Let Their People Come: The Five Forces Leading

to Greater Migration

Lant PritchettKSG, Harvard

October 8, 2007IOM Conference

Future of Migration

� Five irresistible forces in the global economy are producing increased pressures for labor mobility

� Immovable ideas of rich country voters are blocking these forces

� The goal is to accommodate forces and ideas to create “politically acceptable and development friendly” (which includes human rights respecting) policies for labor mobility

Five Forces

� Increased global inequality—gaps in earnings of equivalent workers across national borders are huge

� Demographic changes—gains from trade depend on differences—and boy are there differences

� Globalization of everything but labor goods, capital, ideas and “beachhead” effects

� Limits of capital/labor substitution and labor saving innovation—hard core non-tradables are the future of employment

� Large changes in “optimal” populations

Force 1: Location, location, location

0.0%

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20.0%

30.0%

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Force 1: Wage gaps among industrial workers are larger than ever

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USA/Norway 1870

USA/Sweden 1870

USA/Italy 1870

Spain/Morocco 1 990s

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NLD/Indonesia 1990s

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In the first globalization era the world was set in motion by wage gaps of between 2 to 1 and 4 to 1 between host and receiving countries—those are tiny by comparison today

USA/sending country gapsIn 19th century

Gaps today

Force 1: Most of the gap appears to be where not who…

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$17,266$19,942

-$524-$5,000

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Force 1: Over foreseeable horizon reductions in wage gaps make migration pressures higher, not lower

� Pretty good evidence of “threshold” effects so that migration flows first rise and then fall as laggards gain on leaders.

� My guess is that most large countries are on the rising part so that wage gains increase migration pressure (even if they reduce gaps)

� This is bad news for the “aid to prevent migration”sell—”development” is not a way to stop migration

Force 2: Demography

� Fertility has collapsed in Europe—slowly in some parts (e.g. Germany), rapidly in others (e.g. Italy)

� Projections are the “support ratio” in Europe (25) will fall from 4.25 to 1.82 (Demeny)

� Population of North Africa/West Asia increases to 3 times Europe

Force 2: Europe ’s disappearing act —compared to the “Muslim tier” that surrounds it

0

200

400

600

800

1000

1200

1400

1950 1970 1990 2010 2030 2050

Year

Pop

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ion

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Force 2: Who takes care of granny?—twice as many over 85 (!) than under 5

0

1

2

3

4

5

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2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

France

Germany

Italy

Japan

United States

Force 2: Rule of thumb: what cannot happen won’t happen—but what will happen?

Force 3: “Everything but labor”globalization

� Trade is substantially liberalized� Movement of capital has been substantially

liberalized� Movement of ideas is more rapid

(instantaneous)� Movement of people is cheaper and cheaper� “Beachhead” and network effects mean more

migration makes more migration easier

Force 3: Why is this graph so facetious?

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orld

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All remaining goodsliberalization3% increase in hostcountry labor forceFull Liberalization oflabor markets

Force 3: Slight less facetious? Migration is now on the “development” agenda

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Force 4: Capital/labor substitution and home for marketed

� Huge induced innovation to displace low to medium skill labor—automated check-out at Home Depot

� Home production displacing marketed production—you at Home Depot

� Home appliances/value added in preparation versus labor

Force 4: Massive reductions in the price of capital—how far can capital (with IT) replace labor

Are the nurses of the future Robots or Rosalie?

Force 5: Ghosts and Zombies

� Post WW II world has run a huge natural experiment—(a) expand dramatically number of sovereign states (borders, flags, currencies), (b) encourage mobility of capital and labor but freeze labor in place (POSEBL globalization)

� How will this turn out? Hinges on views of the role of region specific labor demand:� Small shocks—all good� Big shocks, flows accommodate—all good in long run� Big shocks, policy and ‘institutional’—not so good, can be

fixed� Big shocks, really geographic: lets not think about it

Force 5: Evidence that, even with optimal policies and even with globalization of all else labor demand shocks are huge

� Regions within countries vs. across countries

� Regions within US (contiguous counties)

� Countries in first era of globalization (e.g. Ireland)

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Conecuh

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Etowah

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St. Clair

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Sumter

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Ba yl o r

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B osqu e

Bo wi e

Bra zo ri a

Brazos

B rewster

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Broo ks

B ro wn

Bu rl e so n

Burn et

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Cal h ou n

Ca l la ha n

Ca mero n

Ca mp

Carson

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Ca stro

Cha mbe rs

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Chi l dress

Cl a y

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Co ke

Co le ma n

Col l in

Co l li n gswo rth

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Dea f S m i th

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Eastl and

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Edwards

E ll i s

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Fa ye tte

Fi she r

F lo yd

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Free ston e

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Ga lvestonGal vesto n

Garza

G il l espi e

G l asscock

Go li a d

Go nzal es

G ray

Gra yson

Gre gg

Gri mes

G ua da lu pe

Ha le

Ha l l

Ham il ton

Ha nsford

Ha rd ema n

Ha rdi n

Ha rri s

Ha rri so n

Ha rtl ey

Haskel l

Hays

He mph i ll

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Hi d al go

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Ho ckle y

Ho od

Hop ki ns

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Howard

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K en ed y

Ke nt

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La va ca

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L ive O ak

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Mari on

Ma rti n

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M i dl an d

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Mi l ls

M itche ll

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Moo re

Mo rri s

Motley

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Na va rro

Newto n

No la n

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O ch il tree

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O ra ng e

P al o P in to

P ano l a

P arker

Parme r

Pe co s P ol k

Po tte r

P re sid io

Ra i ns

Rand al l

Re aga n

Rea l

Red R iver

Re eves

Refug i o

Ro be rts

Ro be rtson

Rockwal l

Ru nn el s

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Sa bi ne

S anAu gu sti ne

Sa nJa ci n to

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S an S ab a

Schl ei che r

Scu rrySh ackl efo rd

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S tarr

S te ph en s

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Su tto n

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Ta yl or

Te rre l l

Te rry Th rockm orton Ti tus

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Tri ni ty

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V al Ve rd e

VanZa nd t

V ictori a

Wa l ke r

Wal l er

W ard

Washi n gton

We bb

Wha rto n

Whe el e r

Wi ch ita

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Red=County Declined; Net Decline between 0 and 5,000Purple=County Declined; Net Decline between 5,000 and 10,000Blue=County Declined; Net Decline greater than 10,000Green=County Increased by more than 10,000

The emptying of the heartland and the Delta (only green shaded counties had substantial populationincrease over a 60 year period)

Force 5: Contiguous regions of the USA are a third their counter-factual size

62.6%96/192(Jordan, Austria, Sri Lanka)

0.36-27.9%Deep South

85.2%117/1920.33-34.0%Heartland

92.2%117/192(Nicaragua,Bangladesh)

0.31-36.8%Texlahoma

Ratio of area per capita income to national average

Number of countries (of 192) with smaller area(with examples)

Ratio of current populationto counter factual at rate of natural increase

% change in population 1930-1990

Region of the United States(contiguous counties)

Force 5: Ireland’s wages relative to UK rose over entire crisis period—population fell

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1810

1820

1830

1840

1850

1860

1870

1880

1890

1900

1910

1920

Year

Rel

ative

to 1

870=

1

Pop'l Wages/UK GDP PC

Force 5: Bolivia’s population rose—wages fell

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1970 1975 1980 1985 1990 1995

1972

=1

RGDPPW Pop'l Wages/USA wages