In rich democracies, immigration is fuelling a fierce hostile reaction. That is not surprising. While a few insist that everybody is entitled to share in the prosperity and freedom of these countries, many of their fellow citizens view those seeking entry as more like invaders.
Similarly, economists’ benign view of the economics ignores the fact that immigrants are people whose descendants might live there permanently. Immigration then is about national identity.
In recent European elections, attitudes towards immigrants were instrumental in generating support for nationalist parties. In the US, Donald Trump’s fierce campaign against people pouring across the southern border has been a powerful source of his appeal.
In his speech to the Republican convention, he claimed that “the world’s criminals are coming here, to a town near you — and are being sent by their governments”. In both the US and the UK, polls show that immigration is a salient and divisive issue: Trump knows quite well what he is doing and why.
Yet, argues Lant Pritchett, one of the world’s leading thinkers on economic development, in an article on “the political acceptability of time-limited labor mobility”, demographic changes might force an opening in the “Overton window” of what can be discussed on immigration. High-income countries may have to abandon today’s binary view of the options — either exclusion or a pathway to citizenship — in their own interests and those of developing countries.
Start with the latter. The gap in average wages between rich and poorer countries is staggering. In 2021, according to the International Labour Organisation, the purchasing power of average monthly earnings in Ethiopia was 5 per cent of those in Germany. Even India’s were only 15 per cent.
The gap in average wages between rich and poorer countries is staggering.
Such gaps create both the largest arbitrage opportunity on the planet and enormous potential welfare gains. Pritchett argues that if 1.1 billion people were allowed to move and their average wage gain were $15,000 (€13,800) annually in terms of purchasing power, the total gain would be $16.5 trillion. This, he adds, would be more than 100 times greater than the benefits to developing countries of all development assistance.
Yet, while such wage gaps create an enormous economic incentive for the poor to move to rich countries, even temporarily, relatively few are able to do so: the controls are too tight and the costs and risks simply too great.
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However, this might change, he argues.
First, the combination of ageing with low historic fertility will generate such large increases in the ratio of the old to those of working age that support for the former will become unaffordable without immigration. In Spain, for example, this ratio would collapse from 2.45 in 2020 to 1 in 2050.
Second, many essential jobs are unskilled, but the workers have to be present. Care of the old is one example.
Third, people in rich countries will start to realise that there is another option — temporary contract work, without either family reunification or the possibility of citizenship.
Fourth, an industry will then be created to organise movement of people on temporary contracts, to and from rich countries. These businesses will take responsibility for meeting the required terms.
Finally, none of this requires fundamental changes in attitudes towards immigrants in rich countries. But it would probably require the creation of secure digital identities for the various categories of legitimate residents.
The penalties for employing people who do not possess such identities would be very high. The penalties imposed on businesses engaged in the movement of temporary workers who violate their legal obligations, including those workers, should also be highly punitive.
One objection is that this would entrench two classes of humans: first-class people entitled to live in high-income countries and second-class people who would have at best only temporary residence in the former, for the purpose of working there. But the proposed arrangement would not prevent countries from also allowing people in permanently.
More importantly, this proposal would offer far more opportunities, possibly even life-changing ones, to that second class of people.
According to Pritchett, in its 2009-2010 round of surveys, Gallup asked people around the world whether they would like to move temporarily to work in another country. Some 1.1 billion responded “yes”, including 41 per cent of the population aged 15-24 and 28 per cent of those aged 25-44. The unavailable best should not be the enemy of the good.
If mass immigration remains unacceptable, but becomes essential, then something more acceptable must be found
None of this is thinkable now. But that is indeed quite likely to change. After all, the people who will be workers in 2050 have nearly all been born. Even if people start work at 15, which is now very young indeed, nobody who is not already alive will be available for work before 2040, without immigration.
If countries want to sustain the intergenerational welfare bargain and are unable to raise the effective retirement age to, say, 75, immigrants, both skilled and relatively unskilled, will be necessary. If countries do not want to open a pathway to full citizenship for huge numbers of people, they will be driven towards the option of temporary contracts. This will be particularly compelling for countries with fertility rates close to one child per woman, of which there are now quite a few.
If mass immigration remains unacceptable, but becomes essential, then something more acceptable must be found. The only likely solution is temporary contracts. Few will embrace this option. But it would be better than the alternatives. Its time will come. - Copyright The Financial Times Limited 2024
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