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Migration boosts the world economy – studies

2 December 20160 comments

Migration benefits the global economy by a staggering $US3 trillion a year – or about 4 per cent of planet’s economic output – according to reports by the McKinsey Global Institute and the International Monetary Fund.

But while both highlight the economic contributions of migrants, they say that government policy failures, particularly in the promotion of integration, are exacerbating the shorter-term cost of this global mass phenomenon.

The reports say wide public concerns over migration have played a major role in some of the seismic political events of 2016 – including Britain’s vote to leave the EU and Donald Trump’s election as US president.

migration-_thumbnail“Many of the world’s leading migrant destinations are also ageing societies that can benefit from the labour force growth,” said Anu Madgavkar, an author of the McKinsey report, writing in the Financial Times.

“Yet policy discussions surrounding immigration in many countries tend to focus on determining the right numbers and mix of people to admit rather than finding the right formula for integration.”

The McKinsey report found that migrants — which it defines as people who live outside their countries of birth — account for 3.4 per cent of the global population but produce 9.4 per cent of world output, or about $US6.7 trillion.

The study estimated that the total is $US3 trillion more than the migrants would have produced if they had remained in their home countries.

Meanwhile, an article by economists in the IMF’s research department also argues that a one per cent increase in the share of migrants in the adult population of a developed country can raise per capita gross domestic product by 2 per cent over the long term.

But the article says public attention has instead focused on some of the negative effects of migration, including concerns among a country’s citizens about lower wages, pressures on public services and fears of losing cultural identity.

The McKinsey report highlights the importance of integration in reducing such pressures and governments’ failures to achieve social cohesion.

It says that 90 per cent of the world’s 247 million migrants moved voluntarily, with refugees and asylum seekers accounting for the remaining 10 per cent. It says that about half of all migrants moved from developing to developed countries, where migration is an important driver of population growth.

The report also cites several studies that show migration does not harm domestic employment or wages despite short-term negative effects in some limited areas.

It says there is a wage gap of 20-30 per cent between migrant and native workers and that bringing migrants’ pay closer to national averages would also boost economic output.

“None of the major destination nations for migrants scores well across all measures of integration,” said Jonathan Woetzel, another author of the report.

“There is no silver bullet on integration but there are a combination of levers that, if pulled together, can deliver economic and social benefits which our research suggests could be worth up to $US1 trillion per annum to global GDP,” he said.

The McKinsey study found that North America and Oceania perform better than most European countries in integrating migrants into the labour markets.

It said there were simplified procedures for recognising foreign qualifications in Canada, Australia and parts of the US.

But in virtually all the countries studied, migrants were much more likely than natives to live in overcrowded housing, and a significant minority felt discriminated against — ranging from 8 per cent of migrants in Norway to 28 per cent in Greece.

Both reports said an important factor in helping migrant and native communities to integrate was ensuring they can communicate with each other and that assisting migrant communities acquire language skills could directly boost economic participation.

Laurie Nowell
AMES Australia