Let Their People Come
Lant Pritchett
Center Global Development
September 15, 2006
Future of Migration
z
z
z
Five irresistible forces in the global economy
are producing increased pressures for labor
mobility
Immovable ideas of rich country voters are
blocking these forces
The goal is to accommodate forces and ideas
to create “politically acceptable and
development friendly” (which includes human
rights respecting) policies for labor mobility
Five Forces
z
z
z
z
z
Increased global inequality—gaps in earnings of
equivalent workers are huge
Demographic changes—gains from trade depend on
differences—and boy are there differences
Globalization of everything but labor goods, capital,
ideas and “beachhead” effects
Limits of capital/labor substitution and labor saving
innovation—hard core non-tradables are the future
of employment
Large changes in “optimal” populations
Fraction of Total Inequality Due to
Across Countries
Force 1: Location, location,
location
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
Theil coefficient
10.0%
Mean ln deviation
0.0%
1800 1820 1840 1860 1880 1900 1920
Years
1940 1960 1980 2000
Force 1: Wage gaps among industrial
workers are larger than ever
R a ti o o f w a g e s i n P P P
9.0 9.1
10.0
9.0
7.2 7.6
8.0
6.1
7.0
Gaps
6.0
today
4.1 4.4
5.0
3.6
4.0
2.4
3.0 2.3
2.0
1.0
0.0
U S U S U S U S S p U S U K I ta N L J a
A /I A /N A /S A /I ain A /G / Ke ly / E D / I pan
re l or w e t al / M o u n y t h n d /V
a n w a d y 1 ro a t e a i o p o n i e t
d 1 y e n 8 7 cc m
i a e si n a m
19 a 1
8 7 1 8 7 1 8 0 o 1 a la
90 99 199
0 0 70
99 19
s
0s 90
0s 0 s
s
USA/sending country gaps
In 19th century
In the first
globalization era the
world was set in
motion by wage gaps
of between 2 to 1 and
4 to 1 between host
and receiving
countries—those are
tiny by comparison
today
Annual earnings, dollars
Force 1: Most of the gap
appears to be where not who…
$25,000
$20,000
$17,266
$19,942
$15,000
$10,000
$5,000
$1,406
$0
-$5,000
Gain from
HS vs
Primary,
from ES in
ES
Gain from
USA, with
primary
Gain from
USA, with
HS
-$524
Difference
from USA vs
from ES with
HS
Force 1: Over foreseeable horizon
reductions in wage gaps make migration
pressures higher, not lower
z
z
z
Pretty good evidence of “threshold” effects so
that migration flows first rise and then fall as
laggards gain on leaders.
My guess is that most large countries are on
the rising part so that wage gains increase
migration pressure (even if they reduce gaps)
This is bad news for the “aid to prevent
migration” sell
Force 2: Demography
z
z
z
Fertility has collapsed in Europe—slowly in
some parts (e.g. Germany), rapidly in others
(e.g. Italy)
Projections are the “support ratio” in Europe
(25) will fall from 4.25 to 1.82 (Demeny)
Population of North Africa/West Asia
increases to 3 times Europe
Force 2: Europe’s disappearing act—
compared to the “Muslim tier” that
surrounds it
Population (millions)
1400
1200
1000
800
600
400
200
0
1950
1970
1990
2010
Year
2030
2050
Force 2: Who takes care of
granny?—twice as many over 85 (!)
than under 5
Force 2: Rule of thumb: what cannot
happen won’t happen—but what will
happen?
6
5
4
France
Germany
3
Italy
Japan
United States
2
1
0
2000
2005
2010
2015
2020
2025
Year
2030
2035
2040
2045
2050
Force 3: “Everything but labor”
globalization
z
z
z
z
Trade is substantially liberalized
Movement of capital has been substantially
liberalized
Movement of ideas is more rapid
(instantaneous)
Movement of people is cheaper and cheaper
Force 3: Why is this graph so
facetious?
Gains as % of world GDP
120
100
80
60
40
20
0
All remaining goods
liberalization
3% increase in host
country labor force
Full Liberalization of
labor markets
All HIPC debt
relief
79
All goods
liberalization
All of aid
All of the
trade, aid
and debt
350
300
250
200
150
100
50
0
Just 3% of
OECD labor
force
Annual gains bn US$
Force 3: Slight less facetious?
305
167.5
86
2.5
'000 increase in jobs
Force 4: Future labor creation—top 25
occupations, no tradables, mostly low
skills
6000
5000
4000
3000
2000
1000
0
Hard core Hard Core Services,
low skill
nonnontradable, tradable,
high Skill
low skill
Services,
high skill
Force 4: Capital/labor substitution
and home for marketed
z
z
z
Huge induced innovation to displace low to
medium skill labor—automated check-out at
Home Depot
Home production displacing marketed
production—you at Home Depot
Home appliances/value added in preparation
versus labor
Force 5: Ghosts and Zombies
z
z
Post WW II world has run a huge natural
experiment—(a) expand dramatically number of
sovereign states (borders, flags, currencies), (b)
encourage mobility of capital and labor but freeze
labor in place.
How will this turn out? Hinges on views of the role
of region specific labor demand:
z
z
z
z
Small shocks—all good
Big shocks, flows accommodate—all good in long run
Big shocks, policy and ‘institutional’—not so good, can be
fixed
Big shocks, really geographic: lets not think about it
18
16
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
Expansion in #’s of countries
20
ssa
mena
eca
lac
eap
other
14
12
10
8
6
4
2
0
Wages
Inelastic labor supply
(mobility restricted)
Wage fall in
Zombie (living
dead)
Elastic labor supply
(mobility allowed)
Large fall in region
specific labor demand
Population
Population fall in Ghost—people
move out to accomodate
Force 5: Evidence that, even with optimal policies
and even with globalization of all else labor
demand shocks are huge
z
Regions within countries vs. across countries
z
Regions within US (contiguous counties)
z
Countries in first era of globalization (e.g.
Ireland)
Force 5: Tall thin boxes (boom towns and
zombie countries) versus long short boxes
(boom versus ghost)
Force 5: Last one out turn out
the lights
Osceola
Lyon
Emm et
Dic kinson
W orth
W innebago
Mitchell
How ard
Floyd
Chic kasaw
Allamakee
Wn
i neshiek
K ossuth
OÕB rien
S ioux
C lay
B oy d
K ey a P aha
Dawes
Sheridan
P lym outh
Cedar
K nox
Cherry
S ioux
S cott s Bluff
Thomas
B laine
Loup
Garfield
Wheeler
V alley
Greeley
S herman
Howard
Ida
W oodbury
Pierc e
Wayne
Antelope
Fayette
Clayton
B uchanan
Delaware
Brem er
Franklin
W right
Pocahontas
Dakot a
Roc k
Box Butt e
Hooker
Humboldt
B uena
V ista
Cherokee
C erro
Gordo
Hancock
B utler
Dixon
Holt
Brown
Grant
P alo
A lto
S ac
Hardin
Hamilton
W ebster
Calhoun
B lack
H aw k
Grundy
Thurston
B enton
C raw ford
Monona
M adison St anton
Carroll
B oone
Greene
Marshall
Burt
Cuming
Clinton
C edar
Morrill
Garden
B anner
Boone
McPherson
Art hur
Logan
Platt e
Cheyenne
Shelby
Guthrie
Dallas
A dair
Madison
P oweshiek
Jasper
P olk
Iow a
Johnson
S cott
Muscatine
Merric k
P ottawattamie
Douglas
Butler
Polk
S aunders
Y ork
Hall
B uffalo
K eokuk
Mahaska
Marion
W arren
Washington
Sarpy
M li ls
Dawson
C ass
Louisa
Lincoln
P erkins
A udobon
Nanc e
Keit h
Deuel
Harrison
Dodge
Colfax
Washington
Cus ter
Kimball
Jackson
Linn
Tam a
S tory
Dubuque
Jones
Montgom ery
Lucas
Clarke
U nion
Adam s
Monroe
H enry
Jefferson
Wapello
Des
Moines
Cas s
Seward
Hamilton
Lanc as ter
Fe
r m ont
P age
Taylor
Rn
i ggold
W ayne
Decatur
A ppanoose
Lee
V an B uren
D avis
Otoe
Chas e
Hayes
Dundy
Hitchcock
Frontier
Gosper
A dams
Kearney
Phelps
Clay
S aline
Fillmore
Atc hison
Johnson Nemaha
Red W illow
Furnas
Harlan
Frank lin
Webs ter Nuc kolls
Thayer
P awnee Richardson
Rawlins
D ec at ur
Norton
Phillips
Sm ith
Jewell
R epublic
W ashington
Marshall
Nemaha
B row n
Sullivan
Daviess
De Kalb
C loud
Sheridan
Graham
Rook s
Os borne
M itchell
Clay
Riley
Gove
Logan
Trego
Ellis
Geary
Russ ell
D ouglas
Greeley
Wic hita
S cott
Lane
N es s
R us h
Ric e
Mc Pherson
Marion
Os age
H odgeman
Finney
Lincoln
Bo one
Cooper
John son
Miami
Os age
Be nton
St. Cla ri
H ar vey
Ve rnon
R eno
Gr eenw ood
W oodson
Allen
Bourbon
Pulask i
Cedar
Polk
S tanton
Grant
Ford
Hask ell
W ilson
N eosho
C rawford
Gre ene
Seward
Meade
Clark
C om anche
Barber
Harper
Web ster
Ja sper
Sumner
Stevens
Wright
C haut auqua
Mont gomery Labet te C herokee
Cape
Girard eau
Bollinger
Shan non
Wa yne
Newton
Stone
McDonald
Perry
Rey nolds
Te xas
Lawre nce
Cowley
Ste.
Gen evie ve
St.
Fra ncois
Ma dison
Dade
Elk
Morton
Iron
Ba rton
Kingman
Kiow a
Dent
La clede
Sedgwic k
Pratt
Phelps
i gton
Crawford W ash n
Dallas
B ut ler
Gray
Je ffe rson
Maries
Camden
Hic kory
E dwards
St. Louis
St. Louis City
Frank il n
Mo rgan
Miller
Linn
St. Charles
Wa rren
Ga scon ade
Cole
Henry
A nderson
Mon tgomery
Callaway
Pettis
Mo niteau
Bates
C offey
St afford
Kearny
Frank lin
Chas e
P aw nee
Hamilton
Howard
Cass
Morris
Pike
Audrain
Saline
Lyon
Barton
Ran dolph
Lafay ette
Johnson
S aline
Ellsw orth
Ra l s
Carr oll
Jack son
Shaw nee
W abaunsee
Marion
Mo nroe
Ray
Leavenw orth
Jefferson
Dic kinson
Shelby
Ch ariton
W y andot te
Lincoln
W allac e
Ma con
Living ston
Lewis
Ca d
l well
Clay
Ot taw a
Knox
Clinton
Platte
Pottawatomie Jack son
Ada ri
Linn
Doniphan
At chison
Thomas
Clark
Ha rrison
Gru ndy
Bucha nan
S herman
Sc huyler Sc otland
Me rcer
No daway
Ho tl
Andre w
Cheyenne
Putna m
Ge ntry
Gage
Jefferson
W orth
Christian
Scott
Carter
Do uglas
Stod dard
Ho well
Barry
Ta ney
O zark
Ore gon
Butler
Ripley
New Madrid
Pemiscot
Dunk il n
Mississipp i
Force 5: Contiguous regions of the
USA are a third their counter-factual
size
Region of the
United States
(contiguous
counties)
% change
in
population
1930-1990
Ratio of
current
population
to counter
factual at
rate of
natural
increase
Number of countries
(of 192) with smaller
area
(with examples)
Ratio of area per
capita income to
national average
Texlahoma
-36.8%
0.31 117/192
(Nicaragua,
Bangladesh)
92.2%
Heartland
-34.0%
0.33 117/192
85.2%
Deep South
-27.9%
0.36 96/192
(Jordan, Austria, Sri
Lanka)
62.6%
Relative to 1870=1
Force 5: Ireland’s wages relative to
UK rose over entire crisis period—
population fell
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Wages/UK
GDP PC
20
19
Pop'l
10
19
00
19
90
18
80
18
70
18
60
18
50
18
40
18
30
18
20
18
10
18
Year
Force 5: Bolivia’s population
rose—wages fell
1.7
1.5
1972=1
1.3
1.1
0.9
0.7
0.5
1970
1975
RGDPPW
1980
Pop'l
1985
1990
Wages/USA wages
1995
Immovable Ideas: People say they
Really Hate Migration—ten times as
many want it reduced as increased
Reduced
(either "a lot" or "a little")
"Remain the same"
Increased
(either “a lot” or “a little”)
Receiving Western Europe
Germany West
77.58
19.62
2.82
Italy
75.60
20.84
3.55
Austria
56.14
39.92
3.96
Great Britain
68.22
27.65
4.12
Netherlands
61.51
33.02
5.47
Sweden
69.77
23.52
6.71
Norway
63.20
29.37
7.43
Spain
40.07
51.48
8.44
Eight immovable ideas against
the five forces
z
z
z
z
z
z
z
z
Nationality is a morally legitimate basis for discrimination
Moral perfectionism based on “proximity”
“Development” is exclusively about nation-states, not
nationals.
Labor movements are not “necessary” (or desirable) to raise
living standards
Increased migration of unskilled labor will lower wages and
worsen the distribution of income in the receiving countries
Movers are a fiscal cost as they use more services than they
pay in taxes
Allowing movement across borders creates risks of crime
and terrorism
“They” are not like “us”—cultural clash
Why bother?
z
z
z
z
z
Ideas are like damns—abolitionists were
nuts—the crying chief
Anti-globalization—bassackwards
Trivialization of real concern—entirely
symbolic
TRIPs—why can only evil succeed?
Animal rights—will your grandchildren be
shocked you ate meat or blocked migration?
Three possibilities for political
acceptability
z
Increase migrant “skill”—points based
systems (for the same? Or more?)
z
WTO—GATS mode 4 as political device
z
Temporary, occupation specific quotas for
unskilled labor
Increased
emphasis on
high
skill/wealth
Summary
Five forces for increased labor mobility
High and rising wage gaps
-
Equalizes wages only at the upper end (if at all)
Differing demographic destinies
+
Limited impact if allows more migration
Everything but labor globalization
-
Employment growth in hard core nontradable services
+/-
Ghost/zombie countries
-
Detracts from globalization of unskilled labor
Doesn’t necessarily focus on “hard core” nontradables
“Brain drain” effects possibly large (e.g. health care
workers from Africa)
Eight ideas limiting migration in industrial countries
Nationality is a morally legitimate basis for
discrimination
+++
Points systems can be nationality adjusted
Moral perfectionism based on “proximity”
++
Those who are allowed are expected to become
citizens
“Development” is exclusively about nationstates, not nationals.
--
Detracts from “development” to the extent it
exacerbates “brain drain”
Labor movements are not “necessary” (or
desirable) to raise living standards
--
Does not help with labor
Increased migration of unskilled labor will
lower wages and worsen the distribution of
income in the receiving countries
+++
Does address inequality problems in receiving
countries
Movers are a fiscal cost as they use more
services than they pay in taxes
+++
By attracting higher wage migrants reduces fiscal
cost.
Allowing movement across borders creates
risks of crime and terrorism
+++
Points systems allow careful screening of applicants.
“They” are not like “us”—cultural clash
+++
Language and education screening can be used to
increase “compatability”
Can WTO/GATS mode 4 be the
answer?
What are the principles of success behind
GATT/WTO as a negotiating mechanism?
z National origin is irrelevant (a ton of steel is a
ton of steel)—doesn’t work for people
z MFN—doesn’t work for people
z Prices not quantities—doesn’t work for
people
y
High and rising wage gaps
+
Differing demographic destinies
Would allow movement in unskilled services
Could be used to fill gaps
Everything but labor globalization
+++
Brings labor mobility into the globalization
framework
Employment growth in hard core non-tradable services
+++
Focuses on services trade, including those that
require physical presence to deliver
Ghost/zombie countries
No special emphasis
Eight ideas limiting migration in industrial countries
Nationality is a morally legitimate basis for discrimination
---
MFN would extend “market access” to all
countries
“Development” is exclusively about nation-states, not
nationals.
+++
Nation-states negotiate agreements via WTO
Labor movements are not “necessary” (or desirable) to
raise living standards
-
Increased migration of unskilled labor will lower wages
and worsen the distribution of income in the receiving
countries
---
Allows opening of markets in unskilled labor
Movers are a fiscal cost as they use more services than
they pay in taxes
+/-
Since presence would be temporary not a
major concern
Allowing movement across borders creates risks of crime
and terrorism
----
“Market access” and MFN is very difficult to
reconcile with security concerns
“They” are not like “us”—cultural clash
---
MFN implies countries cannot control
nationality of service providers
Moral perfectionism based on “proximity”
Six elements of a viable mechanisms for increasing
labor mobility
1) bilateral agreements between host and sending countries
2) allow for temporary movement of persons in a regime separate
from immigration,
3) have numerical quotas for specific occupational categories (and
internal regions in the host country?),
4) enhance the development impact of the labor movement through
agreements with the sending country government.
5) impose automatic penalties on the sending country (and host
country employer) for laborers who overstay,
6) protect the fundamental human rights of laborers
Five forces for increased labor mobility
High and rising wage gaps
+
Allows workers some
access to high wages
Differing demographic destinies
+
Limited impact as
magnitude of problem is
too large
Everything but labor globalization
+
Brings labor at last into
bilateral relations
Employment growth in hard core
non-tradable services
+
Singles out this
industries/occupations for
quotas
Ghost/zombie countries
+
Employment quotas can
be allocated to poorest
countries
Eight ideas limiting migration in industrial countries
Nationality is a morally legitimate
basis for discrimination
+
Accommodation 1—unilateral
control of agreements with
receiving country
Moral perfectionism based on
“proximity”
+
Accommodation 6—protect human
rights of workers
“Development” is exclusively about
nation-states, not nationals.
+
Accommodation 4—making
schemes as “development
friendly” as possible
Labor movements are not “necessary”
(or desirable) to raise living standards
+
Increased migration of unskilled labor
will lower wages and worsen the
distribution of income in the receiving
countries
+
Accommodation 3—occupation
(and region) specific quotas to
reduce job displacement
Movers are a fiscal cost as they use
more services than they pay in taxes
+
Accommodation 2—temporary
workers only
Allowing movement across borders
creates risks of crime and terrorism
+
Accommodation 1—unilateral
agreements can specify nationality
and conditions for entry
“They” are not like “us”—cultural
clash
-/+
Accommodation 2—temporary
means less cultural/political
influence—but migrants are not
“incoroporated”risks backlash
Labor mobility as MDGs “plan
B”
z
z
z
z
Reconciling the irresistible forces with
immovable ideas is an enormous challenge
The existing mechanisms for international
agreements are inadequate for labor mobility
Bringing migration onto the agenda—when
the “MDGs” fail—then what?
Start now to think, design, produce evidence
to be ready for the next big wave