Changing global migration patterns impact developing economies

As the world’s nations and businesses become increasingly interconnected, so too does the flow of global migration. According to the OECD’s “International Migration Outlook 2018”, in 2017 some 258m people resided in a country other than the one they were born in and more than 5m foreign-born persons were permanently settled in OECD countries. This flow of people not only brings benefits to the lives of the migrants themselves, but also contributes significant economic opportunities to individual businesses and states.

Despite this, public opinion in many countries is turning against migration, with increasing numbers of states implementing measures to limit migration flows. This in turn has caused frustration for both business leaders and economists, who generally continue to stress the economic benefits of migration. Nevertheless, research suggests that the number of those wishing to – or needing to – migrate across borders will continue to grow. Together, these two seemingly countervailing trends will have a number of significant impacts on countries, industries and businesses.

Pace of Migration

The growth of migration is outpacing previous estimates. While the 258m global migrants make up only 3.4% of the world’s population, this figure is already higher than the 2003 prediction by the International Organisation for Migration (IOM) that migrants would reach 230m worldwide by 2050, to account for 2.6% of the global population.

In its “World Migration Report 2018”, the IOM described global migration as “the variable that had shown the greatest volatility in the past and was therefore most difficult to project with some accuracy”. Based on the current trends of natural disasters and political headwinds, the reality of global migration is likely to continue surpassing the projections of analysts.

Forced Displacement

While most migrants choose to move abroad in search of better employment opportunities, between 2000 and 2015 an average of 20,000 people per day, or 6.9m annually, were uprooted due to environmental and political crises. The IOM points to conflict as one of the key drivers of global migration, in addition to generalised violence and other factors. According to the UN Human Rights Council, the number of people forced from their homes as a result of persecution, conflict, violence or human rights violations stood at a record 68.5m in 2017.

Despite significant progress having been made in the development of international diplomacy and security institutions, conflicts persist. Indeed, 2015 saw the highest recorded levels of forced displacement globally since the Second World War. There are often overlapping causal factors behind these conflicts, obscuring global trends. Nevertheless, it is evident that many of the factors contributing to global migration are unlikely to be resolved soon and some will likely grow worse.

Many of the world’s major, long-running conflicts appear unlikely to be resolved in the short term. In fact, the current disorder of international relations and the shifting balance of power may well exacerbate these situations. “What distinguishes conflicts of today is that they are unending,” Demetrios Papademetriou, co-founder and president emeritus of the Migration Policy Institute, told international media in January 2018. “None of the conflicts are anywhere near being resolved because they are extremely complex.”

Another example of crisis driving migration can be seen in Venezuela. In early 2019 the UN estimated that 3.4m Venezuelans had already fled dire security, skyrocketing inflation, and widespread food and medicine shortages. The rate of Venezuelan migration is growing and could reach 4m by 2021 in neighbouring Colombia alone, costing Colombia almost $9bn. However, forced displacement from troubled countries such as Venezuela can benefit the businesses that recruit migrants and the nations that provide them with refuge. Nevertheless, analysts predict years of lag before such large populations can be fully assimilated into the workforce and begin offering economic benefits such as plugging skills gaps or restoring equilibrium to ageing economies. The impact of such large-scale migration in large part depends on how proactive governments are in assimilating new arrivals into the labour market and society. However, taking such a stance has become harder in a political climate which, in many countries, in characterised by rising anti-immigration sentiment.

Climate Change

War has historically been a major driving force behind forced migration, but new factors are increasingly playing a significant role. For example, there is a consensus that climate change currently has an overlooked impact on migration, which is set to increase substantially, Felipe Aliaga, professor at Colombia’s Santo Tomás University, told OBG.

Although rarely cited directly by migrants as a cause for their relocation, climate change is undoubtedly a contributor to food insecurity and job losses in agricultural regions, particularly in the developing world. According to the IOM, a rising number of migrants from Africa and Latin America are citing poor harvests as a factor influencing their decision to migrate, while a 2017 study by the World Food Programme found that 47% of the Central American migrants interviewed described themselves as food insecure.

“The focus on violence is eclipsing the bigger picture. People are saying they are moving because of some version of food insecurity,” Robert Albro, a researcher at the Centre for Latin American and Latino Studies at American University, told international media in October 2018. “This has a strong link to climate change – we are seeing tremendous climate instability that is radically changing food security in the region.”

The World Bank estimates that increasing temperatures and extreme weather will force an estimated 3.9m climate migrants to flee Central America over the next 30 years. The climate change trend can be applied to agriculturally dependent economies across regions, such as Latin America, Africa and Asia.

Beyond climate change, other often overlooked factors that are likely to accelerate migration include the increasing prevalence of precarious work, inequality and unequal development, Aliaga told OBG. Similar to migrants driven by conflict, the majority of migrants driven by climate change and other factors are also likely to initially place a burden on the nations receiving them, but later provide various economic benefits if successfully assimilated into the workforce.

New Routes

The international trend towards tighter immigration policy, particularly among more developed countries, appears to already be having an effect on migration flows. A particularly striking example of this can be found in Latin America. Mexico, which previously served as a transit route for those on their way to the US, has now become a destination in itself. The number of foreign-born persons in Mexico increased from around 970,000 in 2010 to over 1.2m in 2017, according to the UN. Furthermore, analysts expect this trend to accelerate thanks to US President Donald Trump’s anti-immigrant rhetoric and policies. The IOM’s research shows the majority of applicants in Mexico come from Central or South America, but an increasing number come from Africa and the Middle East, with Mexico being seen as a more viable destination than the US.

Across the globe, migration flows between developing countries continue to grow compared to movements from developing to developed countries. Most people prefer to migrate within their country or continent, rather than undertake a dangerous and difficult journey to the US or Europe. The general consensus is that this trend will likely harm the economies that have previously benefitted greatly from liberal migration policies, such as the US, where foreign-born residents make up 13.7% of the population; Canada, where they make up 21.9%; and Australia, with 28.5%.

The impact of this will likely become more marked as companies, universities, laboratories and research centres struggle to hire the talent necessary in an economy increasingly driven by knowledge and technology. Tightening immigration policy in the US has resulted in delays and legal complications for employers seeking to hire labour from foreign countries, while also discouraging highly skilled workers from emigrating to the US. Meanwhile, top universities and financial institutions in the UK have alleged that the pending Brexit is already fuelling a brain drain. The National Institute of Economic and Social Research forecasts that Brexit’s effect on migration could reduce the UK’s GDP by up to 1.16%.

Nevertheless, while the US and European states pursuing stricter immigration policies are expected to see labour shortages, particularly for skilled workers, other countries are set to benefit. Nations that had previously lost out on the international movement of human capital, such as Mexico, now find themselves in a strengthened position. Furthermore, states undertaking initiatives to combat brain drain, such as India and Nigeria, are also expected to benefit from the growing anti-immigration sentiment in other countries.

Chile has long been attempting to take advantage of the declining interest in nations such as the US and UK to actively attract migrants, particularly those working in the tech sector. It has done so by offering incentives to foreign entrepreneurs, such as the Start-Up Chile programme, the economic impact of which has been estimated at $1.4bn between 2010 and 2018. Various European nations, such as Estonia, are undertaking similar initiatives to attract top graduates and tech talent. According to consultancy firm McKinsey, highly skilled workers in fields such as engineering can be “anything from three to 10 times more productive” than the average recruit. Research and development relies heavily on such globally mobile talent, as does the development of disruptive technologies such as artificial intelligence and the internet of things.

Although such initiatives appear to be providing positive results, their precise outcome will likely depend on wages, which continue to shape migration flows. High-income countries still host almost two-thirds of all international migrants. For example, despite a high number of skilled workers coming to Morocco from other African states, this is being offset by an outflow of Moroccan talent to the EU, with efforts to stem this process having yet to produce significant results.