The World Economic Forum recently published a very interesting Q&A with Ian Goldin that bore the arresting title: "What if rich countries shut the door on immigration?" Goldin is director of Oxford University's Martin School and in this short Q&A, he provides a thought exercise on the big picture consequences of a theoretical shutting down of immigration in developed countries.
Such thoughts on the impact of immigration in receiving countries come against a background of a slew of recent news items that point to a tougher life for many migrants in Western Europe. There have been attacks on immigrants in Greece. The UK government has introduced new caps on immigration. Migrants have been expelled from Italy and Spain.
Ian Goldin's short piece is a good reminder of what’s at stake for Europe in the global competition for migrant labor. He catalogues a list of the biggest costs in the case of a hypothetical closing down of immigration. He points out that unemployment would rise, not fall, as key staff and management that are complementary to domestic labor would disappear while domestic demand would fall with the shrinking of the consumer base. Hospitals might close as everyone from cleaners to heart surgeons would disappear and agriculture, construction, tourism and high tech R&D would suffer. On the latter, Goldin reminds us that more than half of the Silicon Valley start ups were founded by migrants.
However, what Goldin does not emphasize is that the narrowing of the migration window would be particularly damaging for Europe. As the World Bank's report on Golden Growth: Restoring the lustre of the European economic model points out, there are about 3.5 people of working age for every person aged 65 or older in Europe. This number will decline to about 1.75 in 50 years. Spain will be the oldest country in the world, followed by Italy and Austria.
Demographic decline extends into Eastern Europe and the former Soviet Union, which will be the fastest ageing region in the world over the next 20 years. This has prompted the assertion that these countries will grow old before they grow rich.
Moreover, Europe is already trailing in the global competition for talent as European countries host fewer immigrants than other advanced economies. As the World Bank's Migration and Remittances Factbook for 2011 illustrates, immigrants comprise less than 10 percent of the EU population, compared with around 15 percent in the US and over 20 percent in Australia, Canada and New Zealand.
In this environment of widespread and deep demographic decline, Goldin's prognosis on the theoretical impact of a sudden stop of international labor flows with the loss of skilled and unskilled labor and fresh, new ideas and dynamism may not be so far fetched. Of course, this is only a theoretical exercise and migration will not stop. Labor migration of all varieties—North to North; South to North; North to South—will continue to be prevalent and necessary.
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