I was recently asked to provide opening remarks at a landmark conference on labor mobility and development sponsored by the Ministry of Labor of the United Arab Emirates (with several partners including the KNOMAD). While thinking about the topic of the conference I was reminded of the Economic Development with Unlimited Supplies of Labor model developed by W. Arthur Lewis almost half a century ago.
What connected this model to the conference in my mind was the fact that it envisaged development as a process whereby labor in low productivity sectors migrated to higher productivity sectors. In other words, migration was the main channel through which development occurred. In the days when the model and its many variants were initially developed and debated the low productivity sectors were typically represented by non-capitalist/subsistence/agriculture occupations while the higher productivity sectors were represented by capitalist/industry/manufacturing occupations and the migration was internal to a country, from rural areas to urban areas.
The central insight of the Lewis model is a powerful one for understanding development even today. How powerful? Well, consider the fact that nearly one billion out of 7 billion people in the world today are classified as internal or international migrants; thus 1 out of every 7 persons alive today is a migrant. This is a very strong demonstration of the importance of migration. One can look at this from several perspectives and one must surely take into account many nuances but the fact remains that the process of productivity change, which is the essence of development, is intertwined with that of large scale movement of people.
Consider also the fact that over $400 billion dollars are remitted to developing countries every year; this is 4 times the amount of ODA provided. So remittance flows, the by-product of international migration, generate more resources for developing country families than what is provided by the entire global aid community. If one were to add internal remittances, the total would increase many times for sure. Thus, from the point of view of welfare enhancement, migration appears to be playing a very important role for a large number of people.
These points were well received at the conference. I also noted, as did many other speakers, that migration was a very important development mechanism for the GCC countries as well as the developing countries that sent workers to the GCC. At present, guest workers account for between 50%-85% of the populations in Bahrain, Kuwait, Qatar and the UAE and about 35% of the population in the Kingdom of Saudi Arabia. They are a huge factor in domestic production, especially non-oil production. In Kuwait and the UAE, virtually the entire private sector labor force consists of migrants, with nationals being wholly employed in the public sector. At the same time, the GCC countries generate about 80 billion dollars a year in remittances; this is a fifth of the total amount of global migrant remittances, a huge share for a small sub-region.
I noted in conclusion that W. Arthur Lewis was technically a migrant from his native West Indies first to the United Kingdom and subsequently to the United States where he lived and taught for many years. And, oh yes, his seminal work on migration and development was cited as the reason for awarding him the Nobel Prize in Economics in 1979.