Nicolas Desarnauts, Middle East Analyst at L’Oréal and ESSEC Business School Alumnus, tackles the challenge posed by anti-immigration sentiments.
Beyond Politics: The Economic Case for Migration. By Nicolas Desarnauts.
A perpetual bone of contention
Immigration is a contentious issue. In recent years, xenophobic political movements have surged in popularity across the West. Emboldened by flawed prejudices, these parties have often claimed that immigration is detrimental to the economy.
In fact, the opposite is true. Migration flows contribute to economic prosperity, not only through their positive demographic impact but also through their propensity to induce innovation through their supply of unique talents and abilities.
Distorting facts to serve political agenda
Across the West, a wave of fringe political movements has succeeded in bringing anti-immigrant sentiment into the mainstream. According to an NBC News poll conducted one week before the Brexit vote, nearly 75% of prospective “leave” voters cited immigration as the most important issue in the referendum.
And just a few months after the victory of Brexit proponents, Donald Trump was elected to the U.S. presidency. Indeed, much of these politicians’ rhetoric has fallen on sympathetic ears. With rapid globalisation contributing to increased inequality in developed countries, immigration is a seemingly obvious culprit for those who have suffered economic woes. Nevertheless, politicians are largely to blame for making this association. In July 2015, the then presidential candidate Donald Trump expressed his belief that immigrants are hurting the U.S. economy, saying: “They’re taking our jobs. They’re taking our manufacturing jobs. They’re taking our money. They’re killing us.”
However, as much as Mr. Trump may have believed that his wall would bring prosperity to his country, his claims about the economic impact of migration flows were based on flawed prejudices against immigrants.
A popular misconception about migration is that immigrants are unskilled and uneducated, making them a drain on a developed economy.
In December 2018, Tucker Carlson, an American political commentator, echoed this idea on his primetime Fox News show, telling his audience: “we’re getting waves of people with high school educations or less” and that “as an economic matter this is insane.” This is fiction.
According to the Pew Research Center, recently arrived immigrants in the U.S. are more educated than ever before — over 75% have at least graduated from high school and 41% have at least completed a bachelor’s degree. Furthermore, studies have shown that even low-skilled immigrants positively contribute to the economy by performing jobs that employers often struggle to fill with native workers. This brings another benefit: by producing goods and services at a lower cost, low-skilled labour increases the purchasing power of high-skilled workers in the country, making them relatively richer. However, critics argue that the issue being overlooked here is that immigrants lower the wages of low-skilled natives by “stealing” their jobs.
The extent to which immigration negatively affects natives by filling low-skilled positions is contested.
Research has found evidence that wages can be pushed down by immigrants willing to work for less. But the effect measured is only marginal. For low-skilled natives, the greater concern should be the rise of automation in numerous industries. From manufacturing to agriculture, technological innovations are enabling robots to perform increasingly complex tasks that have traditionally been reserved for humans. Millions of jobs are at the risk of getting displaced. The threat from low-skilled immigration pales in comparison — not to mention that it is also significantly outweighed by the benefits of immigration as a whole. However, the political expediency of blaming immigrants has pushed some to ignore this fact at a time when migration flows may in fact be more critical to economic prosperity than ever.
A counterbalance to demographic decline
In much of the developed world, countries are facing a demographic challenge as their populations age and begin to decline due to low fertility rates.
According to a study by the OECD, the share of people aged 80 years and over in developed countries is expected to rise from 4% in 2010 to nearly 10% in 2050. Meanwhile, Japan and several European countries have started to experience population decline as yearly deaths surpass births.
Although the severity of this change varies from country to country, the general direction of the trend is clear. Almost all developed countries will struggle to maintain the size of their active workforce. The few exceptions owe their continued growth to migration flows.
There is little doubt that migration can solve the problem of population decline. After all, for a population to grow it simply needs more people.
Aging is more troubling. The increase in the elderly population will entail greater expenditure on social programs for healthcare and pensions — further straining developed countries’ workforces. More than just a lack of people, developed countries will lack economically active people. This is why migration is critical to economic prosperity. On average, migrants are younger than natives and they possess skills and abilities that increase the stock of human capital of the host country — filling in gaps in the labour market. The U.S. has long benefitted from this.
By filling manual jobs, migrants with little education in the country have pushed similarly-skilled natives into better jobs requiring more intensive communication and social skills. In addition, the growing presence of these migrants in the “household services” sector — which includes services such as cleaning, gardening, and child care — has enabled highly educated native women to join the workforce and dedicate more time to their careers. These economic benefits cannot be overstated. However, the positive effect of migration is not limited to demographics.
Drivers of innovation and prosperity
Migrants play a critical role in driving innovation in their host countries. Historically, this has been the case: One-quarter of American Nobel Prize laureates in the last 50 years were foreign-born. Indeed, history books are packed with prominent examples of successful migrants that advanced science and technology.
However, these are not just a few isolated cases. Studies have estimated that highly-educated migrants are responsible for about one-third of U.S. innovation. By clustering in innovation centres, migrants with STEM backgrounds contribute to as much as 50% of the productivity growth in their host countries. This translates to real innovation, with studies estimating that these migrants account for 4 to 8% of technological change.
This may not be surprising given that some of the world’s most famous business leaders, such as Steve Jobs and Elon Musk, are either migrants themselves or the children of migrants. These pioneers may have never had the chance to fulfill their full potential in their countries of origin. Migrating to a more conducive business environment enabled them to employ their unique talents to the benefit of both themselves and their host countries.
The need for innovation is only going to increase in the future. As much of the world’s economy becomes ever more knowledge-based, human capital will be a determining factor in who gets ahead. Countries like the U.S. that have embraced immigration have been the first to benefit from the talent and skills sets that migrants bring to their workforce.
In addition to directly contributing to innovation through new inventions and increased productivity, migrants indirectly support natives’ innovation through a positive “spillover” effect. What’s more is that this innovation does more than just help major corporations and investors — it translates to greater economic prosperity for the entire society by improving people’s skills, creating new jobs and boosting wages. Due to the multitude of secondary effects caused by this innovation, it may not be easy to measure its full economic impact. But what’s certain is that it is not insignificant.
Time to face the facts
Despite the evidence that migration flows contribute to economic prosperity, the perpetuation of flawed prejudices about migrants by fringe political movements has brought anti-immigrant sentiments into the mainstream.
This comes at a time when the demographic and geopolitical challenges facing much of the developed world should, in fact, encourage these countries to adopt a more open policy toward migration. Moreover, as knowledge-intensive activities become ever more important to economies around the globe, the demand for migrants’ unique talents and abilities will only continue to grow.
As such, to achieve economic prosperity, policies must be redesigned to be more open to migration flows — further driving their positive impact on demography and fuelling their contribution to innovation for growth.
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