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June 14, 2007

Russia's new immigration policy will boost the population

Analyst Insight by Adisa Banjanovic.

Russia's population is declining dramatically but the country has not been able to compensate this through immigration. Russia's new immigration policy from January 2007 is hoped to help the demographic woe, fill labour shortages and maintain economic potential.

Issue

Russia is the second largest immigration country after the USA. According to official figures, 180,000 migrants visit Russia every year. The number of unregistered migrants is estimated to be between three to four million.

Until recently, Russia did not have a proper migration policy:

  • On the one hand, controlled migration could help compensate Russia's population decline and labour shortage. Russia's population shrinks by 700,000 people each year due to high mortality and low birth rates;
  • On the other hand, the unregistered nature of labour migration to Russia deprives migrants of citizen rights, making them vulnerable to underground employers and creating fears among Russians that immigration could drastically alter the country's ethnic makeup.

 

Net migration and natural population growth: 1991-2006

Source: Euromonitor International from national statistics/UN.

Illegal labour migration has helped to keep consumer prices for Russian products low but is also making foreign products less competitive on the Russian market due to their higher price.

Importance

Since 1990, migration contributed an increase of 4% to Russia's population mainly due to the influx of ethnic Russian immigrants and refugees from other CIS countries in the 1990s after the breakdown of the Soviet Union. With the political situation in the CIS stabilising and Russia's economic situation improving, migration into Russia today is dominated by labour migrants:

  • In 2005, 95% of documented migrants came from other CIS countries. They are mainly Russians or Russian speakers repatriating from Kazakhstan (29.3%), Ukraine (17.4%), Uzbekistan (17.2%) and Kyrgyzstan (8.8%).

As citizens of CIS-countries can enter Russia without a visa, the majority of migrants do not have residential status or a working permit.

Immigration is insufficient to offset the natural population decline. Russia's population has dropped from 148 million since 1992 to just over 142 million today:

  • Since 1992 the number of deaths has exceeded the number of births. Russia had a birth rate of 10.4 per 1,000 people in 2006 and a higher death rate of 16.2 deaths per 1,000. If these trends continue, demographers estimate that Russia's population could fall to fewer than 100 million people by 2050.

In his state-of-the-nation address in May 2006, President Putin made Russia's population decline his highest priority and initiated changes in the migration policy:

  • A new immigration law from January 2007 is expected to provide 6.5 million migrants in 2007 with a registration and working permit. The law defines quotas for migrant sending countries and high penalties for employers who illegally employ migrants. From 2008 migration will be linked to the demands of the Russian economy. This goes along with protectionism in certain sectors, such as the retail sector, in which migrants can no longer be employed as retail assistants;
  • A six year government programme starting in June 2007 encourages "compatriots" living abroad to return to Russia. Repatriates will receive cash, social benefits and support to regain Russian citizenship. 20,000 people have applied already.

Implications

For Russia's economy as well as Russian consumers, labour migration is an advantage:

  • Immigration helps Russia to fill labour shortages, in particular in construction, wholesale and retail trade, communal and personal services and public transport;
  • 80% of migrants are not required to have a qualification so they only compete with unqualified Russian workers;
  • Migrants are willing to work for significantly lower incomes than Russians. Russia's income level is thirteen times higher than in Tajikistan;
Income level compared to Russia and remittances as percentage of GDP for CIS-countries: 2005
%
Source: IMF and Worldbank.

Labour migrants and their sending countries also profit from migration to Russia:

  • Unemployment in most sending countries is high and competition fierce. In Armenia and Georgia, more than 100 and 20 people respectively apply for a vacancy, compared to less than 3 in Russia;
  • Migrants send more than half their earnings home to support their families. Remittances from Russia to other CIS countries amounted to US$3.0 billion in 2005;
  • For many CIS countries remittances serve as buffer against economic and political difficulties. In the Kyrgyz Republic, Moldova and Tajikistan they accounted for over 10% of GDP.

Future Scenarios

In the best case Russia's new migration policy will slow down the country's population decline, fill labour shortages more effectively, increase revenue and reduce social tensions. Several factors, however, might have an adverse effect:

  • Migration alone cannot make up for the population loss. According to a UN study, between 2000 and 2050, Russia would require a net migration of 24.9 million people to maintain the size of its population and a net migration of 35.8 million to maintain its working age population;
  • Russia is trying to attract qualified workers. The country's economy, however, is mainly in need of unqualified labour so protectionist measures and quotas could discourage migration;
  • Russia is trying to attract compatriots. The migration potential of this group, however, only accounts for 6-7 million people and is limited and expensive. The reintegration of one million immigrants will cost approximately US$6 billion.

Due to the cheap cost of migrant labour, businesses and consumers will benefit from higher profits and lower prices. In the long run, the Russian economy will feel the impact of its declining working age population as its economic potential will decrease.


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