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January 2017, Volume 23, Number 1

Global Migration

The World Bank reported that three-fourths of the 28 million highly skilled migrants in the OECD countries in 2010 were in the US, UK, Canada, and Australia, including 40 percent in the US. Some 18 million or two-thirds are from non-OECD countries.

Highly skilled migrants were defined as having at least one year of post-secondary schooling. The major countries of origin were India, 2.2 million; Philippines, China and UK, 1.5 million each; Germany, 1.2 million; and Poland, one million.

Remittances to developing countries were $442 billion in 2016, about the same as in 2015, reflecting lower oil prices that reduced remittances from Gulf oil exporters and Russia.

Population. The world's population of 7.4 billion is expected to reach eight billion by 2025, doubling in 50 years from the four billion of 1974.

The key to global population is fertility, which now averages 2.5 births per woman. If fertility does not fall toward the 2.1 replacement level as expected, the world's population could reach 26 billion in 2100. If fertility falls to the replacement level, the world's population would be 11 billion in 2100.

Asia has 60 percent of the world's people today, but Africa is projected to be the source of most of the world's population growth over the next 80 years. If African fertility rates do not decline, almost 16 billion or 62 percent of the world's 26 billion people in 2100 would be Africans. In Niger, Somalia and Mali, women have an average of six or seven children.

Globalization. Globalization lowers barriers between nation states, facilitating the movement of goods, capital, people and ideas over borders. Economic theory suggests that globalization benefits most people, as consumers buy cheaper and better goods produced elsewhere. Globalization is associated with many noneconomic "goods" as well, including less inequality between countries, less discrimination, and more sensitivity to human rights.

The US globalized over the past four decades. Between 1970 and 2015, the share of trade, both exports and imports, in US GDP rose from 11 to 30 percent, and the share of foreign-born workers in the US labor force rose from five to 16 percent.

During the 2016 presidential campaign, Donald Trump and Bernie Sanders railed against globalization, and both warned about the negative effects of freer trade and mass migration. The pre-WWI era of globalization was marked by new technologies, freer trade and mass migration.

Globalization in the past occurred in long cycles, increasing between the 1870s and WWI and decreasing from the 1920s to WWII. Increasing trade and migration before WWI increased inequality, displaced workers, and led to a backlash that included US quotas on immigration and higher tariffs.

After WWII, Henry Kissinger said that the US fostered "an expanding cooperative order of states observing common rules and norms, embracing liberal economic systems, forswearing territorial conquest, respecting national sovereignty, and adopting participatory and democratic systems of governance." Globalization resumed at an increasing pace beginning in the 1980s, marked by rising flows of goods, capital and people over national borders.

Globalism became an ideology in the 21st century, as so-called Davos men and women welcomed the demise of national borders. However, falling borders also sowed the seeds of trouble, as when the Euro in 1999 lowered borrowing costs in southern European countries but prevented the periodic devaluations that kept their economies competitive, resulting in massive debts. Similarly, China's entry into the World Trade Organization with an under-valued currency led to the loss of millions of blue-collar jobs in the US and other industrial countries.

Will new technologies, freer trade, and mass migration produce another backlash against globalization? Supporters of globalization point to the many reasons for increased inequality, including new technologies that increase the demand for skilled workers and reduce the demand for low-skilled workers and shrinking sectors such as manufacturing that employ low-skilled workers in rich countries. They urge workers adversely affected by globalization to obtain more education and retrain for jobs in the growing service sector.

The future of globalization is unclear. On the one hand, almost a quarter of world GDP is now covered by free-trade agreements that may be hard to revise or cancel. On the other hand, non-tariff barriers are rising, as more countries invoke health, environmental or other factors to restrict trade in particular commodities.

Labor. Basu, an Indian-born Cornell professor and the World Bank?s chief economist in 2012, distinguishes between labor-displacing and labor-linking technologies. He defines labor-linking technologies as those that enable employers in rich countries to employ workers in poorer countries without migration, as when computers permit call centers in India and the Philippines to serve Americans. Labor-linking technologies put downward pressure on the wages of similar workers in high-income countries even without migration.

Basu argues that the US remains more competitive globally than Japan because its firms take more advantage of both labor-displacing and labor-linking technologies. The US grows faster, but at the cost of more inequality than in slower-growing Japan. Basu argues that the solution is not to stop the march of technologies, but instead to share the profits earned by firms that use labor-displacing and labor-linking technologies with workers who are adversely affected.

Basu, Kaushik. 2016. Globalization of labor markets and the growth prospects of nations. Journal of Policy Modeling. Vol 38. No 4. pp 656-669.