The Economics of Migration Decisions
The article presents a view on the migration of population in search of better opportunities from East to West, or from the Global South to the Global North. It further analyses the costs and benefits of friendly immigration policies across the globe.
Shereein Saraf
September 14, 2020 / 8:00 AM IST
The article presents a view on the migration of population in search of better opportunities from East to West, or from the Global South to the Global North. It further analyses the costs and benefits of friendly immigration policies across the globe.
Humans have migrated since the dawn of time. Whether in the hunt for food and fire for survival or search of high-paying jobs for a better lifestyle, man has migrated. Further, it has bestowed upon us the ability to move freely across borders in this era of globalization.
The duality of the world economy — the formation of the Global North, or the developed world and the Global South, or the developing world — helps us to understand the pattern in migration of labor. It is not only from the standpoint of better work opportunities and higher standards of living but also from cultural, social, and political perspectives that people choose to migrate. According to The United Nations Department of Economic and Social Affairs, 271.6 million people have migrated internationally by mid-year 2019. (UN DESA, 2019)
The distinction between the Global North and Global South, representing inequalities in wealth and income, was conceived in the 1980s using the Brandt Line. It divides the two regions geographically. The United States, the United Kingdom, Canada, and Australia constitute the Global North, whereas Africa, Asia, Latin America, and other developing countries form the Global South. Although the idea remains the same, the line is not as precise as it was then. Countries like Argentina and Malaysia have developed, moving to the ‘Global North’ whereas Ukraine has shifted to the ‘Global South.’
The causes of migration are due to factors of push and pull. As the terms suggest, more jobs, better wages and working conditions, prominence of institutions, political stability, and social acceptance are the pull factors. On the other hand, few jobs, lower wages, worse working conditions, lack of insurance, inadequate government, and social intolerance are the push factors.
The United States accepts the most number of immigrants – legal and illegal – as students and employees in the technology sector. Mexico contributes to the maximum share of immigrants, followed by China and India. Being a diverse country, the United States is home to a larger immigrant population than its native citizenry. (Pew Research, 2020)
A study by Massey (1999) puts forward three determinants influencing immigration policy – the macroeconomic health of the country, the volume of international flows, and the ideology of society. A growing economy favors more open immigration. An exceeding inflow of immigrants advocates restrictive policies. And their social beliefs bind them all.
In recent times, this has led to the debate on the costs and benefits of immigration.
There lies a misconception that migrants take up the jobs of natives, which is refuted by scholars of economics and social sciences studying migration. In Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?, Michael Clemens, a senior economist at the Center for Global Development, suggests that policies restricting immigration are like trillion-dollar bills left on the sidewalk. Thus, the economic losses are much higher.
Immigrants – coming from the Global South – are driven by hope and ambition. Most of them are low-skilled and end up doing chores that pay lower. Natives, on the other hand, are highly skilled, and thus migrants complement their work and not substitute. The capitalists use this opportunity to maximize their profits by cutting costs on labor. This dynamic of the inflow of migrants raises the overall supply of labor, leading to a rise in demand for goods and services, which in turn increases the labor demand. Thus, equilibrium in the labor markets is re-established.
Moreover, these migrants form a large share of the gig economy, working as drivers from Asia and nannies from Philippine. It supports native women workforce to spend productive time at the office, on their projects, rather than being stuck in house chores.
Although many are low-skilled, some immigrants do contribute to the rise in innovation and entrepreneurial growth. Once startups like Amazon, Google, Apple, eBay, and Tesla, to name a few, are now humongous businesses driving employment and GDP growth.
With the rise in student immigrants, there has been an increase in research opportunities and publications within universities. It raises the standards of the institutes, attracting more students leading to greater research productivity. Most Nobel Prize winners affiliated to these universities are not even natives of the United States. Immigration creates more winners in the receiving countries, but there is a rise in inequality within and across these countries.
A large part of the labor work in developing countries like China, the global factory, and home to sweatshops, eventually contributing to the Western economy. There has been a rise in the Corporate Economy and an increasing role of finance in the developed areas. The mass production of goods and Global Production Networks, leading to worldwide supply chains, has resulted in a divide between finance in the West and manufacturing in the East.
So it is to climb up the social mobility ladder that young professionals migrate. In all this, the emigrating countries gain payments in the form of remittances, which constitute a fair share of the Gross Domestic Products (GDPs) of such economies. It also leads to a demographic shift as the younger population from the developing world migrates to the developed world, which might harm the emigrating economies, if in excess.
Lastly, the issue of brain drain finds its relevance here. It is not that people are not capable; it is the lack of opportunities that drives people to the West. If the Asian economies could provide better research and job opportunities, students would not migrate to the United States or European countries.
The economic growth of a nation depends on the quality of its labor force, which will improve only with better education and skill formation, inclusive healthcare, women participation in the workforce, better institutions, civil societies, and strong governments. It will ensure that migration is not pushed by social mobility but by individual choice.