Migration Is Expensive, but Pays Off in Productivity

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Migrants are the big economic winners from migration, because they move from countries in which workers are paid little to ones in which they are paid a lot.

The wage differentials reflect differentials in productivity: People are more or less paid what they are worth. So a crucial question is, why are workers in high-wage countries so much more productive than workers in low-wage ones? Is it the characteristics of workers or the characteristics of countries? Economists have found that it is mainly the countries.

One powerful implication is that, whether or not migrants realize it, the impetus for their emigration is to escape those aspects of their countries that have condemned people to low productivity.

Another implication is that simply by shifting from a dysfunctional society to a more functional one, a worker’s productivity can increase 10-fold. This is an order of magnitude greater than other processes by which productivity can be increased. Globally, the vast edifice of technological research enables productivity to inch forward by only a couple of percentage points a year.

Migration Costs

At first glance, it might be imagined that the people most likely to migrate would be the poorest. However, the poorest people cannot afford it. Africa’s Sahel, the world’s poorest region, has not had emigration rates commensurate with its extreme poverty. Finance constraints give rise to an apparent paradox: An increase in income in the country of origin can actually increase emigration from it.

If a migrant’s family is financing the costs, and benefiting through subsequent remittances, it is possible that the decision to migrate is not truly a decision of the migrant but of the migrant’s family. Many studies support this depiction. In effect, rather than people choosing to change their country, families are choosing to become transnational. Families in poor countries are the mirror image of companies in rich ones. While the multinational companies are predominantly anchored in high-income countries, the multinational families are predominantly anchored in low-income ones.

In response to accelerating immigration, all high-income countries now impose restrictions of some form or another. Faced with these, the potential migrant has three options other than to remain at home. He could try to acquire the characteristics that enable him to satisfy the restrictions. He could try to cheat -- get permission to migrate despite lacking the necessary characteristics. Most desperately, he could try to evade the physical barriers that impede the immigration of those who do not have permission to migrate.

One way of cheating is by masquerading as a member of a category that is eligible for entry. For example, in the 1980s, Sweden initially had a very generous policy of granting citizenship to asylum seekers from Eritrea, then a province of Ethiopia beset by civil war. However, as the numbers grew, the policy became less generous. In response, some of the Eritrean immigrants who had acquired Swedish citizenship lent their passports to similar-looking friends and relatives: In the days before bio-recognition, Swedish immigration officials found it difficult to challenge identity just on the basis of a passport photograph.

A further version of masquerading is to pose as an asylum seeker. This undermines the legitimacy of a vital humanitarian institution, but such ethical considerations may cut no ice with desperate people. The number of asylum seekers is likely to be an order of magnitude greater than legitimately met needs, reflecting the extreme difficulty of refuting claims of abuse at the hands of authority.

Illegal Migration

The ultimate option is both expensive and dangerous: to travel without permission to enter the host country and try to evade physical restrictions. One evident risk is of detection. People caught attempting to enter Australia illegally are held in detention centers off the mainland: They can be stuck there for a long time. Undocumented immigrants to the U.S. are deported in very large numbers: in 2011, a remarkable 400,000.

Another risk is of the physical hazards of the enterprise: Boats sink, and stowaways suffocate or freeze to death. But the final and potentially most troubling risk comes from the people smugglers themselves. By its nature, this is an unregulated industry run by criminals in which the client-enterprise relationship is one-off. Having paid their money upfront, would-be migrants have no recourse if the smuggler defaults or underperforms.

Strapped migrants may be attracted by offers in which part of the payment is deferred until after successful arrival in the host country. But smugglers who offer such deals must build mechanisms for enforcing the obligation: In effect, those who have migrated illegally become temporary slaves to their smugglers. Among the limited options for profitable and enforceable slavery, the most obvious is prostitution: Undocumented immigrants who dreamed of becoming secretaries end up as sex slaves.

From the perspective of the would-be migrant, the combination of the need to finance migration as a costly investment and the need for a nonrisky means of overcoming legal restrictions has one dominant solution: family members who have already migrated. Diasporas facilitate migration through many distinct routes.

Unsurprisingly, established migrants come under intense pressure from their families in their country of origin to facilitate the legal process. Diasporas can provide not just local information about opportunities but also the opportunities themselves: Many migrants establish small businesses, which can find temporary room for newly arrived relatives even if they are not very productive, because minimum wage laws can easily be evaded.

Diaspora Effect

The effect of diasporas that is now receiving the most attention from economists is not that they increase the rate of migration; it is that they change its composition by overriding points systems that are developed to attract more highly educated workers than poorly educated ones.

Societies may choose to structure their immigration rules so as to confer unrestricted rights for each individual immigrant to bring in relatives. But while such a policy is generous, it is not the only rule consistent with an ethical approach. Limiting the rights of the diaspora to bring in relatives and prospective relatives is not primarily about controlling the total amount of migration; it is about controlling its composition.

The barriers to migration lead to a prediction: Actual migration should considerably understate desired migration. A rare natural experiment in which a relatively low-income society found itself with unrestricted access to a high-income society is therefore of interest. That natural experiment is Turkish Cyprus. Due to a complex political history, Turkish Cypriots have had privileged migration access to the U.K. Did they make use of this access?

Unfortunately, U.K. immigration statistics are paltry, but as of 1945, there were probably only about 2,000 Turkish Cypriots in the U.K. The current population is variously estimated at 130,000 to 300,000. Meanwhile, the number of Turkish Cypriots actually residing in Cyprus has declined to about 85,000, as of 2001. So there are now approximately twice as many Turkish Cypriots in the U.K. as in Cyprus.

The evidence that but for the barriers the low-income societies would empty implies that, for better or worse, the barriers really matter. They are all that prevent large inflows that would probably drive down wages and endanger mutual regard.

Yet from certain ethical perspectives, the barriers are a frustrating disaster. Huge gains in income for several hundred million poor people who would like to earn them are being denied. The utilitarian laments the avoidable reduction in well-being; the libertarian laments the restriction on freedom.

(Paul Collier, a professor of economics and public policy at the Blavatnik School of Government at the University of Oxford, is the author of “The Plundered Planet,” “Wars, Guns and Votes” and “The Bottom Billion.” This is the first in a series of three excerpts from his new book, “Exodus: How Migration Is Changing Our World,” published by Oxford University Press. Read Part 2 and Part 3.)

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To contact the author of this story:
Amanda Foreman at mail@wylieagency.com

To contact the editor responsible for this story:
Mary Duenwald at mduenwald@bloomberg.net