A love-letter to migrants

By Daniel Walton

The free world is in crisis. In 2020, Joe Biden won the US Presidential Election, gathering 4.5% (around 7 million) more votes than his opponent. Yet on January 6, armed insurrectionists took control of the Capitol Building as lawmakers convened to declare Biden the official victor. Despite this shocking display of political terrorism, 147 Republican lawmakers signed on to an objection with the intent of overthrowing Biden wins in key swing states. This effort was doomed to fail yet highlights the divide that is now consuming American politics.

The balance of democracy and human rights has also regressed worldwide. In 2020, the state of liberalism only improved in one country according to Freedom House. In the UK, the country grapples with Brexit as the economic disconnect between London and Regional England increases. The EU is faced with growing disunity and an incoherent plan for dealing with authoritarian trading parties such as China, whilst right-wing leaders in Poland and Hungary strip minority citizens of certain rights. In India, Narendra Modi makes Trump look like a saint as he engages in aggressive Hindu nationalism. Indeed, Australia is one of the only countries where democratic conditions have not significantly deteriorated.

Yet all this undersells a more precipitous crisis facing the liberal world order – that of declining populations and, followingly, economic clout. Currently, eight of the ten largest economies are liberal democracies – those that grant democratic power and rights to their citizens. By 2050, that number will be reduced to five. Likewise, current major powers such as Germany, Japan and Italy are expected to face major population declines.

Theoretically, Australia might just throw up its hands and say “Who cares what happens overseas? We’re doing fine.” Yet this is unwise. Australia’s economic prosperity has depended on the rules-based international order since the country’s inception. The last time power was devolved amongst competing political and economic systems, the world fell into two world wars and a cold war. Our recent trade conflict with China also taught us we cannot expect to sit out international conflicts and live the best of both worlds. And in some ways, Australia’s unique level of wealth can be attributed to our ability to hitch our wagons to the world’s most influential powers – first the United Kingdom and then the United States.

But as these powers inevitably weaken over the next century, Australia will struggle to find capacity to hold its own against less friendly superpowers. Australia’s fertility rate is already 15% below replacement level and steadily declining, whilst the senior share of our population has risen by 3% over just ten years, increasing pressure on the welfare system.

Put simply, we need more people.

One way to do this would be to produce more babies, yet there is something draconian about a government telling its population to breed in greater numbers, and incentive measures such as child tax credits are unlikely to make much of a difference. Having a child is rightly a personal and family decision.

Luckily there is no shortage of those who want to move here, and there is also ample room and resources in nations like Australia, Canada and the United States to accommodate a higher population. By most measures of biocapacity, Australia is among the ten most resource-rich and fertile lands in the world, yet our population only barely cracks the top 50.

Larger populations mean larger economies, and larger economies mean more political influence and greater independence. There is also a preponderance of evidence to suggest that open borders enrich a country’s native citizens. Indeed, Jack Donaghy from 30 Rock explains the full cycle of benefits: The first generation works their fingers to the bone making things, the next generation goes to college and innovates new ideas, the third generation… snowboards and takes improv classes.”

Whilst those comments are somewhat in jest, it does hold some degree of stereotypical accuracy. First-generation immigrants largely complement native workers by providing much-needed labour in areas of shortage. Second-generation immigrants, abundantly youthful, are among the most productive, ingenious and fiscally beneficial citizens of society. By the time the third generation arrives, they are for all purposes indistinguishable from native residents and as such are subject to the same first-world problems.

Indeed, an NBER Working Paper found that more open borders can yield welfare gains of $10,000 for any low-skilled immigrant, whilst having no impact on the wages of native workers in the long run (Kennan, 2013). Even a neoclassical view of the labour market would conclude that immigrants boost both labour supply and demand, mostly offsetting any effects on host-country wages.

Similarly, a recent NBER working paper found that 55% of job growth in AI-related industries in the US were accounted for by foreign-born workers, and that relaxation of immigration restrictions leads to large job growth in specialised industries in which the availability of skilled labour is a more binding constraint on growth (Hanson, 2021).

The negative externalities are also unclear: Card (2009) found that immigration lowered wages in low-skilled industries by 1-2 percent, whilst Cortes (2008) found that these effects were partially offset by a lower price level due to increased allocative efficiency. As the OECD found, migrant workers contribute to solving labour market imbalances, pay more in taxes than received in benefits, reduce age-dependency ratios and increase the total stock of human capital in an economy (Lamp, 2015). Indeed, detractors from immigration seem to suffer from the fallacy of ‘Schrodinger’s Immigrant’: that migrants both “take our jobs” and “use our welfare”. The evidence suggests neither of these are true.

The benefits of increased immigration are also not purely economical, they provide humanitarian benefits too. Take the skilled Bangladeshi student, whose ability would be comparatively under-rewarded in her local economy which is still largely reliant on subsistence farming and factory production. In this way, the free flow of people would benefit humanity enormously in allowing citizens of the world to self-sort themselves into economies they perceive as most productive for their abilities.

There is a caveat – “brain drain” as it’s commonly called – where richer countries inevitably attract the brightest minds from the developing world, thus depriving poorer nations of their best talent. For example, the annual fiscal impact in India of its high-skilled migrants in the United States is approximately 0.47% of GDP. Yet this is a philosophical problem where we must decide whether we are aiming for the betterment of the world’s people, or the world’s nation-states, for which there is no easy answer.

Likewise, there are some positive home country effects, for example the allure of migration can lead to increased educational attainment, as well as the remittances sent back to families at home which provide for a greater quality of life (Bredtmann, 2018). For example, India’s annual remittances are over $55 billion, and high-skilled returning migrants have contributed to the development of an impressive IT sector there. Education systems in poorer nations with access to migration have also been demonstrated to alter their learning habits in order to prepare students for more advanced fields, whilst educational tourism provides a huge benefit to home countries (Gibson and Mackenzie, 2010).

In either case, it would be prudent for Australia to rapidly increase its immigrant intake, motivated by both economic pragmatism and humanitarianism. For us to do so, the problem of white nationalism must first be tackled. That is, the fears of native-born citizens that increased migration will lead to democratic and political conflict. Whilst civil war in developing countries has indeed been highly polarised along ethnic lines, research and practice does not produce the same findings in rich nations.

For example, immigrants in the US largely hold the same political beliefs as the native-born public, differing significantly only in their views on immigration. Likewise, Nowrasteh et al. finds that immigrants have a positive effect on institutional quality, leading to long-term growth increases of 0.5%. Intuitively, a rational person would not move to a nation for which they have no intention of adopting their customs and principles, except perhaps for a temporary source of refuge from war and persecution.

As such, it is clear that immigrants do not pose a major risk to a country’s institutions, in fact the real risk is that of electing extreme nationalist governments. Indeed, immigration has never caused a major war in the rich world, whilst extreme nationalism has directly caused 92 million deaths in the twentieth century alone, including in Nazi Germany, Imperial Japan and Chiang-Kai-Shek’s China. And whilst communist ideology is largely a spectre of the past, nationalism is once again on the rise in the US, Europe and Asia.

The clear challenge is persuading these people of their folly, for which there is no simple solution, as misinformation and ideological echo-chambers have become the norm. Nevertheless, they might eventually be convinced that the actions of authoritarian governments overseas, such as the CCP, pose a far greater danger to their way of life than the citizens escaping from them.

But all that being said, the argument for extreme levels of immigration might in fact be the pragmatic one.

UQES Publications welcomes reader correspondence on our articles. If you wish to reply to points raised, or believe a perspective has been missed, feel free to send respectful responses to publications@uqes.com.au. We will endeavour to publish correspondence in subsequent articles.

References

Bredtmann, Julia, Martínez Flores, Fernanda, & Otten, Sebastian. (2019). Remittances and the Brain Drain: Evidence from Microdata for Sub-Saharan Africa. The Journal of Development Studies, 55(7), 1455–1476.

Card, David. 2009. “Immigration and Inequality.” American Economic Review, 99 (2): 1-21.

Hanson, G. (2021). Immigration and Regional Specialization in AI. National Bureau of Economic Research. Working Paper 28671.

Patricia Cortes. (2008). The Effect of Low‐Skilled Immigration on U.S. Prices: Evidence from CPI Data. The Journal of Political Economy, 116(3), 381–422.

Gibson, John, and David McKenzie. 2010. “The Economic Consequences of “Brain Drain” of the Best and Brightest: Microeconomic Evidence from Five Countries.” Policy Research Working Paper 5394, World Bank

J. R. Clark, Robert Lawson, Alex Nowrasteh, Benjamin Powell, & Ryan Murphy. (2015). Does immigration impact institutions? Public Choice, 163(3/4), 321–335.

John Kennan, 2013. “Open Borders,” Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages L1-L13, April.

Migration policy debates: is migration good for the economy? (2015). Lamp, 72(9), 41.

Rummel, R. J. (1994). Death by government. Transaction Publishers.

Pin It on Pinterest

Share This