Analysing the benefits of migration

I am the child of refugees. My parents came to the United Kingdom to escape Hitler. Their arrival saved their lives. More passionate patriots cannot be imagined. It is not surprising that I believe Europe has a moral obligation to protect refugees. But what should one think about immigration more broadly?

Globalisation is not just for goods, services and capital. It is also for people. High-income countries are not only richer, but also less corrupt and more stable than others. Nothing is less surprising than the desire to emigrate to the West.

Yet little is more contentious. Migration is the touchstone of right-wing populism. Think of Nigel Farage, Marine Le Pen or Donald Trump.

A few argue that gaps in real wages across the world are the biggest of all economic distortions. Movement of people, they say, should be seen as identical to trade; humanity would benefit from the elimination of barriers. The movement of people might be vast and the impact on high-income economies, with only one-seventh of the world's population, correspondingly huge. But it would maximise wealth.

Yet such cosmopolitanism is incompatible with the organisation of our politics into self-governing territorial jurisdictions. It is incompatible, too, with the right of citizens to decide who may share the benefits of living alongside them.

Immigration has economic effects. But it also affects the current and future values of a country, including its concern for foreigners. People may legitimately differ on the correct policies.

If countries are entitled to control immigration, the criterion for immigration becomes the benefits to existing citizens and their descendants. Benefits to would-be immigrants, which are the bulk of those generated by migration, count for less.

What then are the benefits of immigration to citizens and their descendants? The arguments divide into those relating to the numbers and, more importantly, those relating to the differing characteristics.

Is it important to increase population? The answer surely is no. Merely increasing the population of a prosperous small country, such as Denmark, would not increase the standard of living of its citizens. But it would impose sizeable investment and congestion costs. The argument for size can only be that it makes defence cheaper.


Migration is not just about economics. Immigrants are people. Over time, large-scale immigration will transform the cultures of recipient countries in complex ways. -PHOTO: AGENCE FRANCE-PRESSE

The argument cannot be from the numbers but from the characteristics of immigrants. So proponents of the benefits of large-scale immigration argue that immigrants are younger, cheaper, better motivated and valuably different. Opponents counter that the young also age, while diversity brings disadvantages as well as advantages.

Immigrants are indeed relatively young. Immigration will soon be the only source of population increase for the European Union. In the past 10 years, immigrants represented 47 per cent of the increase in the workforce in the United States and 70 per cent in Europe, according to the Organisation for Economic Cooperation and Development (OECD).

This is not surprising, since the rate of natural increase has been falling in high-income countries for decades.

Thus, immigrants lower the ratio of the retired to those of working age (the old-age dependency ratio). But the impact on dependency, at least with current levels of immigration, is modest. To lower it substantially requires enormous inflows.

Last year, there were 29 dependants aged 65 and over for every 100 people of working age. According to the United Nations, keeping this ratio below a third would require immigration of 154 million between 1995 and 2050, with far more thereafter: Immigrants age, too, after all.

Consequently, a big reduction in dependency ratios demands huge inflows. One might argue that a continent with so few children must accept such a transformation of its population.

Consider other possible economic impacts. The OECD looked at the fiscal impact of cumulative waves of migration in the past 50 years in member countries, and concluded it was on average roughly zero. The precise impact depends on the skill and other characteristics of immigrants and the flexibility of labour markets. Much the same is true of immigrants' other impacts: Are they complementary to current workers or substitutes; and, if substitutes, for whom?

What, then, can one say about the economic impact?

First, the immigration needed to have big effects, notably on dependency burdens, would be huge.

Second, immigration has significant impacts on investment needs (in housing and other infrastructure) and congestion, particularly in already densely populated countries - though these are similar to those caused by natural increase.

Finally, the main beneficiaries are always the immigrants themselves.

Yet migration is not just about economics. Immigrants are people. They bring in families, for example. Over time, large-scale immigration will transform the cultures of recipient countries in complex ways. Immigrants bring diversity and cultural dynamism. At the same time, as Nobel laureate Thomas Schelling notes, substantial segregation might naturally emerge. People might then live quite separately, without many shared loyalties.

Immigration has economic effects. But it also affects the current and future values of a country, including its concern for foreigners. People may legitimately differ on the correct policies.

Our countries will end up neither closed nor totally open. Striking the balance is hard. In doing so, it is perfectly reasonable for countries to argue that their own citizens always come first.

THE FINANCIAL TIMES

A version of this article appeared in the print edition of The Straits Times on October 02, 2015, with the headline 'Analysing the benefits of migration'. Print Edition | Subscribe