Friday, June 8, 2012

LIBERALIZING INTERNATIONAL LABOR MIGRATION, PART II: Potential Benefits and Costs to Destination Countries

Potential Benefits
  • Replacement migration: According to the International Organization for Migration (IOM), the population of high income countries (typical destination countries) such as the U.S. aged between 20 and 64 years old is expected to decline by 23% in 2050 (see World Migration 2008). Younger immigrants could help both address related labor shortages and fund social security and pensions for that ageing population.
  • Decreased incentives for illegal immigration and related crimes: According to the IOM, international migrant smuggling now matches drug trafficking as a source of income for organized crime (see here).
  • Lower the cost of migrant departure: According to the World Bank, migrants tend to stick to their destination country, even during times of economic crisis, when migration flows decrease (see Migration and Development Brief 11, 2009). I am not so sure that this squares perfectly with more recent (post- Great Recession) experience in the US, but, regardless, perhaps migrants tend to fear losing the opportunity to return if they leave.
  • Fiscal benefit: at least in the case of skilled migrants,  they can be expected to pay more in taxes (due to their higher income) than they receive in public benefits.
  • Alternative to outsourcing: international labor migration (ILM) may be preferable to outsourcing in at least two respects. First of all, it brings new consumers and investors to domestic U.S. businesses (instead of creating new ones for foreign businesses); and, second of all, it enables high income countries to control labor conditions--through wage legislation for instance--in ways that can favor their domestic populations.
  • Specialization of domestic workers in destination countries: In theory, liberalization should favor a better division of labor (see Joel Trachtman, The International Law of Economic Migration, 2009, p. 339).

Potential Costs
  • Domestic worker unemployment: This may be an inevitable corollary of ILM, although “there is no consensus among economists on the empirics” (Trachtman, 342). However, the test should be whether short-term winners of liberalization are made sufficiently better off to compensate short-term losers of liberalization. If so, then, as some sources recommend in the case of outsourcing, a program could be created to help firms purchase targeted insurance policies to cover the costs of domestic worker adjustment (see Daniel Drezner, “The Outsourcing Bogeyman,” Foreign Affairs 83, no. 3, 2004: 32-34). In the alternative, special fees, in the form of tariffs or a reasonable discriminatory tax, could be justified in order to offset those costs (Trachtman, 343).
  • Wage deflation (“race to the bottom”): Since ILM is motivated in part by a global income imbalance, workers in high-income countries might apprehend steep wage deflation as its inevitable corollary (in addition to the simple fact that raising the supply of workers might automatically lower their price). However, some have argued that although nominal wages might decrease, real wages would increase, because an efficient and effective ILM regime would also create an increase in productivity (see, e.g., Harry Binswanger, “Immigration Quotas vs. Individual Rights: The Moral and Practical Case for Open Immigration,” Capitalism Magazine, April 2, 2006, available here). Moreover, as mentioned earlier, destination countries can control wages to some extent through domestic wage legislation (something they simply cannot do in the case of outsourcing, which competitive businesses might prefer in the absence of an ILM option). As an example of wage legislation, in the U.S., pursuant to the Immigration and Nationality Act, federal regulations impose a Prevailing Wage principle, whereby imported workers must be paid the prevailing wage for their position in their geographical area of employment.
  • Fiscal burden: This cost, if it exists, may be related almost entirely to low skill migration (see Trachtman, 340). However, there would be ways to limit it. For instance, the receipt of public benefits could be limited to migrants who have already paid a minimum in social security contributions; moreover, reasonable material and temporal limits on family reunification are acceptable under international human rights law; therefore, dependents could also be prevented from migrating if they do not satisfy certain economic standards (see IOM proposal here).
  • Security and health: This objection is weak. Under the current U.S. national immigration scheme, for instance, four million visitors with a visa were admitted into the U.S. in 2009. (These are more likely to be lower income country nationals, because many higher income country visitors often benefit from a visa waiver program.) It is difficult to predict the increase in the flow of U.S. “immigrants” that would result from a liberalized ILM regime, but it seems reasonable to assume that it would remain significantly lower than the regular visitor visa flow and, therefore, should not be expected to significantly increase the health and security risks already associated with ordinary travel to the U.S. In any event, health and security concerns would have to remain valid grounds for exclusion under any justifiable new regime--and perhaps a weak precautionary principle could be applied.          
  • Social and cultural integration: As even the IOM recognizes, language and other social and cultural barriers may make migrants inefficient and add stress to the societies of destination countries. However, we need to develop more reliable ways of measuring these costs before we can weigh this objection. In any case, logically, the “political” cost of liberalizing ILM should be lower if we begin by focusing on temporary migration. Moreover, ILM liberalization is not likely to lead to a sudden massive increase in the overall migrant stock if it is limited with a job offer requirement, for instance.

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