World Bank: Moving for Prosperity: Global Migration and Labor Markets Review
International Affairs Academy
Document of the Day
Free Professional Development
The rich have many assets; the poor have only one—their labor. Because good jobs are slow to come to the poor, the poor must move to find productive employment. Migration is, therefore, the most effective way to reduce poverty and share prosperity, the twin goals of the World Bank. Not surprisingly, all development experiences and growth episodes in history have involved a reallocation of labor across space and sectors within countries.
According to Moving for Prosperity: Global Migration and Labor Markets, however, some of the biggest gains come from the movement of people between countries. Migrants’ incomes increase three to six times when they move from lower- to higher-income countries. The average income gain for a young unskilled worker moving to the United States is estimated to be about $14,000 per year. If we were to double the number of immigrants in high-income countries by moving 100 million young people from developing countries, the annual income gain would be $1.4 trillion. This global welfare gain dwarfs the gains from the removal of all restrictions on international flows of goods and capital.
These gains remain largely notional because most people cannot move. Only about 3 percent of the world’s population live in a country in which they were not born, a proportion that has not changed much over six decades of otherwise unprecedented global integration, via trade, investment, and knowledge flows. Distances in space, culture, and language are inherent impediments to mobility, imposing an estimated 30–50 percent tax on migrant wages. The most important barriers are, however, national borders. The tax equivalent of an international border is over 150 percent for young unskilled workers from most developing countries, more than three times larger than those imposed by physical and cultural dimensions of distance.
The gains for immigrants do not come at the expense of host countries. Farmers in destinations from New Zealand to New Mexico thrive thanks to the hard work of immigrant workers. Institutions at the technology frontier—from CERN (the European Organization for Nuclear Research) in Geneva to Silicon Valley in California— innovate thanks to the ingenuity of immigrants. Native-born workers also gain on average as they gravitate away from the occupations that immigrants are willing to perform, because they benefit from the complementary skills that immigrants bring, or because they are consumers of the products and services immigrants provide. Almost every empirical study finds that increased labor mobility leads to large gains for the immigrants and positive overall gains for the destination country.
That creates a puzzle. The compelling economic evidence on the economic gains and social benefits of migration sits awkwardly with stark political opposition to immigration. Respondents to political opinion polls rate the arrival of immigrants in their countries as among their worst fears. Citizens worried about what migrants and refugees would do to jobs and wages, welfare programs, crime, schools, and their national identity. Frustrated by the public’s disregard of their empirical findings, many economists attribute political opposition to cultural and social factors, including xenophobia.
This Policy Research Report, Moving for Prosperity: Global Migration and Labor Markets, is an attempt to address this tension between the academic research and the public discourse by focusing on the economic evidence. We suggest a labor market–oriented, economically motivated rationale to the political opposition to migration. Global migration patterns lead to high concentrations of immigrants in certain places, industries, and occupations. For example, the top 10 destination countries account for 60 percent of global immigration. In the United States four states host half of all immigrants, and 10 counties host half of the immigrants in these four states. Immigrants are further concentrated in a narrow set of industries and occupations in specific geographic regions. The same pattern repeats itself in almost every major destination country. It is these geographic and labor market concentrations of immigrants that lead to increased anxiety, insecurity, and potentially significant short-term disruptions among native-born workers. Furthermore, the positive effects and benefits in the destination labor markets tend to be more diffuse whereas the costs are more concentrated and easily attributable to immigration.
Understanding (and empathizing with) these legitimate economic concerns is critical to informed and effective policy making. The goal should be to ease the costs of short-term dislocations of native-born workers and distribute more widely the economic benefits generated by labor mobility. Proactive interventions to ease the pain and share the gain from immigration are essential to avoid draconian restrictions on immigration that will hurt everybody. Ignoring the massive economic gains of immigration would be akin to leaving billions of hundred-dollar bills on the sidewalk.
TABLE OF CONTENTS
Chapter 1: Patterns of Global Migration
Chapter 2: The Economic Drivers of Migration Decisions
Chapter 3: The Wage and Employment Impacts of Migration
Chapter 4: Longer-Term Dynamics: Immigrant Economic Adjustment and Native Responses
Chapter 5: High-Skilled Migration
The gains for immigrants do not come at the expense of host countries. Farmers in destinations from New Zealand to New Mexico thrive thanks to the hard work of immigrant workers. Institutions at the technology frontier—from CERN (the European Organization for Nuclear Research) in Geneva to Silicon Valley in California—innovate thanks to the ingenuity of immigrants. Native-born workers (those who were born in the destination country) also gain on average, either because they gravitate away from the occupations that immigrants are willing to perform, because they benefit from the complementary skills that immigrants bring, or because they are consumers of the products and services immigrants provide. Almost every empirical study finds that increased labor mobility leads to large gains for the immigrants and positive overall gains for the destination country. That creates a puzzle. The compelling economic evidence on the economic gains and social benefits of migration sits awkwardly with stark political opposition to immigration. Respondents to political opinion polls rate the arrival of immigrants in their countries as among their worst fears. During the last round of elections in the United States and every Western European country, immigration was invariably one of the top three concerns. Citizens worried about what migrants and refugees would do to jobs and wages, welfare programs, crime, schools, and their national identity. Frustrated by the public’s disregard of their empirical findings, many economists attribute political opposition to cultural and social factors, including xenophobia. This Policy Research Report (PRR), Moving for Prosperity: Global Migration and Labor Markets, is an attempt to address this tension between the academic research and the public discourse by focusing on the economic evidence. We suggest a labor market–oriented, economically motivated rationale to the political opposition to migration. Global migration patterns lead to high concentrations of immigrants in certain places, industries, and occupations. For example, the top 10 destination countries account for 60 percent of global immigration. Four states host half of all immigrants in the United States, and 10 counties host half of the immigrants in these four states. Immigrants are further concentrated in a narrow set of industries and occupations in specific geographic regions. The same pattern repeats itself in almost every major destination country. It is these geographic and labor market concentrations of immigrants that lead to increased anxiety, insecurity, and potentially significant short-term disruptions among native-born workers. Furthermore, the positive effects and benefits in the destination labor markets tend to be 3 OVERVIEW more diffuse whereas the costs are more concentrated and easily attributable to immigration. Understanding (and empathizing with) these legitimate economic concerns is critical to informed and effective policy making. The goal should be to ease the costs of short-term dislocations of native-born workers and distribute more widely the economic benefits generated by labor mobility. Proactive interventions to ease the pain and share the gain from immigration are essential to avoid draconian restrictions on immigration that will hurt everybody. Ignoring the massive economic gains of immigration would be akin to leaving billions of hundred dollar bills on the sidewalk. This PRR aims to inform and stimulate debate, contribute to better policies, facilitate further research, and identify prominent knowledge and data gaps. It presents key facts and findings, research methods and data sources on economic migration and refugees, the determinants of their decisions, and their impact on labor markets in both source and destination countries. We have in mind an audience of policy makers, think tanks, academics, students, the wider public, and, of course, our colleagues in the World Bank. The labor market focus of the PRR is motivated not only by the fact that important development and poverty implications of migration—the World Bank’s operational and analytical focus—work through these labor market channels. This focus also reflects space and time constraints, and the absence of rigorous research in certain other areas, which simply do not allow an all-encompassing report that covers every dimension of migration. We believe many of the social, cultural, and political dimensions are highly important; and we are certain future analytical work within and outside the World Bank will address these shortcomings. This overview is intended to be a stand-alone summary of the main themes and results in the report. It discusses many questions: Who migrates to where? Why do people migrate? What is the impact on the migrants and those they leave behind? What are the short- and long-term labor market, social, and welfare outcomes on native-born citizens in the destination locations? Are there specific implications of high-skilled immigration for both migrant sending and migrant-receiving countries? How can we address the negative impacts of immigration while sustaining the economic benefits? The overview also includes a series of policy recommendations based on the evidence presented in the following chapters. As will become clear, there are no easy solutions when it comes to migration policies, hence the presence of vigorous and, at times, harsh debates. Economic considerations are only a part of a complex set of issues, and economics literature does not MOVING FOR PROSPERITY 4 always provide simple and unambiguous solutions. Nevertheless, we believe that the current economic analysis does contain insights and lessons that need to be placed center stage by policy makers. The organization of the overview mostly follows the organization of the rest of the report. We start with the description of the size and patterns of global migration and their main determinants, such as wage gaps and geographic distances. We then discuss how these forces and concentrated outcomes shape the economic effects of migration in certain regions, sectors, and occupations. After we present the evidence on the short-term wage and dislocation impact of immigration across different groups, we turn to the question of the policy responses to such impacts. Our focus is on how the gains can be distributed. The next section focuses on long-term impacts, especially on assimilation of immigrants, and the relevant policy measures. The penultimate section is on high-skilled migration, its impact and implications. We conclude with emphasizing the need to develop multilateral and regional frameworks to address the policy conflicts arising in international migration. The patterns of global migration: Scale Today’s headlines create the impression that we are facing a global migration crisis of extraordinary proportions. However, immigrants’ share of the global population has been stable at about 3 percent since the end of the Second World War even though international trade and investment flows have led to an unprecedented integration of the world economy. As of 2015, there were slightly more than 240 million migrants in the world (see figure O.1). Their number has grown throughout the post–World War II period, but only at a rate that has kept an even pace with world population growth.
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