CITIZEN OF EUROPE: How exchange rates influence migration.

The accession to the EU spawned a large wave of CEE (Central Eastern European) migrants in the UK. The number of Poles in the UK went so high that some pundits termed the UK the 17th Polish province...

Nevertheless, the number of Polish immigrants has started going down.

Why? Financial Times explains:

The wave of migration began when about a fifth of Polish workers were without jobs and Polish salaries were far lower than in western Europe. Over the last couple of years, however, official unemployment has dropped to 11.5 per cent, while the true rate is probably much lower. Pay packets are fatter – salaries rose in February at an annual rate of 12.8 per cent. The zloty has also risen sharply against both the pound and the euro, while Poland’s economy is also expanding much more strongly, with growth of 5.5 per cent expected this year.

As we can see, fluctuating exchange rates may have an impact not only on financial markets and trade, but also on the movement of people...

It would be actually good to do some regression analyses on what actually the impact of the falling pound is. Apart from pound, one could include many other variables: GDP growth rates in the UK, Poland and other countries, unemployment levels and take into account culture variables (individualism, mobility etc.). Furthermore, to get better results one could also make a panel data study: take data from various CEE (Central Eastern Europe) countries whose citizens migrated to the West.

But is the impact of the pound considerable? The idea is not mine, but I believe it just works as a deciding factor: you don't come back to Poland because the pound went down. There are other reasons: family, loneliness, depression etc. Exchange rates act like a "switch" - when your pay goes down significantly, you go back because of all other reasons. Money doesn't keep in the UK anymore.

Is the return good for British economy? I don't think so - of course British workers will be happier (migration from CEE did have an impact on wages and, thus, on unemployment), but it will only add to inflation problems (negative supply shock), and make the work of Mervyn King more difficult in the times of rising prices and stagnating economy...

PS: The report of the Office of National Statistics does show that unemployment among Britons went down. How come if standard labour economics theory says that two views, "immigrants take jobs that nobody wants to take" and "immigrants take our jobs", are just simplistic views of reality? In general, all else equal, the impact of immigrants should make wages go down. Well, here it seems that young Brittons give up competing with immigrants because of their small wage demands...