How to Spend $50 Billion to Make the World a Better Place
Page 13
most economists and other commentators. However, there
is no consensus on how migration might achieve this, with
strong arguments being made both for and against.
In 2000, it was estimated that 175 million people – 3%
of the global population – were migrants who had lived out-side their country of birth or citizenship for a year or more.
This number had doubled in the previous 25 years, during
which the world’s population grew by 50%. Most migrants
move from poorer to richer countries, with about 60% of the total now living in the more developed countries. Although there are many more potential migrants, immigration has
become a major political issue in receiving countries (for example, European Union Member States). Public opinion
polls suggest that most residents oppose further immigra-
tion and support government measures to reduce illegal or
irregular migration.
Most economists welcome migration from lower- to
higher-wage countries, because it uses resources more efficiently and maximizes production. The global economic
gain is the sum of net income gains of individual migrants, plus a small bonus for receiving countries. It was estimated in 1984 that world GDP could more than double if
free migration was allowed, adding between $5 trillion and $16 trillion to the 1977 figure of $8 trillion. The global economy has now grown to over $30 trillion, making potential
gains today far greater. With such potential gains, the benefit from even partial liberalization of labor flows could benefit the world economy far more than trade liberalization.
For countries receiving migrant workers, the overall eco-
nomic impacts are clearly positive, albeit there will be some
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Population and Migration
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Table 7.1. Europe and Africa, demography,
1800–2050
Share of world population %
1800
2000
2050
Africa
8
13
20
Europe
20
12
7
World pop. (bn)
1
6
9
losers who must be compensated. For countries that are
net senders of migrants, the situation is less clear-cut. So, although the global economy and individual migrants may
benefit, sending countries may find their economic development held back by the loss of talented, educated citizens. In a worst-case scenario, migration may actually cause further divergence of per capita incomes.
There are clear arguments for developed countries, with
aging populations and fewer young workers, to use immi-
gration to stabilize work forces. Many developing countries are happy to export some of their excess labor to increase remittances and acquire new skills. However, managing
migration optimally for the benefit of all parties is more difficult.
Migration is driven by differences. As economic differ-
ences widen, developing country populations continue to
grow, and transport becomes cheaper and easier, migration
pressures will increase. As well as the basic gap in GDP, the continued drift of labor away from agriculture (the world’s major employer) creates a larger pool of willing migrants.
This is partly a result of trade barriers to agricultural produce, which reduce farm employment in poor countries.
At the same time, there is a demand for migrant labor to
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116 How to Spend $50 Billion to Make the World a Better Place work on the subsidized, protected farms in industrialized
countries.
Ethnic or security differences also drive migration. Con-
flict and the creation of new nations in the old Communist bloc have caused population shifts and contributed to the
flow of migrants, for example.
Assessing the opportunities
Many countries receiving migrants are attempting to
manage immigration by discouraging potential migrants
through tighter controls and restriction of benefits. How-
ever, this is not an optimal solution.
Three opportunities are assessed in this chapter, all of
which could be implemented in the next 5 to 15 years. These would each raise the benefits and reduce the costs of migration, most of which would probably occur in any case. In
brief, these are:
r Active selection systems to allow in those foreigners
who are most likely to succeed. This would reduce fears
of immigration and allow wider entry channels to be
opened for skilled workers and professionals.
r Widening legal entry channels for unskilled guest work-
ers, together with encouragement to return to their
countries of origin. This would provide temporary labor
without permanent settlement.
r Using the 3 R’s of migration – recruitment, remittances, and returns – to promote economic convergence over
time.
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Population and Migration
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The overall goal is to create a world in which migration is unnecessary because sufficient opportunity exists at home.
The majority of people do not migrate, and they will only
enjoy higher incomes if their countries prosper. The chal-
lenge is to ensure that the migration of the exceptional few also improves conditions for those who stay behind.
Opportunity 1: Active selection procedures
for migrants
Whereas migration at one time was a difficult, expensive,
and usually permanent process, the situation today is much more fluid. Migrants now select their destinations and often adjust to long-term resident status after entering on a temporary basis. This adjustment process can be difficult and frustrating for them, and the ambiguity of status of many
arrivals often leads to the perception or fear of excessive immigration in the host country. Active selection procedures could improve this situation, for the benefit of all concerned.
We have already seen that the net economic effect
of immigration to industrialized countries is positive but small. More migration might be tolerated by the host country’s native residents if those migrants who are likely to generate maximum economic benefits to the destination
country are selected. This is the approach successfully
adopted in Canada, which uses a points-based decision
system covering factors such as education and language
skills. The country has continuing high levels of immigra-
tion (approximately a quarter of a million people annually
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118 How to Spend $50 Billion to Make the World a Better Place into a population of 32 million) and significant public sat-isfaction with the policy.
Alternatively, demand-based systems can be adopted, so
that employers select migrants they believe best suited for jobs on offer. This inevit
ably creates tensions between companies wishing to employ foreigners and the need to pro-
tect local workers. To ensure the local labor pool is properly searched, employers could be required to pay a fee to employ migrants.
There are two potential downsides to selection pro-
cedures:
1. The already high costs of curbing unwanted and unlaw-
ful immigration may rise, to ensure that all immigration
is properly managed and controls are not bypassed. In
2002, Canada, Germany, the Netherlands, the UK, and
the USA collectively spent at least $17 billion to enforce immigration law and care for asylum seekers (about
two-thirds of the amount they spent on overseas aid).
2. Selecting the brightest and best from developing coun-
tries could increase inequality and migration pressures.
Some compensatory mechanism such as exit taxes or
continued taxation of migrants by their countries of ori-
gin might alleviate this.
Bearing in mind these provisos, increased immigration of
well-educated, productive workers to developed countries
could help to stabilize their work forces and pension sys-
tems. Resistance from the native populations is likely to
decrease as these benefits become apparent. There is also
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Population and Migration
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a plausible argument that a certain level of “brain drain”
would be beneficial for developing countries. If people
believe that migration could increase their returns from
education, more people will work for higher qualifications, and only a proportion of them will emigrate. The pool of
well-educated nationals will increase even as the brain drain continues.
Although managed migration can be beneficial for all
parties, it is not always so. At one end of the spectrum,
migration of IT specialists from India has contributed to
a virtuous circle of increased technical education and the growth of a significant computer services industry in India itself. At the other end, emigration of doctors and nurses from South Africa has contributed to a continuing decline
in the number of healthcare professionals available at a time of increasing need.
Developing countries, led by India, want to see liber-
alization of the temporary movement of workers (initially
professionals, later unskilled) on a global basis. The mechanism for this in the long run would be a visa issued under the General Agreement on Trade in Services (GATS, part of
the World Trade Organisation).
Opportunity 2: Guest worker policies
Alongside the managed immigration of highly skilled work-
ers, guest worker programs aim to add mostly unskilled
workers temporarily to the labor forces of developed coun-
tries. They usually do so-called “3D” jobs (dirty, dangerous, and difficult) for which local labor is not available.
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120 How to Spend $50 Billion to Make the World a Better Place However, such programs generally have not been a complete success. They have led to both labor market distortions (where employers rely on a continued supply of immigrant
labor) and dependence (when migrants and their families
depend long-term on earnings from foreign jobs). There
has been little large-scale resumption of the process in
recent years, but if better ways could be found to manage
guest workers, there would be benefits for both workers and employers.
In the 1960s, millions of guest workers from Southern
Europe and North Africa were employed temporarily in
Western Europe and were regarded as hardworking. How-
ever, when recruitment stopped in 1973–74, many unem-
ployed workers chose not to return to their countries of
origin. It became easier for new arrivals to receive welfare benefits than get jobs, and migrants began to be viewed by many native residents as a drain on society.
New guest worker programs set up in the 1990s were
much more focused, targeting single groups such as com-
puter programmers or farm laborers. At the same time,
there are now far more irregular foreign workers in
developed countries. They can be encouraged into short-
term legal employment by appropriate tax and subsidy
regimes.
The labor market distortion inherent in large-scale guest
worker schemes can be reduced by appropriate use of
employer-paid taxes and fees. Dependence can be tackled
by use of incentives such as repayment of migrant workers’
social security payments when they return to their countries of origin.
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Population and Migration
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Significant expansion of temporary worker migra-
tion still presents challenges. In particular, enforcement becomes a major burden, especially when some sectors have
large numbers of illegal workers. One solution is “earned
legalization,” whereby irregular workers can earn legal status by registering and completing employment and tax
requirements.
Although economic incentives can help host countries
to manage temporary migrants, their effect is not always
predictable. For example, migrant families were encour-
aged to leave Germany in the early 1980s by the offer of
a departure bonus of up to $5,000 and repayment of their
social security contributions. Between 1982 and 1984–5,
there was a net loss of 300,000 of the then 4.7 million foreigners, but it was concluded afterward that the majority
of foreigners who took the departure bonus would have left in any case. Of course, from the perspective of returnees, the bonus was a significant benefit, but apparently not an incentive.
Detailed examination of the economic impact on the
USA as a host country showed that workers who competed
with migrants tended to move away from the area, dissipat-
ing the impact across the country. While the average wage
reduction due to immigration over the 1980–2000 period
was 3.2%, this rose to almost 9% for US-born workers who
had not completed high school.
In summary, making the transition from the current
widespread employment of illegal workers to a world of
legal migrants is a very difficult challenge given growing international inequality.
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122 How to Spend $50 Billion to Make the World a Better Place Opportunity 3: Migration for development
Development should reduce economically motivated migra-
tion by eliminating its root causes. Migration can speed
up this process if the 3Rs of recruitment, remittances, and returns accelerate economic growth in the country of origin. However, the current impacts of migration are less clear in poor countries than in receiving
countries.
Recruitment of skilled professionals from developing
countries could reduce economic growth in these coun-
tries. However, remittances both from both skilled and
unskilled migrants, and encouragement of returns, can
be managed to promote rather than hinder economic
growth.
Remittances can be maximized if developing countries
set realistic exchange rates and adopt economic policies
likely to foster growth. These remittances more than dou-
bled in the ten years from the late 1980s, overtaking official Overseas Development Aid (ODA) by 1997. In 2001, the total amount remitted was over $70 billion, compared to just over $50 billion of ODA.
Half of all remittances are to India, Mexico, the Philip-
pines, Morocco, Egypt, and Turkey, but they can also be
particularly important to smaller and island nations (for
example they are, 37% of GDP in Tonga and 26% in
Lesotho). The money sent improves the lives of people in
receiving households, but also benefits the local economy
via multiplier effects.
Skilled returnees can help to establish new industries,
for example, the high-tech sectors in Taiwan, India, and
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Population and Migration
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Table 7.2. Migration: Economic impacts, 2001 data
Countries
World
Low
Middle
High
Population (m)
6,133
2,511
2,667
955
Ave GDP($/year)
5,140
430
1,850
26,710
Total GDP ($bn)
31,500
1,069
4,922
25,506
Moving 100 million people from low to high, same
per capita averages
Population (m)
2,411
1,055
Ave GDP($/year)
5,566
430
26,710
Total GDP ($bn)
34,138
1,037
28,179
GDP%
8
Moving 10 million people from low to high, same
per capita averages
Population (m)
2,501
965
Ave GDP($/year)
5,706
430
26,710
Total GDP ($bn)
31,760
1,065
25,773
Change in ave/tot