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International Wage Differential and Migration between Germany and Turkey Essay

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Updated: Apr 11th, 2019

Introduction

Economic models asserts that migration rises when wage differentials widens between the host country and the home country. If the host country has better payment terms than the home country, more employees will be lured to move to take advantage of the higher payment.

In a more vibrant framework, especially where the migrations duration is temporary, the number of immigrants in the host country is more than where the immigration duration is unending. However, economics model reveals that when the immigrants’ duration is temporal the optimal migration is low.

Several factors influence the trend and the magnitude of the migration that is experienced between two countries. Other than wage differentials, the existence of employment opportunities has also been considered to influence workers mobility.

When job opportunity and existence of wage disparities are merged, a rigorous migration trend is created that entirely shape the economic output of the affected countries. The other factor that stimulates migration is the existence of technological differences among the various countries that are involved.

Besides income variation and treed trade has been earmarked as one of the factors thank contribute heavily to immigration. Countries with large income propensities are increasingly receiving large amount of immigrants from countries low-income margins. Similarly, more technically advanced country usually operated at full employment while a less developed countries have high unemployment rates. Therefore, one of the two countries, which meet these conditions, experiences high rates of migration.

Due to the erratic nature of immigration, most countries find themselves in a dilemma to contain such movements. Thus, this research project endeavoured considers all the factors that affect migration between Turkey and Germany. In this case, most emigrants move from Turkey to German where wages are relatively higher.

Research Objectives

The research sought to obtain the rationale of the following issues.

  1. To determine the constituents of wage differential
  2. To understand the optimal level of migration in a given country
  3. To understand the effects of migration; both to the host country as well as the home country

Literature Review

The research consulted several written materials to obtain the views and observation of economists concerning the issue of wage differential and migration. In addition, the literature review helps to find consistence between their finding and the finding of this research.

History of Migration from Turkey to Germany

The migration was more or less active during the twentieth and early twenty-first centuries. The political changes in Europe were pertaining to the migration rates, especially in the between- and post-war periods; ethnic changes and attitude to ethnic groups was another reason for migration when people were seeking shelter or political asylum. Employment rates and labour shortages became one of the strongest motivations for employees from all over the world to migrate to the countries that were rebuilding their economies in 1950-1960s. Economic differences and wage differentials can be considered another contributing factor to the migration flows (Dustmann, “The European Experience” 215). As such, the major events that influenced the economic and political changes impacted the migration rates from Turkey to Germany.

Modern Migration

Though some authors try to trace the roots of the migration from Turkey to German alluding to the colonial migration to the Western Europe (Akgündüz 124), modern trends have reveal change of motivators from need of maiden land to wage differentials. Djajic (99) contends that wage differentials are influenced by variation in factor prices. A higher factor price leads to a low return on capital and therefore low wage rates.

On the other hand, when the country has low factor prices, the return on capital is high and therefore the stimulating international migration. Another section of economist claims that recruitment fee also influences the bearing of the immigration. Higher recruitment fess adds to the factor cost and it negatively affects the amount of wage offered thus discouraging migration (Massey and Taylor). However, this principle is only applicable under free trade where the country does not practice protectionism.

Migration and Income

International migration is also influenced by the level of income in additional to wage differentials. Low income from the sending country motivates locals to aspire to go for better incomes outside the country (Faini & De Melo 49).

One of the reasons for migration was the employment (Eickelman and Piscatori 153). The inclusion of income factor obscures the relationship between migration and trade liberalization. For instance, income below a certain thresholds in the home country complements both trade liberalization and migrations. This is because trade liberalization and migration is liable to promote income in the home country.

Once income is augmented to a particular threshold, migration rate recedes or it is entirely brought to a stop. The rationale behind is the fact that majority of the people prefer working in their native countries. Therefore, trade liberalization and migration are either complements or substitutes in the upper income threshold (Faini and De Melo 50).

Technological Advancement

Technological differences have also been cited as one of the main catalyst of international migrations. Djajic illustrates that a country that is more technically advanced relieves most of its workers from their daily jobs as they are misplaced by machinery (99). The machine usage lowers the pressure on wages leading to low hourly wages; the affected individuals are easily by hire wages elsewhere (Djajic 99).

Massey and Taylor dispel this assumption by arguing that international wage trends are not easily predictable and therefore not easily applicable (10). The internal operations of a country economic factor are not readily predictable due to the dynamism assumed by many factors that influence wage rates. natural intuition provide that countries which are more industrialized have high national income and also high wage rate, thus displaced employees find it difficult to cope with low wages than offered in the local country.

Educational Opportunities

Education can be considered another factor that contributed greatly to the growth of migration rates between Turkey and Germany. New educational institutions in Europe and increasing importance of the education in Turkey made the flow of students from Turkey into Europe and, namely, into Germany growing.

As reported in the study by Sunata, the European governments in 1990s “facilitate legal regulations, such as student visas and work permits as well as the probability of grants and loans” (187). This shows that the situation was changing from time to time and the educational opportunities became open and more affordable for foreign students abroad, especially regarding the legal regulations adapted in many European countries such as Germany.

Economies of Scales

Another notable factor that influences international migration is the economics of scale. Djajic argues that a country that constantly returns to scale generates more demand compared to countries with diminishing returns to scale (100). Hence, increased pull-demand for job is increased in countries that enjoy economies scale.

Moreover, the ability of the country to expand its operation increases that is generated causes increased demand for labour, which by extension causes immigration. These countries keep low production costs that allow firms to maintain higher wages.

On the other hand, economic models assume that economies of scale rarely exist in the end due to entrance of new firms. This may reduce the duration of immigration, hence leading to a low immigration optimal. Nonetheless, where immigration duration is permanent the optimal level of migration is usually high.

Effects of Migration to the Economy

Although most scholars’ associate migration to brains drain but it has been found out that both the host countries and the home country benefits a great deal from employee mobility. Hatton asserts that high economic growth is often experience where the country obtains more work force to utilize the already existing resources (4).

On the other hand, the home country benefits from the resources and finances, which are sent home by the emigrants. Conversely, most host countries benefit mostly when the large constituent of the immigrants are skilled with ability to operate the machinery already installed.

Djajic contends that immigrants’ remittances assume a type of insurance premium that furnish the risks associated with migration and therefore they feel the welfare of their family is well catered for (254). He further asserts that remittances form an integral part of the decision making on the part of the immigrants, once the remittances is able to cater for the welfare of the entire family, immigration decision is reached with ease.

Methodology

The report was prepared after based on information gathered from secondary sources. These sources include books, and internet reports, which were done on this area. From varied literature, the researcher sieved and collected relevant data utilized for this report. The research covers the migration movements from Turkey to Germany.

According to the ILO records, Germany has a higher wage rate compared to Turkey. Moreover, Germany is technically more developed than Turkey thus having a higher demand for skilled labour. With this distinct parity, most skilled personnel from Turkey are attracted by the lucrative opportunity in Germany but not available in Turkey.

The data on the two countries that was used in this report was entirely collected from internet and previous reports on these areas available in books. This information was collected from library books, journals, and internet. The ensuing results and discussion was purely based on the findings from these sources.

Results and Discussion

This section comprises discussions that emanates from the information that was collected from various sources. The discussion strives to find correlation of the report and the previous findings from secondary sources.

Migration duration. Table showing the number of emigrants return (Dustmann, “Wage Differentials” 239).

Year 1985 1986 1987 1988 1989 1990 1991
No 59 32 29 32 26 14 12
Percent 20.49 11.11 10.07 11.11 9.03 4.86 4.17
Year 1992 1993 1994 1995 1996 1997 Total
No 13 16 22 10 8 288
Percent 4.51 5.56 7.64 3.47 5.21 2.78 100.00

A table of Immigrants that returned home

The above data was collected from Germany immigration office covering the trend adopted by emigrants from Turkey and their return behaviour.

This information was used to determine the number of emigrants that returned to Turkey that returned to their home countries after the expiration of their immigration period. From the samples it was evident that majority of immigrant were reacted upon to return to Turkey over the last 14 years that was covered by the research. From the observation of 14 years, 288 immigrants left Germany to return to Turkey.

This figure is broken down according the year that the immigrants returned. The data above reveals that majority of immigrants that went to Germany did not return to their home country because of the lucrative wages that they received in the host country. It is therefore correct to deduce that most immigrants are ready to default their migration period to continue enjoying lucrative wages in German.

Employees from Turkey in Germany, by occupational groups

Occupational group 2000 2005
ISCO-1 1,893 2,279
ISCO-2 5,150 4,968
Engineers 1,476 1,709
ISCO-3 17,994 16,661
Total (Occupational Groups ISCO 1-3) 25,035 23,098
Total (All Occupational Groups) 556,498 458,243
Share of ISCO 1-3 in All Occupational Groups (%) 4.5 5.2

Deduced from Bundestamt für Migration und Flüchtlinge (Sunata 15).

As such, the ISCO-1 relates to managers and senior officials including legislators; the group of ISCO-2 contains professional employees such as medical staff, educators, lawyers, and all the categories of formal education; ISCO-3 covers the category of technicians and other vocational specialisations (Sunata 15-16). Regarding this situation with employment and percentage of occupational groups’ enrolment, unqualified employees from Turkey are more common for Germany than qualified ones.

Wage Differential and Immigration

Predicted average wage

Most of the Turkey’s emigrants are motivated by two things. The duration of stay and wage differentials. When the wage differential is low but the duration of stay is long, most people still finds it worth to go for migration. On the other side, when wage differential is high most employee are willing to work for shorter duration. For instance where higher wages are offered say at 20 Euros most people are willing to work even fears.

Optimal migration

The optimal migration is the flow of human capital from one country to another considering a specific period of time based on the skill-oriented policy when skilled and qualified professionals are motivated to migrate. The current situation, regarding the migration rates from Turkey to Germany in terms of by occupational groups, shows that unskilled workers from poorer country tend to migrate to the richer one.

Just like the observation by many economists when the optimal migration occurs where the duration of immigration is long. In this case, the optimal migration occurs when the duration is stay is between 10 to 15 years. At this point, the number of immigrants starts increasing at a decreasing rate.

Beyond this level, the most Turkey’s immigrants were willing to return to their home country. Similarly, below this duration stay many emigrants are willing to default their stay contract to continue enjoying longer stay. It was also observed that most emigrants were lured by hefty remittances that they received from the Germany’s government. The above observation coincided by the observation that was made by Djajic who associated most immigration to the effects of remittances (254).

Effects of Immigration

Concerning which country benefits the most from immigrants, as Djajic points out; most benefits were received by Germany. The only that was received by Turkey was limited to remittances that were disbursed home. However, majority of this information was used to meet domestic obligations as opposed to development projects. Thus, the parity between the two countries is likely to widen because little of the money is used by Turkeys government for industrialization purposes.

On its part, Germany benefits greatly from the huge production that is generated by the Turkey immigrants. Therefore, the Turkey continues to lag behind as its effort to reduce wage difference existing between itself and Germany remains a far away dream. This observation concurs with Hatton assertion that the host country benefits more from the services provided by the immigrants (4).

Conclusions and recommendations

Recommendations

From the above results, the following recommendations have been proposed to the host countries, which have benefited less from the migration. Since the main cause of migration is wage differential, Turkey could curb mass exodus of its talent and smart brains by implementing the following recommendations.

  1. Turkey should assume protectionism policy to discourage immigration that withdraws the best brains from the country to be used elsewhere.
  2. The country should strive to increase the income levels in the home country because it has been found out that high-income thresholds complements immigration and free trade. This is also because most people prefer working in their native countries than in foreign countries.
  3. The government should adopt technological advancement to provide job opportunities to the skilled personnel that are left jobless or are underemployed and in the process they opt to seek better pay in Germany.

Conclusion

Although international migration traces its origin to the slave trade era, the movement people from country to country is still relevant in the modern days. Notably, the factors that influence such movements have greatly changed. However, wage differentials have remained the most critical factor that oils migration of people across nations. Immigrants from Turkey are lured by better income in Germany. Other factors that have been found to facilitate increased migration from Turkey to Germany include trade liberalization, technological advancement, and constant returns to scales.

It is evident that Turkey has benefitted marginally from the migration and therefore it would be prudent for the government to contain these movements as the best brains are shipped out. The only way that it can contain such movements is through adopting some form of protectionism policy. Failure to act on wage differential based immigration away from Turkey would only perpetuate economic imbalance between Turkey and Germany; the gaps will continuously widen.

Reference List

Akgündüz, Ahmet. Labour Migration from Turkey to Western Europe, 1960-1974: A Multidisciplinary Analysis. Aldershot, Hampshire: Ashgate Publishing, Ltd., 2008.

Djajic, Slobodan. International Migration: Trends and Economic Impact. New York: Routledge, 2001.

Dustmann, Christian. “Return Migration: The European Experience.” Economic Policy 11.22 (1996): 213-250.

Dustmann, Christian. “Return Migration, Wage Differentials, and the Optimal Migration Duration.” European Economic Review 47 (2003): 353–369.

Eickelman, Dale F., and James P. Piscatori. Muslim Travellers: Pilgrimage, Migration, and the Religious Imagination. London: University of California Press, 1990.

Faini, Riccardo and Jaime De Melo. Migration: The Controversies and the Evidence. London: Cambridge University Press, 1999.

Hutton, Timothy J. Migration and the International Labor Market, 1850-1939. London: Routledge Publishers, 1994.

Massey, Douglas, S., and Edward J. Taylor. Development Strategy, Employment and Irrigation and Migration; Insights from Models. Paris: OECD Press, 1996.

Roleff, Tamara, L. Immigration Opposing View Points. Michigan: Greenhaven Press, 1998.

Sunata, Ulas. Highly Skilled Labor Migration. Berlin: LIT Verlag Münster, 2010.

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