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Why countries restrict migration–and why they should stop

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My most recent economic history essay, aka. an example of what I am writing these days (not blog posts, I know).

“The question today is (…) of protecting the American rate of wages, the American standard of living, and the quality of American citizenship from degradation through the tumultuous access of vast throngs of ignorant and brutalized peasantry from the countries of eastern and southern Europe Francis A. Walker in the Atlantic Monthly, 1896

Between 1815 and 1930, an estimated 50 million Europeans migrated to the «New World» of North and South America and Oceania (Baines 1994:525). Much of this migration took place in the absence of migration restrictions. However, since the American economist Francis A. Walker wrote «Restriction of Immigration», popular opposition to immigration among the native population has generally included at least one of three arguments: «Immigrants steal our jobs.» «Immigrants are unproductive and drain our resources.» and «Immigrants threaten our culture.»

Economists have estimated that removing immigration controls could more than double the size of the world economy, because it would allow workers to move to places where they could be more productive (Legrain 2007:64). There is not much evidence that the negative effects these arguments allude to outweigh the gains from migration.

At first glance, it seems countries have an incentive to limit migration to maintain their wage and employment level. This is the «immigrants steal our jobs» argument. In economic migration theory, potential migrants are rational value-maximizers who migrate if the gains outweigh the costs (Castles&Miller 2003:22). Income disparities around the world leads to international migration, and in the long run wages equalize across international borders. This is because migrants move from areas where a large supply of labor relative to capital means the economy has high unemployment, low real wages or both. They move to areas where there is a higher demand for labor, and
consequently low unemployment and high real wages. Mass emigration from Europe to the New World led to wage convergence within the Atlantic economy in the nineteenth century, and the «immigrants rob jobs» debate was as contentious then as now (Hatton&Williamson 2005:105, 97). Walker argued that the US had «a labor problem» and should therefore restrict further migration (Walker 1896:826).

However, even in the most basic economic model, rational value-maximizing migrants do not move to countries where there is no demand for their labor. During the depression of the 1890s, gross immigration remained low, reducing the size of the labor force competing for scarcer jobs (Hatton & Williaomson 2005:97). More recently, as Europe has become a migration destination, studies have calculated if migration is driven by wage gaps. Changes in Caribbean emigration flows to the UK were more strongly connected to seasonal shifts in British employment than to simple wage differences (Massey et. al. 2005:123). In Straubhaar’s 1986 study of migration from southern to western Europe, fluctuations in employment proved to be stronger in predicting international movement than expected wage gains (Massey et. al. 2005:124).

Unfortunately, accurately measuring how immigration changes destination country wages runs into the difficulties of counter-factual arguments. Wages in the US grew more slowly in the high-immigration period between 1890 and 1914 than in the low-immigration 1920s (Hatton&Williamson 2005:97). One could argue that unrestricted mass migration slowed the real wage growth rate, but this argument fails to take into account the other factors that could change the economy. More recently, there is evidence that immigrants lower the incomes of those residents with whom they most directly compete (Hatton&Williamson 2005:296).

However, a national labor market is not a zero-sum game. Immigrants compete with natives for jobs, but they also consume goods and services, increasing demand. They might increase productivity in their firm, possibly through economies of scale, and eventually start their own businesses. For these reasons, while there may be negative relative income effects for some workers, it is unlikely that the overall income of the destination country will fall because of immigration. Governments can alleviate negative effects on individuals through redistributive policies.

Most research contradicts the hypothesis that immigration raises unemployment (de Haan 1999:21). On the contrary, there is ample evidence, including the previously-mentioned Straubhaar study, that European migration has been initiated by segmented labor markets, where immigrants do the jobs native workers do not wish to do – often the dirty, dangerous and difficult ones (Massey et. al. 2005: 127, 180). The same appears to be true for Asia: Sustained economic growth, aging populations and falling labor participation among the young in Japan, Korea and Taiwan has caused massive shortages of labor which are filled by international migration (Massey et. al.  2005:179). In recent years populations in richer countries have been ageing because of falling birth cohorts and falling mortality among the elderly (Baines et.al. 2010:414). Migrants tend to be young (de Haan 1999:16, Legrain 2007:69). European, American and some Asian economies need these young people, especially because pay-as-you-go pension schemes require young workers to pay for the care of the elderly (Baines et.al. 2010:416).

The second point made against immigration, «Immigrants are unproductive and drain our resources» introduces an inherent inconsistency to the anti-immigration argument. Immigrants are accused both of taking the jobs native workers should have, and of being unemployed and living off their destination government. Obviously, the same individuals cannot do both. However, while the first argument might discourage labor migration in general, the second argument leads to immigration policies that restrict certain kinds of migrants: those who are negatively selected. In the Borjas model of migration from 1987, a group of migrants is positively selected if their average
labor market quality is higher than the average in the society from which they migrate. They are negatively selected if the opposite is the case (Pedersen et. al. 2002:4).

US migration restrictions introduced in the early 1900s aimed to positively select migrants through quotas. The US Immigration Commission viewed the new immigrants from southern and eastern Europe as «far less intelligent» and «actuated by different ideals» than the old immigrants from northern and western Europe (Hatton & Williamson 2005:81). The US Immigration Commission’s findings were widely criticized for their arbitrary old-new classification, but there is mixed evidence for a decline in the proportion of immigrants with skills in this period (Hatton&Williamson 2005:81-4). It is difficult to measure how positively selected migrants are, as we do not know how those who did not migrate would fare in their destination country. However, there is arguably a certain degree of positive selection inherent in international migration, because migration in itself requires some level of creativity, courage and skill. It seems intuitively unlikely that migrants – again, as rational value-maximizers – would go through all that trouble if they were not going to at least try to be successful in their destination country. In fact, immigrants were overrepresented among the top businessmen in the US between 1816 and 1850
(Hatton&Williamson 2005:94). Later studies have revealed that second-generation immigrants, who inherit some characteristics from their migrant parents, but do not suffer the initial immigrant disadvantage of adjusting to a new culture and economy, earn more than native workers with native parents (Hatton&Williamson 2005:85).

If the cost and risk of the migration in itself increase the likelihood that migrants will be positively selected, it follows that the easier the migration, the less likely that migrants are positively selected. Walker argued that migration to the US had gotten so easy by the end of the nineteenth century that pretty much anyone could cross the Atlantic (Walker 1896:827). Lower transport costs, safer and quicker journeys, and information and support from previous migrants all lower the cost and risk of migration.

Welfare policies like unemployment benefits and public goods like schools, childcare and healthcare in destination countries might also negatively select immigrants. Not only do they increase the gains from migration, they might do so regardless of whether the migrant finds employment upon arrival. The return to skills in the destination country changes migrants’ incentives, which determines whether they will be positively or negatively selected (Hatton&Williamson 2005:90). Generous unemployment benefits can be interpreted as high returns to low skills. Yet there is not much evidence for this, perhaps because countries with generous welfare systems often have labor markets that limit immigrants’ access to jobs (Hatton&Williamson 2005:327). Moreover, a welfare policy that encourages unemployment will be a problem for any government, with or without migration. Designing welfare systems with the right incentives might be a better approach than barring immigrants in case they do not find jobs.

Finally, a migrant may be «negatively selected» compared to the average in their home country, but impeccably suited for their destination country, due to segmented labor markets. This brings us back to the previous argument: Except in the case of unusually bad welfare policies, rational value-maximizing immigrants will go where there is demand for their labor.

The third argument, «Immigrants threaten our culture» is more political than economic. Immigrants qualitatively change their destination country. If they gain the right to vote, they change the politics of the country. Regardless of potential economic benefits – and even though a countries’ populations and cultures are in flux without migration – these facts scare voters in destination countries, giving their governments incentives to restrict immigration. This third argument is more difficult to criticize economically, but cultural problems can be solved by policies that do not directly limit immigration. Policies that provide information and communication channels, facilitate integration and minimize tensions and environmental damages, may enhance welfare of both migrant and host population more than stopping people at the borders in case they cause problems (de Haan 1999:30). Moreover, migration flows can also be determined by culture, through social and cultural institutions, local customs and ideologies, and shared history between source and destination countries (de Haan 1999:11). The pattern of migration into Britain and France clearly reflects each country’s colonial past (Massey 2005:112). Finally, many potential migrants wish to migrate temporarily, and temporary migration does not involve most of the cultural problems that the native population worries about (Legrain 2007:87).

Immigration restrictions are costly in themselves, and are not fully effective (de Haan 1999:30, Hatton&Williamson 2005:218). In a world of immigration restriction, there is demand for the labor of illegal migrants (Baines et. al. 2010:420, Hatton&Williamson 2005:215). This represents an economic and political cost for governments, and shows that there is demand for more immigrants in source countries. Liberal migration policies would greatly increase international migration around the world (Hatton&Williamson 2005:215) Free migration policy – meaning
increased migration – is at least as likely to be beneficial for the destination country as a migration policy that distorts free migration flows . If migrants «naturally» go where their labor is needed, governments do not gain from distorting this.

Bibliography

Baines, D., Cummins, N. and Schulze, M.-S. (2010), “Population and Living Standards, 1945- 2005”, in Broadberry, S. and O’Rourke, K. (eds.), The Cambridge Economic History of Modern Europe, Volume 2: 1870 to the Present, Cambridge University Press, pp. 390-420

Baines, D. (1994): «European Emigration, 1815-1930: Looking at the Emigration Decision Again» in The Economic History Review, New Series, Vol. 47, No. 3 (Aug., 1994), pp. 525-544

Castles, S. & M. J. Miller (2003): The Age of Migration – international population movements in the modern world, Palgrave MacMillan, 3rd edition

Grubel, H. & A. Scott (1977): The Brain Drain – Determinants, measurement and welfare effects, Wilfrid Laurier University Press

de Haan, A. (1999), “Livelihoods and Poverty: the Role of Migration. A Critical Review of the Migration Literature”, in Journal of Development Studies 36.

Hatton, T. and J.Williamson (2005): Global Migration and the world economy – Two centuries of policy and performance MIT Press

Hicks, J. (1932): The Theory of Wages MacMillan

Legrain, P. (2007): Immigrants – Your country needs them Little, Brown

Massey, D. et al. (2005): Worlds in Motion: Understanding International Migration at the End of the Millennium, Clarendon Press

Pedersen, P. J.; M. Røed & L. Schröder (2002): Emigration from the Scandinavian Welfare States

Walker, F. A. (1896) “Restriction of immigration.” in Atlantic Monthly 77: pp. 822-829

Wellisch, D. and U. Walz. 1998. “Why do rich countries prefer free trade over free migration? The role of the modern welfare state” in European Economic Review, Vol. 42: 1595-1612.

One thought on “Why countries restrict migration–and why they should stop

  1. Pingback: I guess I’m a social media expert | According to Julie

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