Between 1991 and 2010, millions of Brazilians migrated from rural to urban areas, many of them because of the effect of increasing drought brought on by climate change. This migration has had effects not only on wages and employment, but also on the closely-related urban housing market.
We decided to examine the phenomena in a recent study, to contribute to urban policymaking in Brazil and because of the ramifications for many other developing countries where increasing patterns of extreme weather have similarly led to lower agricultural output and lower economic growth in rural areas.
Climate change and rural-urban migration are only likely to intensify in the 21st century. Understanding the labor and housing impact of rural-urban migration on the migrants themselves as well as on long-term residents of the cities is crucial for preparing cities for the future.
Housing and Labor Markets
Our study of the 1991-2010 period shows how weather-induced migration can affect the housing and local labor markets. The influx of migrants increased the local demand for housing, on average boosting the growth in the housing stock by 1% percent and pushing the growth in housing rents up by 5%. Yet, these impacts differed largely according to the quality of housing. Poor migrants from rural areas were more likely to live in precarious housing, with poor access to public services, like sewage or running water, and in slums and land invasions far from job centers. There was a significant increase in the number of housing units and rooms in this category (35% and 37% over two decades, respectively). But there was no significant rise in rents, indicating that the supply in this most basic housing category kept pace with the increased demand.
By contrast, in the next higher housing category, which is still of low quality, rural migration led to slower growth in housing quantity and faster growth in rents. That likely occurred because when land—a particularly scarce resource in many urban settings—is used for precarious housing, it is no longer available for other uses, including better quality housing units. For that reason, supply in the category of low-quality housing above precarious didn’t grow as fast as demand. Indeed, in this housing category, a one percentage increase in the rural immigration rate led to a 6.4% increase in housing rents, a 12.3% slower growth in the number of housing units (and 9.5% in the number of rooms). The effects on higher quality housing were roughly similar.
Employment and Wages
Rural migrants, of course, participate in the labor markets at their destinations, and their arrival in Brazilian cities led to an increase in employment. A one percent increase in migration, led to an approximately 4% rise in jobs. But it also led to a 5% loss in wage growth among urban residents. This negative effect on wages was stronger in the service sector, where there was a weaker effect on employment compared to the local economy as a whole. Meanwhile, in the manufacturing sector, the opposite was true, with a stronger positive effect on employment and weaker negative effect on wages. The more pronounced wage effect in services is probably due to the fact that this sector tends to be characterized by more informal employment, not bound by minimum wage laws as formal firms are.
Policymaking in a Rapidly Changing World
Climate change will increase the frequency and severity of extreme weather events, including drought, hurricanes, floods, and wildfires, and increasingly push rural migrants into crowded cities in the developing world. Our key contribution is incorporating an analysis of how local housing markets adjust to these shocks, into the voluminous studies on weather-induced rural-to-urban migration. Housing policy will inevitably become a key ingredient in efforts to mitigate the social and economic consequences of a warming planet, and more research will have to be done to help policymakers achieve that goal.