Raw economics will trump migration’s sour politics

Trapped. Like most would-be migrants, the debate over international mobility is going nowhere. Economists extol the financial and societal benefits of foreign workers but developed world voters – and thus opportunistic politicians – often oppose them. Rich countries’ twin crises of slowing growth and ageing populations may help break the deadlock.

The number of people that want to migrate is much bigger than the 281 million classed by the United Nations as migrants in 2020. Around 16% of adults globally, or nearly 900 million people, want to leave their country permanently, a 2021 poll by Gallup found – the highest level in a decade.

For many, crossing borders will be a struggle, or remain a dream. Conflicts in Ukraine, Syria and Ethiopia may be increasing the 35 million-strong ranks of migrants that count as refugees, and economic hardship in countries such as Bangladesh, the Philippines and Myanmar may enhance the economic imperative to escape. But the percentage of the world population classified as immigrants has been stuck in a range of between 2% and 3% since 1970. And rich countries’ attitudes towards foreigners are, if anything, hardening.

In the United States, the biggest host nation, 55% of the population thinks that immigration should be curbed - according to a June Gallup poll. That’s the highest level of opposition since 2001 and mirrors the anti-migrant rhetoric from Republican presidential candidate Donald Trump and other politicians. In Germany, where immigrants account for 17% of the population, the far-right nationalist party Alternative for Germany (AfD) came in second with almost 16% of the vote in June’s European Parliament elections. And in Britain, which was rocked by race-related riots in August, immigration has shot up to the top of people’s concerns for the first time since 2016, according to a YouGov poll.

It’s well recognised that building walls against immigration doesn’t make economic sense. Michael Clemens, now a professor at George Mason University, summarised academics’ attitudes towards migration in a 2011 paper. “When it comes to policies that restrict emigration, there appear to be trillion-dollar bills on the sidewalk,” he wrote. In his estimate, the combined benefits to origin and destination countries that would arise from migration could boost world GDP by 20% to 60%.

Two factors tend to drive these gains. The first is the increase in wages for foreign workers. The World Bank estimates that the average income gain for a young unskilled worker moving to the United States is around $14,000 a year. More than 43 million immigrants lived in the United States in 2020. If each of them received that salary boost, and spent at the same rate as other residents, they would add some $590 billion to total consumption, or almost 3% of U.S. GDP. Origin countries benefit from immigration too. International remittances have grown to $831 billion in 2022 from $128 billion in 2000, according to the UN’s World Migration Report.

The second economic benefit is the increase in the labour supply. That’s particularly needed in developed countries where birth rates are falling and many jobs need to be filled – such pressures have even prompted Greece to pass legislation allowing firms to require that employees work a six-day week. In the United States, an unexpected jump in immigration last year to 3.3 million people from the expected 1 million, probably boosted economic growth.

Anti-immigration campaigners’ claim that migrants are a drain on fiscal resources is also shaky. Christian Dustmann and Tommaso Frattini of University College London looked at immigration into the UK between 2001 and 2011. They found that foreigners contributed 25 billion pounds to the state’s coffers more than what they took out. By contrast, natives’ fiscal contribution was a negative 616 billion pounds.

Figures like these don’t necessarily convince developed world citizens who value ethnic uniformity over GDP stats. But two upcoming crises could change the debate. The first is a lack of workers. Developed countries’ labour forces will lose 78 million people between now and 2050 due to low birth rates and ageing, according to a Breakingviews analysis of UN data. By the next century, that number will reach 167 million people.

If those economies are to continue to grow, they will have to replace those workers, especially because many of those jobs cannot be shipped abroad or outsourced to robots. Looking at the United States, economist Lant Pritchett estimates that there will be 4.5 million new jobs in those occupations – such as nursing, catering and janitors - between 2018 and 2028. Immigrants will be needed to fill them.

The second, related shock will come from pension systems. The relentless ageing of the developed world means that there will be fewer working people to pay for a growing army of pensioners. In an upcoming paper, Pritchett looks at 31 rich countries. Assuming zero net migration, he calculates they would need an additional 356 million workers, or 44% of the workforce, by 2050 just to keep the ratio of workers to retirees stable and prevent their pension systems from breaking down.

One possible compromise would allow countries to cherry-pick the workers they need and allow them in on a temporary basis without a path to citizenship. Japan, a country beset by demographic challenges, is experimenting with a version of this system. Under a 2019 law, “skilled workers” in 14 sectors, including farming, sanitation and healthcare, have been granted five-year visas.

This approach – which Pritchett calls “rotational mobility” – presents several problems. Even if the migrants are not treated as second-class citizens and exploited by employers, developed nations are often bad at monitoring populations, especially those reluctant to go home. And ensuring the locals that the new arrivals won’t get a passport may not allay fears of foreigners taking over jobs or reducing wages.

Still, Pritchett’s ideas and others like them have the merit of keeping the door ajar to future immigration. The theoretical economic benefits of foreign workers are abundantly clear. The developed world will soon need to put them into practice.

Context News

Germany's far-right AfD party was on track to win the election in the Eastern state of Thuringia on Sept. 1, an exit poll by broadcaster ZDF said. More than half of the population of the United States wants the government to reduce immigration, according to a poll by Gallup in June. In the UK, immigration has become people’s top concern of voters for the first time since 2016, a YouGov poll found.