The immigration puzzle

The remarkable thing about immigration is how little of it there is. Take three datapoints:
1. George Borjas points out that 10% of Mexicans now live in the US. Sure, this is much more than a few years ago. But it means nine of 10 Mexicans don't respond to the fact that real incomes are four times as great in the US as at home.
2. Between May 2004 and September 2006, only 0.66% of people living in A8 accession countries applied to work in the UK (table A of this pdf), even though incomes there are only around a third of UK levels.
3. A survey of young people by the World Bank shows that fewer than 20% of Ethiopians, Bangladeshis or Albanians would emigrate permanently, given the chance (p196-97 of this pdf).
There's a ready explanation for this. Risk aversion, the costs of moving, not knowing the language and the home bias stop people moving; I suspect songs lamenting being away from home are a staple of any culture.
This matters, because commenters here have said that free migration would lead to a massive inflow of workers and hence downward pressure on wages. But if people don't like leaving home, this danger isn't so great. And you'd expect it to diminish over time to the extent that poorer countries catch up with richer ones. So perhaps the cost of freedom - and remember, the case for free migration is above all a case for freedom - won't be so great.

Comments

[reason]

And you'd expect it to diminish over time to the extent that poorer countries catch up with richer ones.
If only!

But Chris surely it is not just a question of what proportion of foreigners want to leave, there are two other issues
1.There are an awful lot of them (20% of the population of Bangladesh is a lot of people). Lots are being prevented by various barriers at present.
2.Global warming and peak oil may well yet create a lot of refugees.

[Matt Munro]

Case for whose freedom though ? A freedom based argument can equally easily be used the other way. Migration can, and has, threatened certain freedoms enjoyed by the indiginous population: cultural, religious, access to public services, maybe even some democraticically enshrined freedoms are at risk from large scale immigration - just look at the freedoms curtailed by "anti-terror" laws, the pressure on housing, or the way in which white christian culture in under perpetual attack in the wake of mass migration.
I'm just about convinced of the "provided they do no harm to others" conception of liberal rights - but can it be applied to a a multicultural society, especially one with an expansive welfare state ?

[Rohan]

Democracies eh, with their crazy political concensuses.

Those are still very large numbers - an inflow of 600,000 people from A8 countries alone (balanced by some flows the other way) concentrated on certain parts of the country has been enough to reshape the economies and cultures of several parts of London. There are also countless indications in the NHS of a disproportionate effect on their working age case load.

For those reasons it's no surprise there is a concensus for immigration controls and a general feeling of uneasiness about mass EU immigration - if those figures are small then without any controls it would be interesting to see the effects would be on London if their was a genuine breakdown in a major EU economy - as dove Blanchfield et al conclude there is a strong correlation with unemployment in the indigenous country so a severe recession in Poland would be an interesting incident and could lead to some soul searching about free immigration within the EU.

[tom s.]

Maybe risk aversion in part, but the border effect is not limited to migration. See John Helliwell's "Globalization and Well-Being" (http://www.policyresearch.gc.ca/page.asp?pagenm=v7n1_art_13)

From a summary of his book:

* The case for national autonomy in the face of globalization has been underestimated, with geography and borders mattering far more than is generally assumed.
* It is cheaper and easier to operate within networks of shared norms and trust, and the density of such networks declines with distance, especially as one crosses national borders; hence, differences in network densities might explain differences in trade and other economic transactions across borders.
* Individual well-being is driven far less by material wealth than prevailing rhetoric and some policy directions would suggest; health and education, for example, have stronger direct and indirect effects on well-being, and also generate strong positive externalities.
* Retaining and advancing domestically determined policy, particularly social policy, remains feasible given the continuing large degree of separateness of the economies and societies of countries.
* The importance of the social and institutional fabric of a society provides much more scope to policy makers to develop policies based primarily on domestic preferences and less on pressures arising from the international and, for Canada, North American environments.

Much of this applies to migration as well as trade.

[ad]

because commenters here have said that free migration would lead to a massive inflow of workers and hence downward pressure on wages. But if people don't like leaving home, this danger isn't so great.

I should think that 10% of the population of the third world would have quite an effect on the UKs employment market.

Besides, you can easily turn this argument around: if few people want to migrate to the UK, then stopping them from doing so makes little difference...

[Luis Enrique]

It would be unfair of me to ask you to give us your guess of some figures for what would happen to immigration flows, if the policies under discussion were to be introduced, but the expected numbers we'd expect do make a great deal of difference to this argument - 1m, 10m? I wonder what a prediction market would give us.

I got the figure of 660m people living on $2 per day or less from a quick google. So a very small percentages of that lot choosing to migrate is a very big number relative to this island. Most of those would face far higher barriers to migration, and a much tougher time on arrival, than those A8 accession countries you cite, but then again their relative gain from migration might be higher - I've now idea where it would come out.

Many of the arguments being made here (home bias, risk aversion, most people not wanting to migrate) also apply to rural urban migration in poor countries, which results in very large shanty towns.

Isn't there a co-ordination problem here - the co-ordinated opening of borders in EU and USA would mean something quite different than if the UK was first-mover.

[Ken Houghton]

The median earnings for the world is $800/year, so 660m seems a small estimate.

The argument that there is a "first-mover DISadvantage" is substantiated by Germanybut that appears to have been short-term, and a massive dislocation at that.

If all the IIT graduates in Mumbai were offered the chance to move to the US or UKbut ONLY on grounds that it was a permanent move (incented by, say, being taxed at a higher rate, refundable after 10 years if you're still living in the country), none of this green-card-ties-you-to-the-company bsit would probably be a win-win-win.

Examples (e.g., Ireland reaping major benefits from immigration that set the table for their recent growth when they still had the "great-grandparent" clause) abound.

The above is, of course, speaking as someone who cannot move to the UK because of the hurdles of job and immigration requirementshurdles that Canada specifically does not have for those with extensive work experience.

[Bob B]

I posted yesterday, with links to data sources, on the numbers of foreign born residents in London, which have risen from nearly a quarter at the time of the 2001 census to nearly 1 in 3 by the latest estimates published towards the end of last year. Sad to say but the spam blocker ate the message unless Chris can retrieve it.

Evidently, London attracts migrants on a significant scale but then inner London is hugely affluent compared with other parts of the EU according to Eurostat:

"In 2002, GDP per capita, expressed in terms of purchasing power standards, in the EU25's 254 NUTS-2 Regions ranged from 32% of the EU25 average in the region of Lubelskie in Poland, to 315% of the average in Inner London in the United Kingdom."
Eurostat, January 2005

Dick Whittington (1350-1423) is still a popular pantomine theme for Londoners:
http://en.wikipedia.org/wiki/Richard_Whittington

In medieval times, he came to London from Gloucester and went on to become a successful merchant. Famously, he went on to be elected Lord Mayor of London in times when that post went with important executive functions.

Besides:

"The worldwide volume of foreign exchange trading is enormous, and it has ballooned in recent years. In April 1989 the average total value of foreign exchange trading was close to $600 billion per day, of which $184 billion were traded in London, $115 billion in New York, and $111 billion in Tokyo. Fifteen years later, in April 2004, the daily global value of foreign exchange trading had jumped to around $1.9 trillion, of which $753 billion were traded daily in London, $461 billion in New York, and $199 billion in Tokyo."
Krugman and Obstfeld: International Economics (2006) p.311

"The City of London is globalisation in action. It is, first of all, thoroughly international, handling more of the world's deals in over-the-counter derivatives, global foreign equities, eurobonds and foreign exchange than any other financial centre (see chart 3). Second, its firms specialise in innovative, high-value-added products. Third, the City is living proof that clusters work in the way that economists claim. Capital can move like mercury. The main reason why international finance has made London its home is that everyone is there, making it easier to do complicated deals and to trade quickly in large quantities. The City offers a cluster of talent—financial whizz-kids, lawyers and due-diligence accountants—that is second to none, and self-renewing. It helps that English is a near-universal second language and that London's time zone makes it possible to trade in a (long) working day with both Asia and America. Regulation is mainly deft but not lax, and the taxman takes a hospitable view of foreigners' personal earnings."
http://www.economist.com/specialreports/displaystory.cfm?story_id=8582323

[TDK]

"little" is a relative term.

Given Risk aversion, the costs of moving, not knowing the language and the home bias stop people moving; I suspect songs lamenting being away from home are a staple of any culture., 10% is not a low figure; it is very high.

If you take 10% of the people from a given culture, it must have an impact on that culture. Does employing highly qualified medical people in the NHS from the third world benefit their home systems?

[Bob B]

According to the 2001 Census, 45% of ethnic minority people in Britain live in London:
http://www.statistics.gov.uk/cci/nugget.asp?id=263

No other region in Britain comes close.