Remarks for ALS Friedman conference — The benefits of Immigration
I was invited to speak at the ALS Friedman conference. Below is the text of my remarks. I have edited some parts for clarity. You can find my slides here, and I’ve pasted some of the charts in-text.
26th May 2018, 6th ALS Friedman Conference, UTS Aerial Centre, Sydney
I was hoping to start my talk with a story, if you’ll indulge me, and it’s a story of a young boy. This young boy and his family grew up on the streets of Mumbai, a 6x4 portion of the pavement covered by blue tarp was home for the first few years of his life.
He and his family would’ve been at the very bottom of not just the income ladder in India, he was at the bottom of the global income ladder!
But in a matter of a few decades — he rose to the top of the income ladder (the top 1 per cent — which in today’s dollars is anyone earning around 45,000 AUD annually).
How was this kind of income growth possible — did he win the lottery? Did he come into inheritance from a distant relative? did he marry rich?
No, he was given a different kind of lottery ticket — the freedom to move so he could determine his own economic future.
At the end of almost 40 years living in the Arabian Gulf, he managed to amass enough income to educate his kids at universities overseas, and to enable them to make decent lives for themselves.
I should know… I’m his daughter.
In a recent study, World Bank economist, Branko Milanovic, estimated that about 59 percent of the variation between people’s wages was dependent on where they were born — implying that not only was the country you were born in an important aspect of your earning potential — it was *THE* most important characteristic affecting your earning potential. More than half of variability in income globally is explained by circumstances given at birth.
People of a working age, from some countries could increase their incomes by about 6 to 14 fold by moving alone. Yet they cannot because we place restrictions on the ability of people to migrate. (Clemens et al)
According to prominent economist (and noted globalisation sceptic), Dani Rodrik, “even a minor liberalisation of the advanced countries’ restrictions on the use of foreign workers would produce a large impact on global incomes. He goes on to say, “the gains would outstrip comfortably any other proposal currently on the table… Labor markets are the unexploited frontier of globalization.”
Migrants send some of the money they earn overseas back home as remittances. The Bank estimates that officially recorded remittances to low- and middle-income countries reached $466 billion in 2017, an increase of 8.5 percent over $429 billion in 2016.
The chart below shows the contribution that people like my father made to their economies back home through (estimated) remittances. Estimated Remittances to India from the UAE comprising a large proportion of total remittance received by Indian citizens.
And it is one of the more effective aid mechanisms we have in place — some estimates put the global remittances flow at three times larger than the global aid budget.
And now you may ask, but what’s in it for the countries that they migrate to — there has been a lot of spirited debate about whether migrants depress local wages. However the evidence on this is mixed, with studies concluding that the effects are usually either small or positive, and that negative effects tend to smooth out over time, as the economy adjusts and the new migrants attain the human and social capital needed for them to thrive.
Noah Smith from Bloomberg, chronicling the evidence, summarises that
“A number of studies of refugee waves have found little or no impact on the employment of native-born workers in the cities where the refugees go. These small or zero effects hold whether the refugees go to rich countries, poor countries, or simply to neighbouring countries. In 2005, Card found little or no harm from Mexican immigration to the U.S. Some studies even find that immigration raises native-born wages, by prompting locals to go back to school and improve their skills.”
Migration in Australia
Australia has one of the highest rates of foreign born populations in the world (trailing behind only country whose labour forces consists of overseas workers — like the Gulf Council countries).
Immigration historians like Megalogenis, Peter Mares and others have chronicled Australia’s history with migration and overwhelmingly the successful integration and assimilation of waves upon waves of migrants who have made Australia home over the years.
I wrote a paper last year, identifying the impact that Australia’s tight selection policies mean for the characteristics of the most recent cohorts of migrants.
Between 1994 and 1996, the Department of Immigration greatly expanded the number of permanent migration places available to skilled migrants at the expense of family migration places.
I looked at samples of individuals that arrived before and after this change, and found that skilled migration system was working well to ensure that migrants of high earning potential migrate to Australia, contributing to economic growth.
So despite what you hear about from ONP senators or, more recently, NSW ALP MLCs, immigration has been good for not just the destination country but for the people and the families who migrate. The values of our society is a part of what entices migrants to make other places home. Turning hostile is not the solution.
As Milton Friedman, who this conference is named after, once said,
“The clearest demonstration of how much people value freedom is the way they vote with their feet when they have no other way to vote”.
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