LIBERALIZING INTERNATIONAL LABOR MIGRATION, PART I: Benefits to Countries of Origin

In December 2011, Robert Guest (business editor for the Economist) described the general case "in praise of brain drain" (i.e., the "transfer of intellectual capital" due to skilled worker migration from poor countries to rich ones), pointing out that, under normal conditions, the transaction benefited poor countries by:

• Motivating their citizens (the majority of which would not be able to emigrate) to acquire "marketable skills;" 
• Creating uniquely-stable financing through remittance flows (money earned in rich countries and sent back home to poor families, which is more than double the foreign aid their allegedly "corrupt" governments receive); and
• Opening channels of commerce (through diaspora networks).

Guest (an economist) failed to mention some easily-overlooked political benefits of so-called brain drain--e.g., releasing key young labor surplus (thus reducing the chances of social unrest). Most poor countries have very young populations in demographic ascent. (A 200% increase is expected in Africa, and around 40% increase expected in Asia, Latin America and the Caribbean, in the 20-64 age group, by 2050.) For poor countries, where those populations are likely to be unemployed and there is currently too little capital for entrepreneurship, exporting even a skilled labor surplus might well increase political stability.

However, in terms of economics, his argument is compelling, especially on the role of remittances. For example, according to the International Organization for Migration, in 2008, international migrants returned an estimated $444 Billion in remittances, $338 Billion of which went to poor countries. That is three times more than the World Bank’s recent record 18-month commitment to poor countries, dwarfing all Official Development Assistance flows. (Our research also suggests that remittances tend to attract other forms of capital flows in their momentum.)

We would add that apparent brain drain may in fact lead to brain gain overtime, given that many migrants move back home of their own accord. In the alternative, countries of origin could, for instance, tax the income of their economic emigrants to guarantee a minimum return on their human-capital investment.

Nonetheless, some fear that remittances might create the wrong incentives, and are likely to be malinvested by their recipients and to cause more inflation than investment. But, then again, the same could be said of virtually any form of development finance.