International Economics - Migration


Elementary considerations lead to a presumption that international migration results in a net gain in economic welfare. Wage differences between developed and developing countries have been found to be mainly due to productivity differences which may be assumed to arise mostly from differences in the availability of physical, social and human capital. And economic theory indicates that the move of a skilled worker from a place where the returns to skill are relatively low to a place where they are relatively high should produce a net gain (but that it would tend to depress the wages of skilled workers in the recipient country).

There have been many econometric studies intended to quantify those gains. A Copenhagen Consensus study suggests that if the share of foreign workers grew to 3% of the labour force in the rich countries there would be global benefits of $675 billion a year by 2025. However, a survey of the evidence led a House of Lords committee to conclude that any benefits of immigration to the United Kingdom are relatively small. Evidence from the United States also suggests that the economic benefits to the receiving country are relatively small, and that the presence of immigrants in its labour market results in only a small reduction in local wages.

From the standpoint of a developing country, the emigration of skilled workers represents a loss of human capital (known as brain drain), leaving the remaining workforce without the benefit of their support. That effect upon the welfare of the parent country is to some extent offset by the remittances that are sent home by the emigrants, and by the enhanced technical know-how with which some of them return. One study introduces a further offsetting factor to suggest that the opportunity to migrate fosters enrolment in education thus promoting a "brain gain" that can counteract the lost human capital associated with emigration .

Whereas some studies suggest that parent countries can benefit from the emigration of skilled workers, generally it is emigration of unskilled and semi-skilled workers that is of economic benefit to countries of origin, by reducing pressure for employment creation. Where skilled emigration is concentrated in specific highly skilled sectors, such as medicine, the consequences are severe and even catastrophic in cases where 50% or so of trained doctors have emigrated. The crucial issues, as recently acknowledged by the OECD, is the matter of return and reinvestment in their countries of origin by the migrants themselves: thus, government policies in Europe are increasingly focused upon facilitating temporary skilled migration alongside migrant remittances.

Unlike movement of capital and goods, since 1973 government policies have tried to restrict migration flows, often without any economic rationale. Such restrictions have had diversionary effects, channeling the great majority of migration flows into illegal migration and "false" asylum-seeking. Since such migrants work for lower wages and often zero social insurance costs, the gain from labour migration flows is actually higher than the minimal gains calculated for legal flows; accompanying side-effects are significant, however, and include political damage to the idea of immigration, lower unskilled wages for the host population, and increased policing costs alongside lower tax receipts.

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