Emigration and Immigration

During the height of the Cold War, the Berlin Wall was built to keep the citizens of East Germany from leaving. We cheered as it and similar barriers to emigration from the Soviet to the Free World fell in 1989. But the right to leave awkwardly confronts the right of countries to choose who may or may not enter. The right to leave has little meaning if you have no place to go.

Immigration, especially in the U.S. and Europe, has become a very divisive and difficult public policy issue. Individual freedom and economic efficiency call for the free movement of people. The common market of Europe (the European Economic Community) requires the free movement of labor, capital, goods, and services among its members. This is a desirable and worthy goal, but in typically “take no prisoners” fashion, the European Union has applied this requirement without serious attention to the needs and sensitivities of recipient countries with regard to who enters and works in their country.

During the cold war, when our sympathies were with those behind the Iron Curtain wanting to get out, the East-West participants in the CONFERENCE ON SECURITY AND CO-OPERATION IN EUROPE in Helsinki in 1975 agreed to:

“Make it their aim to facilitate freer movement and contacts, individually and collectively, whether privately or officially, among persons, institutions and organizations of the participating States, and to contribute to the solution of the humanitarian problems that arise in that connection,

Declare their readiness to these ends to take measures which they consider appropriate and to conclude agreements or arrangements among themselves, as may be needed,…”[1]

The emphasis at that time was on “cultural exchange” and cross border employment. The right to emigrate, however, was a step too far.

Aside from the political dimension of a “right to migrate,” there are clear economic efficiency benefits from the free movement of labor, supplementing those of the free movement of goods and capital.[2] Leaving aside the special case of war refugees, people generally move, whether within their own country or to a new one, in order to take better jobs. One exception is the Brits who vacation or retire to sunnier parts of Southern Europe. They obviously bring their pension incomes with them. The Polish plumbers in England and the Filipina nurses throughout the world increase their own incomes but fill worker needs in their host countries as well. In short, immigration is generally a win win scenario.

Within the overall annual limits the U.S. has placed on immigration, the number of H-B1 work visas (those requiring high skills or education) has been squeezed by preferences to extended family members of existing green card holders, thus depriving American industries of the skilled workers they need. If foreign workers are not allowed to immigrate here, capital will tend to move abroad in order to produce what is needed overseas and import it. Opposition to immigrants by workers who fear that they will lose their own jobs are generally misinformed or motivated by other concerns.

Immigration can also ease the economic problems associated with an aging and shrinking population. Japan’s population is now smaller than it was in 2000 but more problematic is that it is also older. The percentage of those over 65 in Japan’s total population has increased from 17% in 2000 to 24% now. Its working age population has declined 9%. As a result, a growing share of income from those working is required to support those who have retired. This problem has been partially addressed by an increase in the number of Japanese women entering the labor force, but it has not been enough. Relaxing Japan’s very restrictive immigration laws would also help. As a general rule most Japanese are quite insular and not comfortable living and working with foreigners. According to The Economist: “The country has remained relatively closed to foreigners, who make up only 2% of the population of 127m, compared with an average of 12% in the OECD.”[3] But Japan’s demographic crisis is leading to a gradual liberalization of immigration requirements.

Workers who worry about immigrants taking their jobs are generally confusing the impact of technology on some existing jobs and job skills, and to a lesser extent the impact of increases in cross border trade. The disruptive, but income enhancing, impact of ever changing technologies does impose costs on those who must learn new skills, but it is the relative openness of Americans to such innovation and growth that has made America the wealthy country that it is.

However, there are limits to the pace of change (and the pace of immigration) that societies can comfortably absorb. The backlash of public concern with immigration, which played an important role in Britain’s recent vote to leave the EU, seems to reflect the upsurge in the pace of immigration in recent years. It also seems to have reflected misinformation about the extent of British control over that pace. While EU membership carried an obligation to accept the free flow of labor into the UK from other EU member countries, only half of the UK’s immigration was from that source. The UK government fully controlled the other half.

Donald Trump has linked his anti-immigration rhetoric to public concern with terrorism. His campaign website states that: “Trump is calling for a total and complete shutdown of Muslims entering the United States until our country’s representatives can figure out what is going on.”[4] This statement, dated December 7, 2015, has been followed by increasingly nuanced (if that word can be used for Trump) formulations of Trump’s anti-terrorist immigration “policy” proposals. On April 16, 2016, “Donald Trump’s speech on foreign policy Monday focused in large part on his proposal to suspend immigration from dangerous parts of the world and impose a new system of ‘extreme vetting’ that would subject applicants to questions about their personal ideology.

“We should only admit into this country those who share our values and respect our people,” said Trump, proposing what he called an “ideological screening test.”[5]

Typical of Trump’s campaign, he is either ignorant of existing visa requirements or deliberately misleading his audience. At least since 9/11, visa applications from all but a few countries, whether work or tourist, require an extensive background check.[6] All green card recipients swear to uphold the American Constitution and its laws. These are reasonable and appropriate requirements and they have been in place for a long time.

And then there are concerns about the preservation of a country’s culture, a legitimate goal. And then there is plain old racism and protectionism (the protection of monopoly returns to jobs from entry restrictions via closed shop unions or licensing requirements and to firms from import tariffs).

So what should a country’s immigration policy be? Aside from war refugees, whom the U.S. and most countries have taken a moral/humanitarian obligation to accept,[7] a country’s immigration policies should serve the economic needs of the country and respect the cultural traditions and security concerns of its citizen’s. The United States has benefited enormously and famously by accepting all people seeking a better life who are committed to our laws and values. However, pragmatism calls for regulating the rate of immigration to numbers that can be readily assimilated and limiting it to people of good character committed to abiding by our laws and values.[8]

U.S. immigration laws suffer from a number of defects. The overall number of immigrants permitted per year has not kept pace with the growth in our population and economy. But more important, as noted earlier, the number of actual workers, and especially high skilled workers, has been seriously crowded out by a preference for extended family members of existing residents (not core family, but extended family).

The U.S. has a special problem because of a relatively large number of illegal immigrants who have become an important part of our labor force for some time. It is important for our laws to effectively limit immigration to legal channels while enlarging those channels. It is also essential to resolve and normalize the status of those who came here illegally in the past. Several years ago a bipartisan group of U.S. Senators, the so-called Gang of Eight, fashioned immigration reform legislation that addressed these issues. Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 No one was happy with every provision of the draft law but it enjoyed broad support as a compromise and was passed by the Senate. It was never brought up in our dysfunctional House of Representatives.

The Senate immigration bill is a good basis upon which to renew the discussion of immigration reform in the U.S. Hopefully, following the November elections in the United States its Congress can return to the important business of fashioning laws that promote economic growth, well being, and fairness. This should include adopting a comprehensive immigration reform law.

[1] CONFERENCE ON SECURITY AND CO-OPERATION IN EUROPE FINAL ACT concluded in Helsinki, Finland, August 1, 1975, Page 38.

[2] https://wcoats.wordpress.com/2016/08/03/trade-and-globalization/

[3] The Economist, August 20, 2016, page 31.

[4] https://www.donaldjtrump.com/press-releases/donald-j.-trump-statement-on-preventing-muslim-immigration

[5] The Washington Post: https://www.washingtonpost.com/national/trumps-immigration-plan-raises-many-unanswered-questions/2016/08/16/754fba76-6382-11e6-b4d8-33e931b5a26d_story.html

[6] Some countries, such as England and German and other parts of Europe do not require a US visa to enter the US, though they should have criminal checks when applying for a Passport in their own country.

[7] Of the 4,812,993 Syrian refugees registered outside of Syria (several million displaced Syrians remain inside Syria) as of March 2016, only 7,123 have settled in the U.S as of July 2016. Germany has accepted 600,000 and about 4.5 million have been registered in Turkey, Lebanon, and Jordan. It is estimated that there are an additional 2 million Syrian refugees that are unregistered. https://en.wikipedia.org/wiki/Refugees_of_the_Syrian_Civil_War

[8] Six years ago I wrote these proud words about our immigrants. Please note the last sentence: https://wcoats.wordpress.com/2010/06/10/a-nation-of-immigrants/ My comments on Syrian refugees almost a year ago are also worth rereading (in my humble opinion): https://wcoats.wordpress.com/2015/11/19/what-to-do-about-syrian-refugees/ as are my comments on immigrants and terrorists two months ago: https://wcoats.wordpress.com/2016/06/11/the-challenges-of-change-globalization-immigration-and-technology/

About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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3 Responses to Emigration and Immigration

  1. Jim Roumasset says:

    Warren,
    As you put it: “It is important for our laws to effectively limit immigration to legal channels while enlarging those channels.” Some refer metaphorically to your recommendation as “high fence, wide gate.” Trump supported this view during the CNBC Republican debate in October when he said that he wants “a big, fat beautiful door right in the middle of the wall” for legal immigration. (He even said later that it would have a “golden doorknob.”) But you’re right; it’s hard to reconcile this w/ some of his other statements.
    Jim

  2. Joe Cobb says:

    The political tension is between the economic progress the market would bring, and the cultural adaptation of the existing workers and neighbors of the new arrivals. A quote seems logical, but it is not actually the best answer.

    How can any “plan” titrate the inflow of new residents to a rural community? How “racist” in opinion are the current residents (or “localists” as in New Hampshire, who will not regard you as properly in New Hamshire unless you parents were born there).

    A quota focused ONLY on workers, not on family members and older relatives, would be very good for Socialist Security’s funding prospects.

    • Joe Cobb says:

      Quota of work visa opportunities, perhaps unlimited annually. This would not obviate the need for positive identification, health check, and criminal record follow-up. Those new arrivals could be tracked by an electronic card, issued on the spot (“actual-green card”).

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