Losing out: The broken economics of irregular migration (and how to fix them)

The following essay was originally compiled for the Mixed Migration Review 2021 and has been reproduced here for wider access through this website’s readership.

The essay’s author Doug Saunders is a Richard von Weizsäcker Fellow at the Robert Bosch Academy in Berlin. He is the author of books on migration and cities including Arrival City: How the Largest Migration in History is Reshaping Our World (2010) and The Myth of the Muslim Tide (2012).

The economies surrounding irregular migration are usually hidden from or largely ignored by organisations and policymakers that focus on mixed migration. Yet many businesses and local economies in sending, receiving, and transit countries depend to a large extent on irregular migrants. Averting or even reversing widespread irregularity would deliver myriad benefits to many stakeholders.


Shifts in states’ migration policies and related enforcement actions often have economic knock-on effects in a range of locations affected by irregular migration, from places of departure to final destinations and points in between. Over the past decade, for example, European, North American, and Australasian policies aimed at curbing irregular migration have disrupted economies and livelihoods in transit-hub cities and regions of lower-income countries on key migration routes. In some cases, this has led to people on the move becoming “involuntary immobile”— or stranded, in plain English—and has reduced economic opportunities for residents who once benefitted from a more constant coming and going of migrants and refugees with money to spend on accommodation, food, transport, and other essentials.

More recently, the border closures and mobility controls imposed by governments since the onset of the Covid-19 pandemic have brought much-needed attention to the dependency of many economic sectors on migrant workers, including irregular migrants. This has prompted some countries to take steps to fill gaps in labour supplies previously served by irregular migrants.

Since the beginning of the pandemic in 2020, several higher-income countries, including Italy, Portugal, and Ireland, have found that the unintended consequences of their border closures have made it necessary to recognise the economic and logistical reliance of certain industries on irregular migrants’ labour and to introduce regularisation and recognition policies. In other countries, such as Australia and Spain, business and political leaders have called for similar steps to be taken to resolve severe labour shortages.

These moves point to the longer-term feasibility of policy options aimed at preventing migrant labourers from falling into irregularity, at regularising those who have, and at creating more economically rational migration pathways and visa regimes.

Understanding the irregular economy

Governments have long been hampered by misunderstandings of the nature of irregular migration. There is often an underlying assumption that regular “recognised” or visa-holding immigrants are a distinct group unrelated to irregular migrants, who are seen as clandestine or trafficked. In reality, irregular status is more often a product of gaps and flaws in immigration and visa regimes that cause the same migrant populations— and often the same individual migrants—to shift back and forth between regular and irregular status. “There are many paths to irregularity,” the International Organization for Migration (IOM) observes, “such as crossing borders without authorisation, unlawfully overstaying a visa period, working in contravention of visa conditions, being born into irregularity, or remaining after a negative decision on an asylum application has been made.” Irregular labour migration was found by one United Nations analysis to be predominantly “driven by asymmetries between the demand for labour and the supply in countries of destination and origin,” producing “limited legal channels through which to migrate.” A great many “irregular-stay” migrants in higher-income countries are simply formerly regular migrants who have overstayed their visas or who are working while holding non-work visas. In other cases, they are among groups of previously recognised, regular seasonal migrant workers forced into irregular and clandestine status by the elimination of work-visa regimes. (This has been shown to have been the origin, in the early 2000s, of irregular trans-Mediterranean migration from North Africa to Europe). In the Global South, irregular status is more likely to derive from irregular entry (crossing borders without required documentation) than irregular stay (working in a country with expired or improper documentation) and is often tied to informal economies. In fact, research has found a direct link between the size of an informal economy and the proportion of irregular workers in the labour force.

The economies of mixed-migration transit hubs (explored in further detail below) are equally misunderstood or even ignored entirely. Migrants in such locations spend their savings on transportation and documentation services and other transit needs, and often decide to stay there for longer than they had anticipated either to engage in casual labour or entrepreneurial activities to fund onward travel, or because downstream legs of planned journeys have been severely restricted or closed off entirely under political pressure from major destination countries.

In part because the status of many migrants is constantly in flux, it has been difficult to gauge with any precision the scope of irregular migration, or its contribution to labour markets and economies.  Significant numbers of undocumented people are found in low- or middle- income countries susceptible to large mixed-migration flows. These populations usually enter irregularly without documents. For example, rough estimates suggest that Pakistan is home to about 4 million undocumented people, with the largest national group coming from Afghanistan; Thailand to between 2.5 and 3 million, from Southeast Asia; and Malaysia to 500,000. Brazil is thought to have hundreds of thousands of irregular Andean migrants within its borders. In higher-income countries, irregular populations are more typically, but not exclusively, irregular-stay migrants who enter legitimately and later slip into irregularity. Recent estimates of irregular- migrant stocks have found that in “normal” years (that is, years without a pandemic or a large-scale migration “crisis” such as the one that gripped European countries in 2015-16) there are typically between 1.9 and 3.8 million irregular migrants residing in the European Union, approximately 11 million in the United States,  12 and between 60,000 and 100,000 in Australia.

Transit hubs

Because migration pathways are so lengthy, complicated, and unpredictable for refugees and migrants who do not comply with receiving-country entry regimes, transit regions—which often adjoin international borders— become centres of economic activity driven by hospitality, transportation, accommodation, food service, smuggling, communications, and other migrant needs. These local economies are highly vulnerable to shifts in the migration policies and enforcement regimes of receiving countries and regions.

Two well-known transit hubs are Agadez in Niger and Gao in Mali. Both lie on routes heading north across the Sahara to Algeria, Morocco, Tunisia, and Libya. IOM has estimated that between 320,000 and 350,000 migrants stayed in Agadez during 2016 on their journey northward, with an additional 91,500 staying there during southbound circular-migration or following deportation from Algeria or Libya. Residents of both Gao and Agadez were found to have little long-term interaction with the migrants, but nevertheless see them as essential to their livelihoods. In Agadez, before the EU-funded enforcement of the 2015 Law Against Illicit Smuggling of Migrants reduced the number of refugees and migrants transiting the city, services to people on the move “offered direct jobs for more than 6,000 people (in jobs such as passeurs, coxeurs, ghetto owners and drivers) and the combination of migrant consumption and increased trade with Libya indirectly supported incomes of reportedly more than half of all the households in Agadez.”

Another well-documented example is the Frontera Corozal region, which straddles western  Guatemala and the Mexican state of Chiapas. In places such as the Guatemalan border town of La Técnica, large numbers of Central and South American and Chinese migrants have fuelled a thriving local economy around smuggling and related services. There, migrants will typically pay $2 to $3 each for a short trip across the Usumacinta River that marks the frontier—and considerably more for taxi or bus rides to and from the crossing points—$10 a night to stay in flophouse “hotels,” and more on restaurants and other services. As one restaurant owner there told a reporter: “The economy of La Técnica is the migrants. If there are migrants, there is business. If there are no migrants, there is none.”

When migration routes become impassable due to policy or enforcement changes at the receiving end, transit hubs and countries not only experience a sudden loss of income for thousands of people, but often become longer-term homes to large populations of involuntary immobile migrants. As irregular-stay populations, they become competitors for scarce irregular-market and legitimate jobs, and risk running out of money to spend in the local economies. This was the case in the transit districts of Indonesia, where changing Australian migration policies in the 2010s left thousands of Afghans and then Rohingya from Myanmar stranded indefinitely. They developed their own informal economies and have joined the labour market, inspiring calls for regularisation or limited services and labour rights.

Settled irregular populations

It has been known for some time that irregular and undocumented migrants play a significant part in the labour forces of major industries and service sectors in advanced economies. In sectors such as agriculture, elder care, childcare, hospitality, construction, and food service, one analysis found that irregular migrants “make an economic contribution by allowing firms to overcome bottlenecks caused by recruitment problems.”  But it is not only in low-skilled and low-wage sectors that irregular migrants play a role: many highly skilled workers in fields such as education, health, public administration, and financial services are students who have overstayed their education visas and are thus irregular; one study estimates that more than 50 percent of non-European Union students employed “illegally” in full-time positions in Europe are working in such fields.

Dependence on irregular-stay migrants may be a necessity caused by gaps in regular immigration and visa systems, but it can be exploitative of the migrants themselves and sometimes harmful to the earning prospects of the wider labour force. As one study found, undocumented labourers “tend to arrive in larger numbers when the economy is booming and move to regions where job growth is strong.” Literature shows that, although regular immigrants have little or no negative effect on the earnings of domestic workers, irregular immigrants can have a more noticeable negative wage impact—albeit one that can be mitigated by minimum-wage laws. One study in the UK found that average irregular immigrant wages are around 25 percent lower than those of regular migrants and that reliance on undocumented labour can bring down sectoral salaries in a way that regularised labour would not. However, a number of analyses suggest that irregular-immigrant labour delivers a net economic benefit, at least at the limited scale typically found in developed countries: “Due to the overall small number of irregular immigrants their impact on the economy is modest though significant in the few sectors where they concentrate… they are highly responsive to labour market needs and more geographically mobile than the indigenous population.” Studies in Greece and the United States have found that irregular immigration has a net positive effect on these countries’ economies.

Relying on irregular labour, however, risks incurring fiscal losses, in the form of forfeited tax revenues and increased enforcement costs. In general, immigrant labour is a considerable benefit to the public revenues and overall economies of host countries. It is estimated that at least 85 percent of immigrant-worker earnings remain in the host country, even when employment is in the informal economy. Irregular-immigrant labour does play some fiscal role because even undocumented workers employed in the grey-market pay some taxes, such as sales or value-added tax. Moreover, they “do not claim as many benefits, including access to public services to the same degree” as regular migrants. But analyses have shown that irregular workers pay considerably less overall in taxes, and that regularisation results in higher fiscal contributions. One UK estimate found that an earned regularisation scheme (affecting around 400,000 migrants) would raise national tax revenues by the equivalent of £1.1 billion per year, while it would cause these migrants to use only £410 million more in public services. Additionally, regularisation was estimated to save the country between £10.5 billion and £15.5 billion annually in deportation and removal-related costs. Indeed, wider-scale analyses have suggested that the worldwide economic benefits of appropriately matching labour-market needs to regular migration demands would be in the hundreds of billions of dollars.

The Covid effect

As the Covid-19 pandemic began to spread across the world in March 2020, most countries imposed some form of border closure or restriction, introduced quarantine requirements, banned seasonal, student or work immigration, or prohibited all entry by non-citizens. Anticipating or responding to such actions, millions of migrant labourers returned to their home countries or were left stranded in transit countries. These phenomena had two effects on irregular migrants in the labour market: the loss of irregular-entry seasonal or temporary workers who were usually available for work, and an increased reliance on undocumented irregular-stay workers already present when the restrictions came into effect.

As a consequence, many countries found themselves desperately seeking qualified workers in sectors such as healthcare (as the pandemic intensified) and in agriculture (as planting and harvest seasons approached). Likely the first country to recognise the problem and to seek a policy solution was Italy, which had been struck hard by the coronavirus and closed its borders in the spring of 2020. While Italy faced severe labour shortages, the presence of tens of thousands of undocumented migrants living in dangerous conditions became a public issue, and a potential solution to the labour shortages. Research had already identified Italian agriculture as a migration pull factor that regularly draws in as many as 200,000 undocumented field workers per year, on top of around twice that number of undocumented workers within Italy, employed mainly in elder care and healthcare.

In the summer of 2020, the Italian government issued a decree allowing certain undocumented residents to apply for regularisation with employer sponsorship, or to apply for a residence permit for the purpose of seeking employment. By October, 207,000 people had applied for a six-month visa and another 13,000 had applied for job-seeking residence permit. Most of the applicants worked in the health and care sectors; workers in fields such as construction, logistics and hospitality were excluded from the scheme. This restrictive scope, the limited timeframe of the program, and its reliance on employer goodwill were criticised by humanitarian organisations. Regularisation programs on smaller scales (affecting a few tens of thousands of migrants) but providing more robust visas and pathways to citizenship, were launched in 2020 by Portugal and in 2021 by Ireland.

In other countries, the plight of irregular-stay migrants and many industries’ urgent need for legal access to this labour force amid pandemic restrictions has led to public debates about the processes and policies that lead to irregularity and the need to reform them. In Brazil, as hundreds of thousands of irregular-stay migrants were in danger of becoming a serious infection risk due to their lack of access to the public health system, there was a sustained push to offer two-year renewable residency permits to an estimated 200,000 people “who are undocumented or have a pending immigration case.”

A similar push has taken place in Australia, where a government-sponsored study in the spring of 2021 recommended amnesty—or “status resolution”—in the form of a one- or two-year visa be given to an estimated 100,000 undocumented workers, three-quarters  of them employed in agriculture, the rest in fields such as cleaning and hospitality. The report cited public health concerns; most of these workers had not been vaccinated, because this would involve collection of their names and addresses. Farm-industry groups supported the recommendation because it would make widespread clandestine employment legal and allow the workers to pay taxes. One New South Wales business organisation found that 42 percent of firms surveyed believed labour shortages were imposing a “significant” toll. In August, the Australian Strategic Policy Institute recommended the country “seize the opportunity Covid-19 brings to harness Australia’s large number of unlawful non-citizens.” This would be similar to the mass amnesties Australia conducted on several occasions from the 1970s to the 1990s. A similar debate has taken place in Spain, where one recent study estimated that about 430,000 immigrants—12 percent of the total immigrant population, most of whom come from Central or South America—were living irregularly. The Spanish government is considering a mass regularisation program, similar to those it conducted in the 2000s, that would grant longer-term visas, both for health reasons and to bring irregular migrants into the formal economy.

Border closures and movement restrictions have also had devastating effects on transit hubs, creating economic hardship and often dangerous situations both for migrants stranded along transit routes and for host populations economically dependent on servicing those on the move. In Panama, towns along the Colombian border became populated with thousands of Haitian, African, and Asian transit migrants who were unable to travel further and had exhausted their savings, creating economic and humanitarian challenges. In the Libyan capital Tripoli, a traditional centre for services and informal employment of transit migrants, the blockage of transit routes due to the Covid-19 pandemic, coupled with tougher EU enforcement regimes, led to a violent and dangerous situation for tens of thousands of sub-Saharan migrants who lacked resources. Citing pandemic concerns, in late 2020 the Algerian government expelled thousands of sub-Saharan transit and resident migrants to towns in Mali and Niger, further exacerbating existing economic tensions in those towns, which had already suffered from the decline of their core transit-migration economy.

Beyond amnesties

Even if they garner the political will to be implemented, amnesties and regularisations are never more than stopgaps—emergency measures to recognise the economic and humanitarian importance of a migrant population whose plight and potential have been exposed by the commercial desperation of the pandemic period. Regularisations do not address the gaps between immigration policies and labour-market demands that force immigrants to take irregular paths or that leave large numbers of previously visa-holding workers and professionals without proper credentials after a short period. The pandemic-era crises of closed borders, labour shortages and reliance on irregular-migrant populations could prompt policy reforms that address irregular-stay populations through more economically informed visa regimes. These could facilitate easier renewals for work and seasonal visa holders and smoother transitions between statuses for students or tourists seeking periods of work.

Amnesty is not the only effective measure to provide a better and more official livelihood for residents who have fallen out of regular status. Even without regularisation, it is possible to implement policies that provide irregular immigrants with healthcare (including vaccinations), access to housing and school systems, and rudimentary social benefits, so they do not have to live underground or at risk. One significant example is Thailand’s Migrant Health Insurance scheme, under which all regular and irregular migrants from Southeast Asian countries must pay an annual fee to cover themselves and their families. Argentina and Costa Rica both provide schooling, social protection, and health services to all residents, regardless of citizenship or immigration status. And Spain is one of the few Western countries to provide access to healthcare and education to undocumented residents, although take-up is very limited because migrants fear deportation if they register. Below the national level, access to social and health services without regard for immigration status is offered by a number of cities in Europe and North America.

Some countries and regions have attempted with some success to reduce the volume of irregular-entry migration by creating limited pathways for regular migration, seasonal or otherwise, sometimes in partnership with sending countries. This has been done, with measured success in reducing irregular flows, by Spain (in relation to Moroccan emigration) during the 2000s; by ASEAN countries since the 1990s to allow temporary regular skilled-labour migration and deter irregular movements; and by some South American MERCOSUR countries through a 2002 Residence Agreement which aims to reduce irregular entries by granting legal residence for labour purposes to nationals of participating states. Similar steps have been proposed by the African Union since 2018 in its policies to implement the Free Movement of Persons Protocol to harmonise labour policies and regularise the cross-border movement of labourers across the continent. However, in many cases, actual implementation is lacking and programmes for regular, temporary labour migration are often limited to small-scale pilots. Although expanding pathways for regular migration would not end irregular migration entirely (as it is unlikely the number of available pathways would satisfy demand), it would go a long way in reducing it.

The Global Compact for Safe, Orderly and Regular Migration (GCM) advises its signatory states to ensure a better fit between irregular migration and the domestic economy through several measures. Signatory states are urged: to “facilitate transitions from one status to another” so visa regimes allow migrants who have fallen into irregular status to become regular again; to “prevent migrants from falling into an irregular status in the country of destination”; and to “reduce precariousness of status and related vulnerabilities.” The global Covid-19 pandemic has made a number of countries— including those not party to the GCM—aware of the need to make these reforms in order to take advantage of populations who have proven vital to sustaining the economy amid closed borders, but who do not have proper documentation.


Irregular migrants, rather than being strictly a legal and economic liability, are often an integral part of host countries’ economies and would be better served by closing the policy and visa gaps that create their irregular status. Irregular migration already contributes massively to the economies of transit and destination countries, as well as to origin countries through remittances. Regularising a larger part of irregular migration would lead to even greater economic benefits both for destination countries via, for example, increased tax revenues and lower spending on enforcement, and for migrants through, for instance, higher wages and lower risks of exploitation. Moreover, the economic impact of transit migration along major mixed migration routes needs to be taken into account in broader migration management policies, as reducing migration along these routes has severe economic impacts on transit hubs which could lead to further destabilisation in often fragile contexts.