Nowadays during the era of globalization and global interdependence there is a massive amount of immigration taking place throughout the world. People choose or are forced to leave their homes and live elsewhere. Is there a single unified theory that would present a general trend in these immigration patterns? Immigration is so diverse that there is no one theory that would explain, generalize or put all movement under a single equation. People leave for a variety of reasons ranging from job search and family reunification, to escaping poverty and political persecution; each case is different yet some fall under a common category and have similar patterns. Consequently, there are various theories that explain immigration cases; one of those is neoclassical economic theory. Neoclassical economists explain migration as an outcome of wage differences between countries (Chung’s lecture 2017). In their perspective, people move because of their dissatisfaction with current income in search of higher wage rates abroad. There are two levels that neoclassical economists consider when reviewing the movement: macro level (nation-wide scale) and micro level (interpersonal level).
Neoclassical Economic Theory: Macro Level
Macro level reviews large scale factors that influence individuals/households to move. Douglas Massey in Theories of Internal Migration: A Review and Appraisal (1993) offers a perspective on international immigration that contains following assumptions: “ (1). The international migration of workers is caused by differences in wage rates between countries. (3). International flows of human capital – that is, highly skilled workers – respond to differences in the rate of return to human capital … yielding a distinct pattern of migration that may be opposite that of unskilled workers.(4). Labor markets are the primary mechanism by which international flows of labor are induced; other kinds of markets do not have important effects on international migration.” These conclusions examine not only the causes but also the effects international flows have on the economies of both receiving and sending countries, as supply decreases or increases, causing a wage fluctuation. In the end, according to Roel Jennissen (2006), a new equilibrium will be achieved when both net labour migration and net capital flows will be equal to zero.
Neoclassical Economic Theory: Micro Level
Micro level immigration takes the human aspect into consideration. Here, an individual is the one deciding whether or not to move weighing down his/her options. This model has been named “the human capital theory of migration” by Michael P. Todaro (Kurekova 2011). Todaro examined functions of “rural supply push” and “urban demand pull” and their effect on one’s probability of successful finding of employment. Additionally, individuals when deciding to move consider “Human capital endowments, skills, age, marital status, gender, occupation, and labor market status as well as preferences and expectations” (Kurenkova 2011). If, after calculating the differentials the earnings are greater than the expenses, individual decides to move. However, according to Eva Olejárová (2007), “… the issue with this perspective lies in the fact that in order for the non-monetary factors to be included in the calculation; they need to be transformed into monetary values.”
Thesis
According to neoclassical economic theory, a sending country should be experiencing a high net labour migration and a low net capital flow, contrary with a host country with a low labor migration and a high net capital flow (Jennissen 2006). I suggest that Russian immigrants were driven by these geographical differences in wage differentials which consequently forced them to leave their homeland and immigrate to the United States where their labor was valued higher. This includes both low-skilled and high-skilled individuals who belong to different segments of the labor market.
History
Very first Russians entered the States in 18th century. They arrived to North America, colonized Alaska and built a community which eventually disseminated after Alaska was sold to the United States. (Smith Peter 2015). First wave of immigration from Russia started in the second half of the nineteenth century with majority of Jews escaping a Pale of Settlement. This movement cannot be characterized or reviewed from the neoclassical economist’s viewpoint and therefore refers to a flaw in the theory – it does not cover a political factor of migration. Lucia Kurekova in Theories of migration:Conceptual review and empirical testing in the context of the EU East-West flows (2011) notices that the theory “…has been viewed as mechanically reducing migration determinants, ignoring market imperfections, homogenizing migrants and migrant societies and being ahistorical and static.” She also adds that “the effects on home and host states are being ignored and the importance of politics and policies is left out”. Therefore, early Russian settlement can be studied under different immigration theory.
The second wave of Russian immigration happened after Russian Revolution (1917) and the Civil War (1921). Russians massively fled the country from the new regime, governmental repressions, and collectivism. Similarly, the third wave (1945) brought about 50000 people from the Soviet Union to America. The inflow of people is relatively low due to some immigration policies. In the same manner, neoclassical viewpoint is not applicable to either of these waves, for they have a political context which is not covered in neoclassicism.
Modern level of Russian immigration is significantly bigger in size: “between 1989-2004… 1.3 million Russian citizens obtained permits for a permanent emigration to the West.” (Vishnevskii, 2006) According to wageindicator.org, as of January 1 2016, Russia’s minimum wage was $1110 United States Dollars or $3106 Geary-Khamis Dollars (United Nations Statistic Division: “a more valid measure to compare standards of living”) per year. United States in return had an annual wage of $15080 both of USD and Geary-Khamis Dollars. This equates to wage difference of the United States being 4.85 times greater than Russian. According to the neoclassical theory, this difference is one of the paramount reasons why people choose to migrate. Moreover, Russian immigration is often characterized with a high number of highly-skilled individuals who leave the country for places where their labor and intellectual abilities are valued higher, or the brain drain. In 2004, there were over 100 thousand Russian specialists working in US hi-tech (Andrienko Y., Guriev S. 2005). Paul Robert Magocsi in his book Russian Americans (2000) says: “The educational and skills level is highest among the most recent Russian-Jewish immigrants. As high as 46.8 percent have had a university education, and 57.6 percent have been employed in the Soviet Union as engineers, economists, skilled workers, or technicians. In the United States, most have been able to find similar jobs and improved their economic status.”
Not only was it difficult to find job in Russia, the State itself restricted movement by controlling the inflow and outflow of people. Theodore P Gerber when studying Regional Economic Performance and Net Migration Rates in Russia, 1993-2002 (2006) finds out that Soviet Union employed different techniques in order to control the population: “… political controls on information, mandatory residence permits that were often withheld in the most desirable cities, an administered labor market, incentives discouraging extra-firm job mobility (such as the allocation of wages and social benefits through the workplace on the basis of seniority), chronic housing shortages, and the allocation of housing through local waiting lists. Although, as these studies suggest, such obstacles could be overcome by those who wished to migrate, they… inhibited migration… by increasing its costs.” Gerber performed an extensive research trying to test how traditional economic explanations, e.g. neoclassical economic theory has an empirical basis that can be proven using equations and formulas. Gerber finds that Russia complies with the theory’s proposition, and wage differentials along with unemployment rates have a significant impact on immigration: “… higher wages and annual increases in wages both positively affect net migration. More migrants flow into regions with relatively high wages than flow out, and vice versa. Some evidence suggests that the effects of regional wage levels actually increased as Russia’s transition progressed. The findings also broadly support [that]… regional unemployment negatively affects net migration rates in post-Soviet Russia.”
Conclusion
Russian immigration to the United States was diverse from the very beginning. Its numbers steadily increased throughout the years and according to the Institute of Modern Russia, there were 3.13 million Russians in the United States in 2011. They dispersed throughout the country creating ethnic enclaves with the biggest one located in New York City (Brighton Beach, Brooklyn) and California (The Silicon Valley). Russian immigrants are mostly educated and consequently they enter labor market with wages above minimum level.
The neoclassical economic theory proves to be right when analyzing Russian immigration. Wage differentials between receiving and sending countries are substantial enough for people to seek employment opportunities abroad. Unemployment rates in Russia play a significant role as well being a push factor leading to immigration. As unemployment level rises in Russia, the number of illegal aliens (mostly visa overstayers) increases as well. However, under recent political tensions between the two countries number of immigrants dropped.