CIAO DATE: 11/2008

International Labor Migration in a Globalizing Economy

October 2008

Carnegie Endowment for International Peace

Abstract

As globalization spread dramatically over the last twenty years, migration expanded less rapidly than either trade or foreign investment. Yet migration remains contentious, often being blamed for income stagnation, even as some economists praise it as the fastest route to raising world incomes. The reality is more limited and nuanced. 

Money sent by migrants to their home countries can promote rapid growth in developing regions, and the withdrawal of laborers can induce higher wages or less underemployment for those left behind. However, the flow of money can dry up quickly and unexpectedly, as has happened recently in Mexico.

Robert Lucas finds in a new report that the net impact of migration is positive for the migrants and high-income countries, and more gains are feasible. At the same time, he finds more ambiguous effects on developing countries, which may suffer from growing brain-drain; only temporary migration among southern hemisphere countries seemed to provide clear benefits.

Key findings:

• Impact on world income: Some economic simulations have suggested that even a 3 percent expansion in global migration could increase world incomes more than a complete liberalization of all trade. However, migrants are increasingly dependent on commercialized intermediaries with access to visas and transportation-calling into question the actual financial gains for migrants, their host countries, and their countries of origin.
   
• Impact on recipient countries: In some cases, migration can accelerate technical progress or force changes in industrial activities-such as an increase in labor-intensive forms of agriculture. Migration can have mixed effects for the fiscal balance-providing greater tax revenue, while placing increased burden on state support programs.
   
• Impact on sending countries: Remittances from migrants back to their home countries can promote rapid growth in developing regions, and the withdrawal of laborers can induce higher wages or less underemployment for those left behind. However, remittance flows can decline quickly and unexpectedly, as currently observed in Mexico. Migration of highly skilled workers can become problematic through "brain-drain" of talented healthcare workers and educators in developing regions.
   
• Relationship between trade and migration: Subsidies in many industrialized countries often protect the sectors in which migrants seek work. There is little or no coherence between the trade and migration policies adopted by higher-income countries. Better internal coordination is necessary to reconcile the two agendas.
   
• Policy implications: Many countries prefer a policy of temporary migration, in which migrants contribute to the local economy but depart before they become dependents. But such programs should be better managed, as reports of abuse and exploitation by recruiters and intermediaries become more common. Effective contracting schemes will require better oversight to improve worker conditions, increased transparency, and bilateral cooperation between the host and recipient nations.

Lucas concludes:   "The net potential gains to migrants entering the industrialized countries are extremely high. Yet the impacts of any additional migrations on the incomes of those left at home and of natives in the host countries are more ambiguous. While migrants are clearly the big winners, others may even lose."

Robert Lucas is a professor of Economics at Boston University. His research has included work on internal and international migration, employment and human resources, income distribution and inter-generational inequality, international trade and industry, the environment, and sharecropping.  He has served as chief technical adviser to the Malaysia Human Resource Development Program, and director of undergraduate studies and the M.A. program in Economics at Boston University. He is also a Research Affiliate at the MIT Center for International Studies. His latest book, International Migration and Economic Development: Lessons from Low-Income Countries, was published by Edward Elgar Press in 2005.

Resource link: International Labor Migration in a Globalizing Economy [PDF] - 248K