The economic role of migrants in the production of tradeables and nontradeables: the case of Austria

Globalisation has been associated with increased international mobility of capital but, partly due to legal restrictions, it is not often associated with labour mobility. However, free labour mobility and free trade are substitutes in respect of tradeable goods and services. The Austrian migration system channels migrants into industries which produce tradeables, e.g. manufacturing with a low capital to labour ratio, in particular, labour intensive industries like clothing, leather and textiles; and also into activities which are non-tradeables, e.g. tourism, construction and personal, health and domestic services. In the course of the 1990s, the rise in labour mobility lagged as industries employing a high proportion of migrants in the production of tradeable goods declined behind the growth in international trade of goods and services. Technological developments, the reduction in transport costs as well as improved processes for the production capacities of less developed trading partners resulted in a shift in the production of tradeable goods. The structure of migrant labour changed as a consequence and labour mobility lost momentum. Physical labour mobility is necessary only where services are linked directly to the consumers, for example, nursing or tourism industry, or where a particular type of labour is linked to direct capital investment, for example, highly skilled labour which move with multinational companies. Recent developments especially in communications technology, tend to promote mobility of services without the need for labour mobility. As long as capital, technology and managerial skills are mobile, labour may remain in the country of origin, e.g. in the case of Indian computer programmers. Both labour mobility and trade in goods and services will tend to produce a convergence in the pay rates of the countries concerned. (Heckscher-Ohlin) Therefore, forces which promote international movement of goods and services, may be expected to produce a tendency for convergence of pay rates even without a movement of labour