Economic Effects of Migration

The economic effects of migration vary widely. Sending countries may experience both gains and losses in the short term but may stand to gain over the longer term. For receiving countries temporary programs help to address skills shortages but may decrease domestic wages and add to public welfare burden. "While every mouth brings a pair of hands, these hands sometimes make more than they eat and sometimes less," noted a writer in the Financial Times.

Nevertheless, most commentators argue that the net effects of migration are generally positive. The Economist magazine, for example, claimed that loosening restrictions on labor migration "would be one of the fastest ways to boost global economic growth." The positive effects, they say, would be significantly greater than removal of any trade barriers.

For sending countries, the short-term economic benefit of emigration is found in remittances. According to the World Bank, remittances worldwide were estimated at $397 billion in 2008, of which $305 billion went to developing countries. This figure only takes into account funds sent by formal channels, so the number is much larger.¹¹

For example, Somaliland, a breakaway region of conflict-devastated Somalia, receives an estimated $500 million a year in money sent home from abroad, four times more than the income from the main export, livestock, according to a study by the researcher Ismail Ahmed reported in the Financial Times. In the case of Mexico, remittances have become the country's second most important source of foreign exchange, after oil. The income is so large that Mexicans working outside of the country were able to gain the right to vote after threatening to withhold remittances.

In Tajikistan, remittances from its cheap unskilled labor force abroad in countries like Russia, Kazakhstan, and Uzbekistan has helped the country rebound from the failures of a planned economy and government instability, contributing around 50percent of Tajikistan’s GDP in recent years.¹²  Although difficult to measure the impact of remittances on developing countries, one World Bank study has concluded that a one per cent increase in the share of remittances in a country’s GDP leads to a 0.4 per cent decline in poverty.¹³

Meanwhile, for developed countries, the positive gains from immigration are a result of the infusion of cheap and eager labor into the economy. In the United States and Canada migrant workers often fill low-wage jobs for which there is not enough local supply of labor, such as farm labor. Just as cheap imports of industrial goods benefit the American economy, so too does the import of cheap labor. Economists who support the notion of these positive gains claim that immigration has little impact on wages or job availability for domestic workers.

On the other hand, the Center for Immigration Studies (CIS) discounts the positive gains of immigration. One CIS study states that Mexican immigrants have a generally negative economic effect on the United States. It claims that Mexican immigrants have caused a 5 percent reduction in wages for the poorest 10 percent of the American workforce. At the same time, impoverished immigrant households use social services at twice the rate of native-born Americans (31 percent vs. 15 percent) the study says.

Other studies, however, have found just the opposite. The British government , for example sponsored a study that found little evidence that immigrants drove down wages for native workers in the United Kingdom. It also found that immigrants contributed about 10 percent more to public finances than they took out.

At the same time, developing countries can suffer from "brain drain"—the loss of trained and educated individuals to emigration, an example of the possible negative effects of emigration for developing countries. For example, there are currently more African scientists and engineers working in the United States than there are in Africa, according to the International Organization for Migration (IOM), a worldwide agency that assists migrants. In Zambia, emigration has reduced the number of practicing doctors from 1,600 a few years ago, to a mere 400 today. The IOM estimates Africa's brain drain has cost nearly $9 billion in lost human capital and growth potential since 1997. According to the United Nations Population Fund, 2006 State of the World Population report, Africa only retains 1.3 percent of the world’s  health care practitioners. Thus, despite having over a quarter of the world’s tuberculosis cases and 64 percent of the total numbers of people infected with HIV, Africa only has, on average, a mere one nurse per 1,000 people.¹⁴

Nearby in India, 100,000 skilled technology workers are expected to leave in the next three years. Since it costs India about $20,000 per student to educate these individuals,India essentially will subsidize the rest of the world for $2 billion worth of technology education.

Click here, to watch an interview with Dr. Papademetriou, President of the Migration Policy Institute. He discusses the economic implications of international migration.