THE mobility of capital has been the principal driving force in the previous half century of globalization and has led to an unbalanced factor combination, with the developing world still weighed down by its large labour surpluses and mired by poverty and unemployment, while the developed world experiences chronic shortages of labour and the need to export its capital surpluses. To redress this imbalance, there is an urgent need for liberalization of labour flows from developing to developed countries.
The growing importance of international migration (both real and virtual) will be driven by structural factors, both demographic and technological, in both developing and developed countries. The population of current EU member states is expected to decline by about 12 per cent by 2050, creating strong negative effects on living standards and government budgets. OECD estimates suggest that the cumulative effects of demographic changes in industrialized countries could be to reduce living standards in the US, EU and Japan by 10, 18 and 23 per cent respectively (OECD, 2000, p. 197).
Without an influx of new workers, European pension systems will become unsustainable. A growing body of opinion holds that aging European populations might be rejuvenated by inflows of migrants who would work, pay taxes and hence finance pensions, helping to avert a future pensions crunch (OECD, 1998; UN, 2000).
A UN report calculated that in the case of the EU, in the absence of any other measures or changes, the net number of immigrants required over the next 50 years to maintain the size of the total population would be about a million annually; to maintain the size of the working-age population about 1.5 million annually; and to maintain the old-age dependency ratio (the ratio of working-age to over-65 population) about 13 million annually - about 15 times current net migration rates (United Nations, 2000).
The last half-century has seen major changes in the ongoing division of labour among developed and developing countries, accompanying the increasing global interdependence. One important vehicle of these changes, which have led to unprecedented growth in the world economy, notwithstanding the associated increase in income inequalities, has been a growth in the migration of labour from labour-surplus to labour-deficient regions.
The migrations that have taken place in this period have been largely voluntary, based on the migrant’s perception of economic opportunity for himself and his family and its succeeding generations, on the one hand, and the need for hiring cheap labour by employers in host countries, on the other.
However, the governments in both labour-receiving and labour-sending countries did try to regulate the flows of such labour, both in terms of the quantity as well as the composition of the workforce,to suit the perceived ends of their countries. The receiving countries had to often weigh the cost advantage of such labour against the problems created by the assimilation of a culturally different population, which often led to social and political tensions. The sending countries, on the other hand, had to weigh the benefits of the remittances from their workers, which often provided valuable balance of payments support, against the skill shortages, especially of those trained with considerable public expenditure, such as doctors and engineers.
Nonetheless, overseas migration, whose complex costs and benefits, are not easy to analyse, has continued unabated and has proved its mutual worth to both sending and receiving countries. Its internal dynamic seems to unleash latent forces for the development of the poorer nations. The gradual transformation from unskilled hired labour (in the colonial era as indentured labour) to highly skilled professionals (as in the case of India and Pakistan and savvy entrepreneurs (as in the case of China) demonstrates how this age-old, risk-prone human endeavour can be harnessed to the greater good of the development of poor countries. Once the international community realizes the full importance of this process, it would allow its development in a harmonious way by developing innovative methods to share its burdens and benefits equitably.
That increased emigration is beneficial for developing countries and the world as a whole is a widely shared perception which has been confirmed by a number of studies by international agencies.
The UNDP Human Development Report (1992) claimed that opening up migration access to the north from the developing world would increase income for the latter by $200 billion per year. An ILO study for five Asian labour-exporting countries estimated that labour migration contributed an equivalent of $55 billion in capital inflows. A World Bank study showed GDP per capita growth is considerably higher in developing countries with higher emigration rates. However, national and micro studies show that migration is far from being an unmixed blessing and causes a number of tensions and distortions in the sending economy.
Most developing countries have pursued passive policies of benign neglect, rather than proactive policies of maximizing the benefits and mitigating the undesirable effects of overseas migration. Despite its generally beneficent effects, overseas migration outcomes have to be weighed and harnessed carefully. The welfare effects of migration of people depend on the patterns and magnitude of migration and the structure of domestic labour markets. While migration increases overall global output, it also increases inter-country inequality.
In so far as the human capital is financed by public funds (which it normally is in most LDCs, although this is declining), and the beneficiaries are in the upper decile/quintile of the country’s income distribution, the overall impact is regressive both in terms of intra- and inter-country inequality.
Two primary effects of overseas labour migration have often received most attention in the policy discourse, viz. the gain derived from migrants’ remittances and the loss of human capital (often called the “brain drain”). The former affects mainly the poorer segments of the population and poorer countries, while the latter involves the educated elites of both poor and rich countries – among the worst affected being some of the African countries, which export a high proportion of their highly skilled labour force.
In general, households with some asset base or borrowing power have benefited from overseas migration, which involves both high initial investment and considerable risks, much more than the poorer sections of the population who do not have access to such enabling resources.
Remittances are particularly important for low, and lower middle income countries. The total volume of remittances in 1998 was $52.4 billion about the same as net Official Development Assistance (ODA )in that year ($52 billion). Remittances have important economic implications for a locality. Financial remittances are greater (especially as a fraction of income) for lower skilled workers who are more likely to be temporary migrants.
These remittances finance consumption, liquidity for small enterprises (in the absence of well functioning credit markets), housing and philanthropy; they are an important source of social insurance in lower income countries; and they also finance capital investments – in equipment, land, wells and irrigation works and education — with longer-term implications for economic development. It is difficult to track what percentage of remittances goes into consumption, working-capital or long-term investment
Deliberate pursuance of emigration policy as an instrument of development strategy has been more an exception, both geographical and temporal, than the rule in Asia. Most developing countries adopted a policy of benign neglect towards their settled and emigrating expatriate communities after independence largely because of the fear that the latter would be accused of divided loyalty between the home country and the one in which they had settled or were seeking a living. This fear was partly borne out when the newly independent nations in East Africa, particularly Uganda, expelled large numbers of Indian and Pakistani origin and in many cases confiscated their property and businesses. Most of these, however, never returned to their home countries but decided to settle in the UK and other countries as political refugees.
The main policy interest of Asian Governments in overseas migration, especially of unskilled labour, has been as a source of generation of foreign exchange, through workers’ remittances. An increasing number of developing countries have been using their emigrant labour as a resource for development of their domestic economies.
Since the size of these emigrant populations relative to the domestic population has now assumed considerably high proportion, many developing countries have realized that they can no longer treat their diaspora as a passive resource but have to give due consideration to the latter’s concerns so that they continue to have a link with the mother country and do not get permanently estranged from it.
