Development Days
Reframing the immigration debate
By Michael Neri
Cozumel is a small and dreary island just off the coast near the popular tourist destination of Cancun in Mexico, but you’d probably never go there if you weren’t forced to. It has little to attract the visitor that Cancun can’t provide in spades. But it was in Cozumel – where my cruise itinerary forced me to disembark – that I ran into Ketan Ramnani, the 40 year old manager of a ritzy jewelry store. Ketan left his home town of Jaipur 5 years ago to take up a job in a country whose language he did not speak and where he had no connections or family. But Ketan is successful today and despite his less than perfect Spanish, is the star salesman at his store. Which to my mind is an incredible story of talent, combined with courage in the face of enormous risk, and a can- do spirit willing to battle very great odds. I can easily picture the intrepid Ketan being the owner of his own diamond boutique soon, and perhaps even becoming a real player in this closely controlled trade. Migrants like him who seem to risk it all are following a big dream which often pans out.
Ketan’s story, inspiring as it is, is not unique in North America where you will probably run into an Indian entrepreneur with an equally dramatic story at every corner store and corporate office.This got me thinking: are Indians more entrepreneurial than other nationalities, or are all immigrants equally so? Hard data to answer this question is not readily available, but Asians as a broad group (4.4 % of population) own 10 % of all small businesses in the US, while Latinos, who make up 16 % of the US population, own 13 %. Clearly Asians are disproportionately more likely to set up businesses than other immigrants to the US. This may be a largely a function of education, because you need to be adequately educated to become an entrepreneur, and Asians are typically better educated than other immigrants. Based on circumstantial evidence (e.g. the number of Indian citizens studying in US universities) I would wager that within the Asian group, Indians account for a disproportionate share of small businesses because they are the best educated. And since small businesses are the main engine for job creation, it stands to reason that educated immigrants are net job creators, and without them, the employment picture in the US will be worse than it is currently.
New research
Unlike Indians, most immigrants to the US and other developed countries are not particularly well educated, and in every election cycle the charge that they are robbing home born citizens of jobs and depressing their wages is raised. Fortunately, new research by New York University’s Michael A Clemens and the IMF’s Prachi Mishra(an Indian immigrant herself, now based in Washington DC) will put some of these charges permanently to rest. A key question that both scholars deal with is: what impact does immigration of low skilled people have on wages of low skilled workers in the receiving country? The startling answer: local wages are depressed but only by tiny amounts (1-2 % on average). Against the backdrop of stagnant wages across all skill levels in the US, this miniscule dip will hardly be noticeable, and can probably be disregarded.
|
The flip side of this equation is that wages of low skill workers in originating countries rise as a result of such migration, by as much as 8 % on average! Thus, argues Clemens, total welfare is increased noticeably by the initial act of migration, not to mention the subsequent flows of remittances which can boost originating country incomes significantly, while continuing to add value to the receiving country.
That migration of skilled and semi-skilled workers is good for originating states/regions/countries in both the short and long terms is well known and understood. Global remittances from overseas workers now total $ 400 billion per annum, or about 0.7 % of global GDP. Fortunately, this conclusion can now be extended to unskilled workers as well since their migration pushes up wages in originating countries without disrupting wage levels in receiving country labormarkets, while also augmenting remittances.
But what impact does immigration of unskilled workers have on employment levels of unskilled workers in receiving countries? Here, the answers are still unclear. Mexican migrants dominate the farming industries of many US states, but this may be because local born Americans shun farming jobs, though more research is clearly needed before we can arrive at a clear conclusion. Additionally, it stands to reason that immigrants may displace no one at a phase in the economic cycle when unemployment is low, and positively displace some domestic citizens at a different phase when it is high.
Reframing the question
Clemens urges that rather than focus on employment issues which can fluctuate with time, the migration question, especially of poor unskilled persons, must be seen in the larger context of growing pressures to make global trade fairer and increase capital flows to poor countries as part of the commitment of rich countries to attain the so called Millennium Development Goals. These poverty busting policies will cost developed nations a sizeable packet in outflows and foregone revenues, possibly in the region of a trillion dollars over the next few years.
Wouldn’t it be cheaper and faster to simply increase immigration? Three per cent of the world’s population can currently be classified as immigrants. What if this ratio was raised to 6%? That will more than double remittances, increase originating country wages, enhance receiving country GDP by much more than the outflow of remittances, and possibly even obviate the need for official capital flows from rich countries to poor ones, which could potentially be replaced by private flows coming from richer migrants seeking to reinvest back in their countries of origin? In short, migration could be the simple solution to poverty in developing countries, says Clemens.
That’s a great way to reframe the migration discourse, and hopefully it will get some traction in the ongoing global debate on migration as the world seemingly lurches towards a worsening of the current economic crisis.
****
Migration within a country is fundamentally no different than migration across borders in that both are driven by economic considerations (I am excluding the phenomenon of mass migrations in the event of war and famine which are forced migrations and thus governed by a different logic). Your editor, Ratnakar Tripathy, has shown( http://www.phalanx.in/pages/article_i007_Retelling.html) that the migration of Bihari farm workers and other unskilled laborers to other states has had a big positive impact on Bihar’s economy over the years. It would be tempting to jump to the generalized conclusion that internal migration has the same local and systemic effects as international migration does, and would thus be a better solution to domestic poverty in India than welfare schemes, but for the moment we have no data to support this view.
What I find equally fascinating are the regional and sub-nationalistic variations in the propensity to migrate. What I mean by this is that the people of some states and regions seem more inclined to migrate than others. Thus, the greater metropolitan area of Mumbai is predominantly populated by non-Maharashtrians, even though Maharashtrians as a whole compare very favorably on the parameter of educational levels to southerners and Gujaratis who constitute the majority of Mumbai’s migrants. Logically, Maharashtrians should have had the home base advantage and filled available jobs in Mumbai. Similarly, Bangalore’s tech industry is populated predominantly by non-Kannadigas, though Karnataka is no laggard in educational attainments.
These peculiar patters may have something to do with the “clustering” phenomenon which accounts for the disproportionate representation of Filipinos in nursing, Jews in finance, Andhraites in programming, and so on. The way this works is that people more easily believe they can do what other people like them have done successfully, which is why they are willing to follow in their footsteps, resulting in clustering. But here again, it would be interesting to see more research on clustering in the context of migration.
The author is a writer and consultant based in Fort Lauderdale, Florida