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Globalization of labor markets

Globalization of labor markets. 5 th World Chambers Congress, Istanbul, July 2007. Overview. The globalization of labor markets (IMF WEO Spring 2007) Migration: who benefits, and why? Migrants! Home country (through remittances) Host country? Policy implications.

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Globalization of labor markets

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  1. Globalization of labor markets 5th World Chambers Congress, Istanbul, July 2007

  2. Overview • The globalization of labor markets (IMF WEO Spring 2007) • Migration: who benefits, and why? • Migrants! • Home country (through remittances) • Host country? • Policy implications ICC CEAG – Istanbul – July 2007

  3. Global labor supply since 1980 Source: IMF WEO Spring 2007

  4. Global labor supply by education level Source: IMF WEO Spring 2007

  5. Labor migration and trade (percent of labor force and GDP, respectively) Source: IMF WEO Spring 2007

  6. Source: IMF WEO Spring 2007

  7. Note: ICT is share in total capital stock Source: IMF WEO Spring 2007

  8. Skilled vs. unskilled employment and compensation Source: IMF WEO Spring 2007

  9. Source: IMF WEO Spring 2007 Annual changes in percentage points

  10. Most recent trend: trade in tasks (Richard Baldwin) • New information and communication technology facilitates (progressively) the splitting up of value added chains and outsourcing of individual tasks • Increasingly: tasks compete internationally, not goods/sectors ICC CEAG – Istanbul – July 2007

  11. Source: Baldwin (2006)

  12. (2.) Migration: economic benefits and costs • The globalization of labor markets (IMF WEO Spring 2007) • Migration: who benefits, and why? • Migrants! • Home country (through remittances) • Host country? • Policy implications ICC CEAG – Istanbul – July 2007

  13. Share of foreign-born population (percent)

  14. Benefits and losses through migration(traditional model) • Migrants: benefit clearly (or else they would not migrate) • For rest of analysis: distinguish between high-skilled and low-skilled migrants • Reasonable assumption: migrants move from poor (labor-rich) to rich (skill-rich) country ICC CEAG – Istanbul – July 2007

  15. Benefits and losses: home country remaining population • Benefits from remittances (all migrants): consumption, investment in real estate or businesses, investment in education (because of the prospect of migration and higher wages) • May lose from brain drain (high-skilled migrants), particularly in case of specialized skills • Real wages for some or all workers may increase • Case in point: in spite of large low-skilled emigration from Mexico, low-skilled workers experienced little wage increase – because proportion • Migration costs may limit migration opportunities for the very low-skilled / poor (counter-example: Moldova) ICC CEAG – Istanbul – July 2007

  16. Benefits and losses: host country incumbent population • Effects not obvious: total output grows, but immigrants appropriate some or all of the output increase • Could lose or gain from fiscal effects (e.g. low-skilled migrants with large families vs. high-skilled, young, single immigrants) • Could gain from access to scarce skills (particularly when other workers are unemployed) • High-skilled immigration could diminish incentive for education of locals ICC CEAG – Istanbul – July 2007

  17. Benefits and losses: thinking in terms of mobile vs. immobile factors of production • Rich countries are becoming knowledge-based economies • High-skilled workers are the backbone of knowledge transmission and application • For this group, maximum diversity is desirable (universities and research institutes typically have no problem hiring foreigners when qualified) • High-skilled workers are increasingly internationally mobile • Productivity/wage of immobile factors depends on attracting mobile factors ICC CEAG – Istanbul – July 2007

  18. (3.) Policy implications • The globalization of labor markets (IMF WEO Spring 2007) • Migration: who benefits, and why? • Migrants! • Home country (through remittances) • Host country? • Policy implications ICC CEAG – Istanbul – July 2007

  19. Policies • Question: How can we make an income gain for the world as a whole through migration a win-win proposition to the countries involved? • Answer: Tax migrants (explicitly or implicitly) • Income requirements for support of family members • Administrative fees to cover cost of processing, language course, etc. • Currently: limited portability of pensions • Limit immigration to fiscally profitable immigrants ICC CEAG – Istanbul – July 2007

  20. Policies: more pragmatic • Policies would relate to the 3 aspects of migration: • People flows • Financial flows • Diaspora flows ICC CEAG – Istanbul – July 2007

  21. Note on humanitarian crises • Relief efforts are not susceptible to cost-benefit calculations! ICC CEAG – Istanbul – July 2007

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