Do migrant workers introduce asymmetries in the Phillips curve?

Abstract

This study hypothesizes that an increase in migrant workers may introduce asymmetric effects into the Phillips curve relationship in dynamic and open economies. As the share of migrant workers increases, the traditional price level–unemployment–output trade-off could become asymmetric, potentially reshaping price dynamics through labor market imbalances. Malaysia and Singapore have been used as case studies to explore this evolving structural asymmetry. Time series analysis has been employed to carefully analyze the sample study over the period 1980 to 2021. The findings reveal that gross domestic product (GDP), has a positive effect on the consumer price index (CPI), and that this effect is significantly amplified by higher levels of migrant workers. Conversely, while rising unemployment typically exerts downward pressure on price level, this negative effect is weakened in the presence of a larger migrant workforce. These results suggest that migrant workers play a key role in reshaping price dynamics. Given the role of migrant workers in amplifying price pressures, policymakers must carefully balance price level and income growth in order to preserve real gains and support sustainable economic development.