Surely the benefit to high-skilled wages and loss to low-skilled wages is an artifact of the legal regime under which high-skilled workers are the only ones allowed to come in most cases?
Not if Frédéric Docquier, Çağlar Özden, and Giovanni Peri are right:
… emigration, which entails the loss of talent and brains in much larger proportion than the loss of unskilled workers, is the real threat for unskilled workers left behind, even in some OECD countries. Less educated workers in Cyprus, Malta, Ireland, New Zealand, and Portugal all lost between 1 and 6% of their wages because of the flight of highly educated emigrants. While net emigration, especially of college educated individuals, may be a symptom of economic malaise and not its cause, it certainly directly contributes to lower productivity and wages of the remaining workers.
As I understand it, Ireland and Portugal had freedom of movement within the EU, and most of their emigrants went to the EU, so the effect shouldn’t be an artifact of a legally-discriminatory regime.
And the same effect appeared in simulations across 2000 and 2007, across a host of EU countries, including Luxembourg, Austria, Sweden, Denmark, Finland, France, and the Netherlands, in addition to the countries of the eastern and southern European periphery.
I think the hypothesized mechanism here is plausible: high-skilled workers have positive externalities, which helps raise the wages of complementary low-skilled workers. If you drain a country of its high-skilled workers, it should hurt the wages of native low-skilled workers.
And because high-skilled workers are inherently more mobile and employable than low-skilled workers, they have a higher propensity to emigrate even when the target country’s legal regime is non-discriminatory.
This table is pre-accession for nearly every country but Ireland, but the table shows the same disparity for Greece, Portugal, and Spain – Greece had a 0.3% emigration rate during the 1990s, but a 4.6% emigration rate for college graduates – and I suspect it would show the same disparity in post-communist Europe post-EU accession.
Interesting.
But there are other legal barriers to the employment of low-skilled workers which would discourage them from moving, even within the EU; e.g. the minimum wage.
Also money, it costs money to move, to temporarily live in new places while finding a job, to find new insurance, to survive while learning new rules or a new language…
There is an awful lot of friction that isn’t just government interference. And of course, there are ways to reconcile lowering the minimum wage with employment of low-skill workers, but not with perfect freedom of movement.