How Migration Could Effectively Worsen Global Economic Inequality.

Economic Inequality is a controversial subject. While everybody agrees that it exists, there is a lack of consensus on whether it is good or bad for the world, or how much of it is acceptable. Some argue that a bit of inequality is good - even necessary - to keep the global economy growing, but can't agree on at what point it begins to do more harm than good. There are two main types of economic inequality: wealth inequality and income inequality.

Wealth inequality is the unequal distribution of assets, minus liabilities; that includes things like stocks, savings, and pensions.

Income inequality is the unequal distribution of income/earnings. A couple hundred years ago, the richest countries in the world were only about three or four times richer than the poorest countries. Today, due to increased globalisation and international trade, that gap has been greatly expanded, putting the richest nations somewhere between eighty and a hundred times richer than the poorest nations. And that figure only keeps increasing. This is not to say that globalisation and international trade are in themselves bad, but it is more a question of just how much the gap between the richest nations and the poorest nations is expanding, and how much they contribute to it.

I recently saw a YouTube video by The Economist which explained just how migration could help make the world richer.

The claim was that by opening their borders to migrants, developed countries could help grow the world's GDP by 50% to 150%. The question this begged, and something that The Economist completely ignored or perhaps inadvertently overlooked, was just how much of that increase belonged to the developed world, and how much belonged to the developing world?

Migration is the movement of people from one region or state to another, usually in search of better opportunities. There are an estimated 1 billion migrants in the world today, 258 million of whom are international migrants, and 763 million internal migrants.

The focus of this article is on international migrants, i.e. those who move from one country to another across international borders.

When people move away from a place into another place, they usually move with all of their knowledge, skills, experiences, dispositions, and every other intangible thing that they possess. In the developing world where corruption is rife, citizens often go overseas in search of greener pastures and better living conditions for themselves and their loved ones. This more often than not, culminates in a brain drain, because in the first place, the people who are likely to be granted visas and work permits by developed countries are those who have something to offer in terms of skill and capacity.

How does 'brain drain' worsen inequality gaps?

Developed countries have better living standards - they hold a larger share of the world's resources, have better education, healthcare, and better financial systems than their developing counterparts. What that means is that they are better able to facilitate labour and maximise output from that labour.

For example, a computer programmer who leaves Ghana for the UK can access better internet speeds, better electricity, and higher paying jobs and never wants to return to Ghana to put her skills to use in her local economy. A farmer who emigrates from Nigeria to the United States suddenly has access to more modern farming technologies, better quality fertilisers, and even government aid that ensure she can maximise harvest with the most minimal effort. This farmer, along with others like her, become contributors to the economies of their host nation while their fatherlands continue to suffer.

Migrants create jobs.

While it is undeniable that migrants do take jobs from natives, they compensate for that by creating new jobs and complementing local workers. How do they do this? Taking the United States as an example, it has become a melting pot of diverse cultures from all over the world. Food, art, fashion, and entertainment brought in by immigrant cultures make up industries of their own.

When a sufficient number of immigrants move into a state, they come with a significant part of their culture and through these set up new industries. Sushi, tequila, pizza, all of these were introduced by immigrants and have even gone on to be appropriated into American culture, forming integral parts of the country's commercial enterprise.

It goes without saying that migrants and the countries they come from also benefit from migration. For one, it opens migrants up to better economic opportunities. It also strengthens economic ties between states.

When it comes to international trade, more often than not and all things being equal (which they seldom are), all parties benefit.

But benefits are not created equally and are often asymmetric. In the bilateral trade ties between China and African countries for example, China always benefits more because of this economic asymmetry. When American corporations go to Bangladesh to set up factories and create jobs for the locals there, Bangladesh's economy improves. But the influx of capital back into the United States from the production done in those factories far exceeds the Bangladeshi gains.

But besides the possible strengthening of economic ties, how else do migrant countries benefit from the migration of their citizens?

Remittances

When people move from developing countries to developed countries, they often send money back home to their family and friends in the form of remittances.

Remittances form a significant portion of the

GDP of many developing countries around the world. 10% of Philippines' GDP comes from remittances, as well as over a third of Kyrgyzstan's GDP. These figures mean that developing countries make more from remittances than they do from Foreign Direct Investment (FDI), and even foreign aid. But on a balance, the capital gains accrued for developed countries when the potentials inherent in these skilled migrants are unlocked far exceed what their home countries get in remittances. In fact, not all immigrants even send remittances back home.

In the game of cross-border economic transactions, there are winners and there are big winners. Even when all parties win, that is not necessarily a good thing because in the long run, power dynamics ensure that the bigger winners have the leverage to in future take even larger pieces of the pie from the smaller winners. At the end of the day, rich countries become significantly richer while poorer countries only experience marginal growth.