Saturday, 3 October 2015

Analysing the benefits of migration

By Martin Wolf, Published The Straits Times, 2 Oct 2015

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 thought-provoking piece on immigration in The Straits Times today. British journalist Martin Wolf gives a clear and...
Posted by Lee Hsien Loong on Friday, October 2, 2015

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.

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.

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.


"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."
Posted by Financial Times on Tuesday, September 29, 2015

Immigration pays dividends
By Ted Widmer, Published The Straits Times, 9 Oct 2015

Immigration is not the easiest issue to debate. It stokes emotions about "homelands" and invasions, as we have seen all summer, both in the Republican presidential contest and in the tragic situation in Europe. These arguments tend to produce more heat than light, making objective analysis difficult.

Many politicians find that their poll numbers rise the further from reality they stray - as the Donald Trump playbook continues to prove. A recent Pew report confirms that the parties remain far apart, with Republicans far more certain than Democrats (53 per cent versus 24 per cent) that immigration is making our society worse.

But history provides some clarity about the relative costs and benefits of immigration over time. Fifty years ago this month, President Lyndon B. Johnson signed the Immigration and Nationality Act of 1965 at the foot of the Statue of Liberty. By any standard, it made the United States a stronger nation. The Act was endorsed by Republicans and Democrats in an era when cooperation was still possible.

Indeed, the most serious opposition came from Southern Democrats and an ambivalent secretary of state, Dean Rusk. But it passed the Senate easily, with skilful leadership from its floor manager, Senator Edward Kennedy, and Johnson himself.

Since 1924, US immigration policy had been based on a formula, derived from the 1890 census, that made it relatively easy for Northern Europeans to immigrate. But the formula set strict limits for everyone else. That seemed ridiculous to President John F. Kennedy, who was trying to win hearts and minds in the Cold War, and it seemed even more so to his successor in 1965, as Johnson was escalating the war in Vietnam. The Act's passage was one of the few positive legacies of that complex moment in American foreign policy.

Johnson promised his opponents that the Act would "not reshape the structure of our daily lives". But that prediction proved utterly untrue. By destroying the old national-origins system, the Act opened the floodgates to the parts of the world that had been excluded in the past.

What ensued was arguably the most significant period of immigration in American history. Nearly 59 million people have come to the US since 1965, and three-quarters of them came from Latin America and Asia. It was not unrestrained immigration - the Act created preferences for those with technical training, or family members in the US. But it was vastly more open than what had come before.

There is little doubt that the Act succeeded in the ways that its progressive supporters hoped - it made America a genuinely New Frontier, younger and more diverse, truer to its ideals. But it also was a success when measured by a more conservative calculus of hard power. It certainly increased American security. Significant numbers of immigrants and their children joined the US military after 1965, and in every category the armed forces became more ethnically diverse.

The flood of new immigrants also promoted prosperity in ways that few could have imagined in 1965. Between 1990 and 2005, as the digital age took off, 25 per cent of the fastest-growing American companies were founded by people born in foreign countries.

Much of the growth of the last two decades has stemmed from the vast capacity that was delivered by the Internet and the personal computer, each of which was accelerated by immigrant ingenuity. Silicon Valley, especially, was transformed. In a state where Asian immigrants had once faced great hardship, they helped to transform the global economy. The 2010 census stated that more than 50 per cent of technical workers in Silicon Valley are Asian-American.

Google was co-founded by Mr Sergey Brin, who emigrated from the Soviet Union with his parents at age six. The new CEO of United Airlines is Mexican-American. And an extraordinary number of Indian-Americans have risen to become chief executives of other major American corporations, including Adobe Systems, Pepsi, Motorola and Microsoft.

In countless other ways as well, we might measure the improvements since 1965. A prominent Aids researcher, Dr David Ho, came to America as a 12-year-old from Taiwan. Immigrants helped take the space programme to new places, and sometimes gave their lives in that cause. Almost no one would argue for a return to pre-1965 American cuisine, which became incomparably more interesting as it grew more diverse. Baseball has become a more dynamic game as it, too, has looked south and west. The list goes on and on.

There will always be debates over immigration, and it's important to acknowledge that opponents of immigration are usually correct when they argue that immigration brings dramatic change. But a careful consideration of the 1965 Immigration Act shows that our willingness to lower barriers made this a better country.

To convey that hard-earned wisdom to other nations wrestling with the same issues, and to open our own doors more widely, would be a modest way to repay the great contributions that immigrants have made on a daily basis to the US over the past 50 years.


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