of Macedonia continuously faces the same economic problems, i.e. high rates of unemployment and poverty. In the period when Macedonia was a part of Yugoslavia, the unemployment rate reached 26.7% which positioned Macedonia as the poorest republic in Yugoslavia. One of the indicators of the macroeconomic situation in the Republic of Macedonia is the actual rate of growth of the Gross Domestic Product, which had a negative growth from 1991 to 1995, after the independence of the country.

This fall was normal and expected for a young economy which was facing difficulties even before the independence. The independence resulted as an inevitable transition towards a new economic, political and social system which, according to many researches and studies from relevant institutions and researchers was characterized with unpreparedness and criminal transition which contributed to negative effects in the state’s system. During the transition, many enterprises were criminally privatized, went under bankruptcy which was previously planned, or were completely excluded from the market. In that period the unemployment rate abruptly increased and stayed high until the first quarter of 2013. It was between 32% and 40% in the period 1995 – 2013.

With the new report the Statistical Office in the second quarter of 2013 the unemployment rate in the Republic of Macedonia was 28.8%. If we make a comparison of the unemployment rates in Macedonia today with the period in Yugoslavia, we can notice that the highest rate in Yugoslavia was 26.7%. In the past period, up until today, Macedonia couldn’t reach this unemployment rate.

This situation of the country is one of the indicators of an unstable economy, leading to increased and deep poverty among the citizens of the Republic of Macedonia. Timely speaking, the majority of the Roma population lives in chronic poverty, so many surveys repeat the same statements without answering how our population copes with the consequences of the poor economic performances in the country.

All these different negative economic, political and other indicators and activities of the state are reasons enough to seek a way out and asylum, and more often seeking asylum from the same in the other states. The outflow of staff and middle class citizens from the country are evidence of unsuccessfully applied policies and strategies for improving of the economic situation. Therefore, the last results for the unemployment rate published by the Statistical Office caused doubts. The question here is: how did we manage to sharply reduce the unemployment rate in Macedonia? Do the migrations have an effect on reducing of the unemployment rate or is there increased employment, although it is clear that except the employment in the public administration, there are no significant changes on labor demand in the private sector.

Analysis

In this part I will try to analyze several indicators for the migrations from which certain calculations and illustrations will follow.

I mentioned on several occasions that the migrations are a recognizable habit of the Macedonian citizens who have massively left the country in the past 100 years. Therefore today there is no accurate and a defined number about the citizens with Macedonian origin. Different sources have different figures, for example: according to the estimates of the World Bank (World Bank, 2011, 2011a) the rate of migration from the Republic of Macedonia amounts to 21.8%, which means that a significant part of the population lives abroad. On the other hand, if we take into account Eurostat’s data then the emigration rate is 26% which is mostly considered as an accurately estimated indicator for the current size of the Macedonian diaspora.

Chart 1: Number of citizens in the Republic of Macedonia who are citizens of different countries in Europe in the period 1996-2010

Switzerland Migration Office data for 2008, 2009 and 2010

Source: Eurostat (2011): Population by sex, age and citizenship (migr_pop1ctz). in: http://epp.eurostat.ec.europa.eu; Council of Europe, Recent Demographic Developments in Europe; Switzerland Migration Office

According to Eurostat’s data we can observe that the migrations have a cumulative upward trend with time. Unlike the other years, since 2005 a high outflow of migrants was marked who leave the country legally. This number in 2005 cumulatively amounted to 251 247, while in 2010 it dropped to 240 052 people.

If we include the illegal migration in this calculation then the total figure will continue to rise. But because of the fact that there is no accurate information about illegal migrations the calculations will be based on the number from 2010.

COST-BENEFIT ANALYSIS

Expenses (loss) of the state

Given that the total number of migrants who obtained citizenship or residence outside of Macedonia amounts to just over 10 percent of the total population it is necessary to calculate the losses in the state budget.

Under the assumption that 50% of the total number of emigrated citizens from the Republic of Macedonia, or 120 026 people, are active population, 10% seniors and 40% children, pupils and students the state losses are:

1. The State budget suffers loss in taxes-income tax, insurance tax, value added tax, property tax and other taxes. The budget of the Republic of Macedonia consists of total revenues and expenditures. The category of total revenues includes: tax revenues and contributions, non-tax revenues, capital revenues and donations. The total budget revenues in 2012 amounted to 2,883 billion USD [2]. If you divide this number with the total population of 2,030,000 inhabitants, it arises that the influx in the Macedonian budget per capita is 1.420 USD. If you multiply this amount with the total number of migrants ($ 1,420 * 240,052 migrants) then the state loses about 341,205,180 USD. This means that instead of 2,883 billion USD the total revenues would amount to about 3.224 billion USD (2.883 billion USD + 341 205 180 USD).

2. The total population of the Republic of Macedonia is 2.087.171. The sum of the total population in the Republic of Macedonia and the total number of displaced citizens amounts to 2,327,223. This would mean a natural growth of the total population without additional costs and projects to increase the birth rate. Here is the opportunity cost in the state budget that is spent on social transfers to families with a third child in order to increase the birth rate

If the state had a natural birth rate growth, rather than in social transfers, it could direct the funds in investments that would contribute to the creation of new jobs and increased economic activity which would further demonstrate more successful macroeconomic results.

3. Total Gross Domestic Product – In 2012 the BDP was 9.6 billion USD. If we divide this amount with the total population of 2,030,000 (9.6 billion USD / 2,030,000 population) we get the amount of 4729 per capita. With the total population of 2,327,223 this figure would be around 11 billion USD (4729 USD * 2,327,223 total population). This means that the total GDP loses around 1.5 billion USD from the 240,052 Macedonian immigrants.

Gains (benefits) of the state

Besides losses and opportunity costs the state has benefited from the migrations. The benefits are mostly from the perspective of facilitation of the costs from the state budget because most immigrants are from economically vulnerable groups, or welfare recipients. It is mostly the Roma who fall into this group because, according to the estimations, 95% of the Roma population lives in the suburban areas in very poor living conditions [3]. Also the unemployment rate for the Roma is the highest in the country.

According to the UNDP report in 2005 the unemployment rate of the Roma population reached 79%, compared to the National average of 37.2% (UNDP, 2006, p. 11). The high unemployment rate also means a high poverty rate. According to the reports, the poverty rate among the Roma population in 2008 was almost three times the national average: 88% compared to 30% in Macedonia (LBI, 2008, p. 168).

As a result of the high unemployment and poverty rates, it is normal for the larger part of the Roma population to depend on social welfare. According to the ISPR’s researches (2004), 44% of the Roma are dependent on social transfers.

All abovementioned facts are reasons and justifications that the Roma usually migrate out of the country and seek a way out in other countries. From these migrations, the state benefits in:

1. Reduction of the expenditures in the state budget – the total expenditures of the budget of the Republic of Macedonia include: expenditures for salaries and benefits, expenditures for goods and services, transfers to ELS, transfers and subsidies, social transfers, interest payments and capital expenditures.

According to the Statistical Office, in 2012, more than 50,000 people were welfare recipients. The upward trend of migrants relieves the burden of the state budget with the very act of leaving the state.

Chart 1: Asylum seekers divided by age groups in the second quarter of 2011, showed in percentages:

Total0-1314-1718-3435-6465 and more
Macedonia183035,96,134,922,80,3
Serbia183540,16,430,522,60,4
Kosovo253531,2540,822,10,9

If we take the numbers from the chart display for Macedonia in 2011 and multiply them with 1,800 MKD (social monthly assistance per person), then the resulting sum shows how much the expenditures of the state budget for social welfare are reduced (about 650,000 EUR per year).

In twenty years this is a sum of about 13 million EUR less for social financial transfers for the poor population which left the state. This is a relatively small saving in the budget expenditures in terms of the amount of revenues that can be generated by the persons if they worked and spent in Macedonia.

Assuming that all who left were low educated staff in which the state spent at least eight years for their education, the saved expenses of 13 million EUR are almost meaningless. Unfortunately, the number of the highly educated staff is very high and without accurate records, and on the other hand their departure remains overshadowed by the criticism that we receive for the displacement of poverty. Therefore we come to the paradox situation in which all social and institutional attention is focused on keeping the poor strata in the country and carelessly releasing the educational profiles in which we have all invested from the state budget through the funding of public educational institutions. The hypocrisy is even greater because the EU members have a positive regulation for the flow of the higher education workforce while more restrictive measures are set for the poor who want to travel across the continent. By default, each new restrictive measure causes new anomalies in the society, especially in the area of restriction of movement of people and goods, so we often have an occurrence of organized groups that corrupt the border guards and customs, and again financially draining precisely the poor people who have no other choice in their home state. On the other side the media and the politicians publicly criticize the vulnerable groups for their alleged abuse of the visa regime, although we all know who and how manipulates the information and convictions that the West has better living conditions.

Finally, the attention of the whole public is mistakenly aimed at the ordinary citizen, rather than to the selectivity of the measures and the behavior of the EU institutions expressed through the pressure towards our domestic institutions. The radical groups appear as “protectors” of the state interest regarding the retention of the visa regime which additionally brings negative points for our democracy and weakness to the institutions. This is a typical example of how the EU and its incomplete measures negatively reflect on the rights of the poor citizens.

In the end, the whole situation produces systematic and financial anomalies because besides time and labor, much of the resources end up in the hands of suspicious structures or corruption, while the poor citizens become poorer.

The EU members and the current candidate countries haven’t learned the lessons from the last two expansions, or showed a desire to change something in their behavior and the assessment of the situation, but simply look for the easiest solution in a political flirtation with their electorate that with the new mechanisms of the visa regime they will protect the interests of their citizens.

2. Reducing the unemployment rate – the employment agency of the Republic of Macedonia recently divided the unemployed people in active and passive job seekers. The employees and persons who are not employed but regularly looking for work are considered as active population, while passive population means people who are unemployed for a longer period and haven’t applied for work.

If we take into consideration the migrated Macedonian citizens who had left the country then they would belong to the group of passive jobseekers because they are out of state for a longer period and unable to apply for work.

3. Inflows of deposits – one of the important benefits of having migrants abroad is the influx of foreign currency in the country. This inflow has a significant role for the state because it provides foreign deposits without it having to oblige to foreign investors.

Internal migrations

In the Republic of Macedonia besides the increased number of migration outside of the state, there is also an increased number of internal migrations. This is a result of the demographic and economic development of the country. Depending on the region of residence, the state is divided into two parts: East and West. The eastern part of the state is not as developed as the western part because the concentration for development is directed towards the bigger cities (usually in the west) of the country.

It is mostly the poor who suffer the most because they are constantly suppressed outside of the central parts of the cities and thus create poor ghettos or neighborhoods. Therefore, there is also the so-called “Macedonian phenomenon” for internal migration to the western parts of the state. The following data confirm the internal migrations in different regions throughout the country.

Chart 2: Internal migrations on a regional level in the Republic of Macedonia, 2006-2010

Region20062007200820092010Total
 

Migrants

Total2837290933443181297615247
Vardar region2242783253033141444
East  region2402322602572951284
Southwest region3233373933793621794
Southeast region2322502642102501206
Pelagonia3003303283243181600
Northeast region1861462692241871012
Skopje10921102120012079645565
Polog2402343052772861342

Source: State Statistical Office of the Republic of Macedonia, Migrations, Statistical Review: 2.4.8.08 (2007); 2.4.10.07 660 (2010)

The number of internal migrations in the Skopje region is remarkable – it accounted for 5565 of the total 15,247. This means that the wealthier strata of people migrated within the country, while the poor, unable to respond to the developmental infrastructure changes, remained in the poor ghettos … until the moment they decide to leave the country for a better future.

This migration leads to uneven development of the units of local government and the occurrence of developed and major municipalities and rural and underdeveloped communities. Of course, this is again a cause of internal migration.

Conclusion

The overall analysis shows that Macedonia still continues to face the same anomalies and problems. In order to reduce or improve the situation in Macedonia, I will cite few brief recommendations:

  • Reduction of political pressure on jobs – not having regular employment makes people unhappy and poorer. To increase the welfare and quality of life the ruling political party should not decide on the working positions but rather create harmony and equal treatment towards the citizens of the Republic of Macedonia. Because through respect of the rules and procedures, quality staff, that would contribute to significant changes in the state, will be created.
  •  Increased investments for education of the youth – the investments in education are most reliable and most cost effective. But, the creation of educational programs, projects and scholarships are not enough for a perfect educational system. It is necessary to provide job positions for the young generations in order for them to require practical knowledge and skills.
  • Opening of private educational institutions – in order to create qualitative educational personnel, the state institutions should collaborate with private institutions. The joint cooperation will not only create quality, but will also contribute to increased revenues in the state budget.
  • Infrastructure projects and investments aimed at rural areas – the development concentration aimed at the central cities neglects the poor parts of the country. Investments are required in order to reduce the inequality between citizens in rural areas that would enable equal and better conditions for the poor.

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