Does Migration Bring Economic Salvation or Ruin?
TheFinancialist: The author is Professor and Director of the Oxford Martin School and Professor of Globalization and Development at the University of Oxford. This article draws on his widely acclaimed book “Exceptional People: How Migration Shaped Our World and Will Define Our Future,” published by Princeton University Press in 2012.
We live in an era of two competing narratives. The first suggests that migrants are flooding across our borders, stealing jobs and eroding the social fabric. The second argues that in spite of minor short-term dislocations, international migration is a boon, spurring innovation and fueling long-term economic growth. Both of these caricatures are too simplistic. The costs of migration are immediate and local, so they have real social and political consequences, while the benefits are more diffuse and longer term. As with debates on trade, in which protectionist instincts often prevail, the role migrants play in economic development is often overwhelmed by a push for defensive measures to keep them out. But the economic evidence is clear: Migration helps economies in both the developed and developing world.
The world’s estimated 231 million migrants make up about 3 percent of the global population. While the share of our societies that are migrants may well be lower today than in previous centuries, their numbers have grown. There has been a fourfold increase in the number of independent countries over the past 100 years, so people whose moves previously would have been within national borders are now considered migrants. The global population has also quadrupled to more than 7 billion.
At the end of 2012, three out of four migrants lived in a small group of 24 countries, most notably the United States. Approximately 70 million people have left one developing country for another, while roughly 65 million have gone from developing countries to rich ones. About 55 million people have moved among OECD countries, and a rapidly growing number – around 20 million – have left the OECD for emerging markets, where job opportunities are growing most rapidly.
The European Union is the world’s largest experiment with visa-free labor migration. Though it isn’t surprising that substantial numbers of people have emigrated from poorer countries such as Romania and Poland, it’s quite eye-opening that Germany, Italy and the U.K. led the way not only in absorbing migrants, but also in producing them. But perhaps the main lesson from Europe is how few people move when given the chance. Migration levels were seldom higher when restrictions were lifted than when they were applied. Given the more than 50 percent youth unemployment rate in Greece and Spain, that is particularly remarkable.
Of the 15 million people who leave their homes each year, most fit into one of four categories: economic, student, social and refugee/asylum. Around 5 million people cross borders to work each year. Highly skilled workers have special talents or training that help fill gaps in the native workforce, while low-skilled ones tend to fill shortages in physical labor or take jobs natives don’t want. In addition, about 3.5 million students migrate each year. While some countries, such as the U.K., insist that students leave after their schooling is complete, countries such as Australia and the U.S. have gained talented workers by allowing some young people to stay. Sixty-eight percent of foreign students who received doctorates in the U.S. in 2000 were still there five years after graduation. About 2 million people move to reunite with loved ones each year, while refugees and asylum seekers account for another 2 million migrants.
At the end of 2012, there were 15.4 million officially recognized refugees worldwide, and developing countries were host to 80 percent of them, up from 70 percent 10 years ago. While it is impossible to know how many undocumented migrants there are in the world, estimates put the number in the U.S. at about 11 million, roughly 22 percent of the country’s 50 million total immigrants.
On the economic front, firms everywhere are competing for talented workers, and governments that are more open to migration help businesses become more agile, adaptive and profitable. By the mid-1990s, for example, more than 30 percent of documented migrants into the U.S. were highly skilled. The proportion is similar in Europe: the percentage of skilled migrants entering EU countries was 36 percent by 2011. But lower-skilled workers are vital, too. In the USA, unskilled immigrants are an essential part of the construction and services sector, and migrants comprise more than 90 percent of the labor force in Dubai and Qatar.
If migrants play such a vital role, why is there so much concern? For one thing, many people believe they take jobs and destroy economies. The truth is the opposite: migration makes economies more dynamic, creates jobs and sparks long-term growth. American immigrants founded Google, Intel, PayPal, eBay and Yahoo. Skilled migrants are at the helm of more than half of Silicon Valley startups and hold more than half of the country’s patents, though they only comprise only 15 percent of the population. There have been three times as many immigrant Nobel laureates, National Academy of Science members and Academy Award-winning film directors in the U.S. as native ones.
Research on immigrants to the U.K. from Poland, Romania and other countries that joined the European Union in 2004 showed that the migrants contributed “significantly” more in taxes than they received in benefits and services. According to the World Bank, if migration increased to the equivalent of 3 percent of the workforce in developed countries between 2005 and 2025, it would generate worldwide economic gains of $356 billion.
There are, however, legitimate concerns about large-scale migration. Social dislocation is real. As with globalization, the positive aspects of migration are diffuse and often intangible, while the negative aspects bite hard and tangibly for a small group of people. There is also some truth to the notion that migration siphons talent away from the places that need it most. Sixty-five percent of university graduates from Morocco, 60 percent from Gambia, 25 percent from Iran and 10 percent from the Philippines leave their home country.
But if managed appropriately, the “brain drain” can become the “brain gain” for developing economies. The Philippines, for example, is one of the largest sources of migrant nurses for developed economies. But it also has more nurses per capita than comparable countries and even some much richer ones, including the U.K. Second, remittances (money sent home from migrant workers to their families and friends) lift people out of poverty and are integral to many developing economies— in Tajikistan, for example, these flows amount to almost half of GDP. In 2012, migrants sent an estimated $401 billion in remittances to developing countries.
The aging global population makes it even more imperative to ensure a strong labor supply augmented by foreign workers. In 1950, only 14 million people were over the age of 80. More than 100 million are today, and current projections show the number rising to nearly 400 million by 2050. Fertility is collapsing to below replacement levels everywhere except Africa, and the OECD workforce is projected to decline from around 800 million to close to 600 million by 2050. As a result, the ratio of elderly people dependent on government support to those still in the workforce will grow rapidly over the next 30 years. The problem will be particularly acute in Europe, North America and Japan, but the developing world will feel the pinch, too. By 2050, some 20 percent of India’s population and 31 percent of China’s will be 65 or older.
In the age of globalization, the barriers being erected to migrants pose a threat to economic growth and sustainability. Free movement across borders, like totally free trade, remains a utopian prospect, though it has proved workable in Europe. As John Stuart Mill argued, we need to ensure that the real local and short-term social costs of migration do not detract from its role “as one of the primary sources of progress.”
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