Why Today’s Migration Crisis Is an Issue of Global Economic Inequality

A yearlong project of the Ford Foundation has asked a simple question—“What is inequality?”—to CGD’s Michael Clemens along with a group including Nobel laureate Joe Stiglitz, Gloria Steinem, Sir Richard Branson, and Sir Elton John. Many spoke about rising domestic inequality. But to Clemens, #InequalityIs global. And innovative policy can tap the power of migration to reduce inequality while minimizing its risks. “Extending equality of opportunity means uncaging human potential,” he says, “and that is a beautiful thing.”

Here’s the video Clemens recorded for the #InequalityIs project. Below that is the accompanying blog he wrote that first appeared here, drawing on research by CGD non-resident fellow Branko Milanovic.

How much money can you ever hope to make in your lifetime? I can make a decent guess without knowing your education level, race, or social class. I just need to know what country you live in.

If you live in the United States, by far the biggest reason you will earn vastly more than a typical person in, say, Mali or Haiti is not because they have less perseverance, intelligence, or talent. It’s primarily because that person lives in Mali or Haiti.

What country you live in is more important in determining your life outcomes than anything else about you. In fact, what country you live in is more important than everything else about you, combined.

This inequality of opportunity is driving the current migration crisis. It means that economic opportunity and personal security are handed out mostly by lottery: a lottery of birthplace. People born into settings of poverty and violence are moving, refusing to simply accept a grim fate ordained for them. The migration crisis thus makes it easy to see some of the enormous costs of global inequality—including the thousands of deaths in the Mediterranean each year, and the security problems inherent to poorly-regulated mass movement.

The hidden cost of inequality

But there is a hidden cost to global inequality that many people don’t realize. It is an inequality of opportunity that makes the entire world poorer.

Suppose that you were not allowed to become an engineer in the US if you’re black. That would create repugnant inequality and injustice, of course. It would also decrease the earning potential of many individual African Americans across the country. But it would do something else too, something less visible: it would make America as a whole poorer.

After all, engineering firms that employ African Americans don’t pay them out of charity, but because they make those firms more productive. Without those workers, the US economy would lose the productivity and ideas of countless people who could have been skilled engineers, replacing them with people hired for reasons other than their skills. This wouldn’t just mean that African Americans got a smaller slice of the economic pie; it would mean that the whole pie was smaller. As a country, we would be collectively poorer.

At the global level, similar effects exist when workers’ productivity is hobbled by their country of birth. Just being in Cameroon, Cambodia, or another poor country makes a typical worker more than $10,000 less productive every year than the same person would be in a rich country. And since 97 percent of the world lives in the country they were born in, many people across the developing world lack the opportunity to be a productive worker because they are hobbled by the place they live. As a consequence, we are all collectively poorer. Summed across even small fractions of the people who live in poor countries, the total loss from this form of global inequality reaches trillions of dollars per year.

So aside from any questions of fairness, global inequality hurts the world economy and costs the world what workers could have produced in better circumstances. The ramifications are most severe for young people who would lose out on enormous economic gains in lifetime opportunity.

The promise of economic mobility

There is some good news. Global inequality among people probably peaked around the year 2000 and is now slowly falling. That is mostly due to the rapid economic growth in China and India, however, and large swathes of the world are left out. People born in poor countries still need a lot more peace, good governance, and economic engagement with the rest of the world if we want global inequality to keep falling.

But for many of those people, the single most effective route to reducing global inequality and enriching the world economy is simply to move—to seek opportunity in a new country. This is nothing new. Most Americans descend from people who did just that: doubling or tripling their earning power by moving to the United States in the 19th or early 20th centuries, thereby reducing world inequality, similarly to what people do when they leave poor countries today.

Just like most policies to reduce domestic inequality, policies to reduce global inequality are often politically charged and controversial. Even draconian migration barriers have strong political support from those who see them as an effective tool to protect domestic employment, preserve national cultures, and prevent violence. Indeed, strong nationalistic movements succeeded in banning Chinese immigration for generations starting in the 1880s and cutting off most immigration from outside Northern Europe for a generation starting in the 1920s. Policies like those served only to reinforce global inequality and similar policies today will also do the same.

But there is a better way forward than getting stuck in centuries-old debates about whether immigration is inherently good or bad. That alternative path is to innovate, to change the effects of migration, and to make those effects more visibly beneficial to everyone involved. That means designing systems and institutions to realize the economic benefits of migration and share those benefits equitably. It means finally taking migration policy beyond the questions it answered a century ago: How many people, if any, should we allow through the fence?

Instead, we must move the policy dialogue toward asking new questions: What forms of regulation maximize the mutual benefits to migrants and the people around them? How can we stop transnational terrorists without retreating into self-built prisons? How can flexible and dynamic regulation minimize fiscal and economic side-effects of migration, and inhumane conditions for those who move?

Answering these 21st century questions requires systems and institutions that don’t currently exist. Here are a few ways to start making global migration into a more powerful tool to fight against global inequality:

We do not have to live in a world where the country you are born into becomes the number one determinant of your economic prospects. That is a world with more skewed opportunities and less overall wealth than the world we could have. One of the most effective ways to reduce global inequality is to build new systems for human mobility so that fewer and fewer people must accept the circumstances of their birth as their fate. Those systems must be built thoughtfully and creatively to maximize and share the benefits while minimizing the risks. But migration crises will continue as long as we prioritize building walls over building institutions for shared benefit.

• Match the skills migrants have to the skills countries need. Migration is most mutually beneficial when there is the greatest demand in the destination country for their unique skills—from caregiving work to coding. There is enormous room for innovation in matching potential migrants’ existing skills to suitable jobs overseas, andcountry-to-country agreements to invest in creating needed skills among migrants. But international institutions of this kind are in their infancy.
   
• Help native workers complement, not compete with, migrants. Economists find that most immigrant workers already complement native workers because immigrants and natives tend to have different skills sets. There will always be ways some limited competition between the two groups, but it can be reduced with innovative institutions. For example, Canada has made advances inselecting and also recruiting immigrants with skills in shortage. Australia allows special immigration channels for geographic sub-regions that need immigrants’ skills—an innovation that has been proposed for the United States as well. The US Department of Labor subsidizes upskilling for US workers who might be in competition with trained immigrant workers. While these are great initiatives, there is much more space for innovation at the domestic level.
   
• Share responsibility for survival migrants. When people fleeing conflict and extreme deprivation—survival migrants—arrive in any single country suddenly and en masse, they can bring major short-term fiscal and social burdens as well as security concerns. History shows that broadly sharing this responsibility pays off. When 200,000 people poured into Austria during the Hungarian Revolution of 1956, responsibility to assist and resettle them was shared among 37 countries. Rather than becoming a crippling burden to Austria, they became an economic and cultural asset to the world—again andagain and again. Stronger cooperative institutions could turn assisting today’s survival migrants into an investment similarly beneficial in the long term.

We do not have to live in a world where the country you are born into becomes the number one determinant of your economic prospects. That is a world with more skewed opportunities and less overall wealth than the world we could have. One of the most effective ways to reduce global inequality is to build new systems for human mobility so that fewer and fewer people must accept the circumstances of their birth as their fate. Those systems must be built thoughtfully and creatively to maximize and share the benefits while minimizing the risks. But migration crises will continue as long as we prioritize building walls over building institutions for shared benefit.