Migration to advanced economies can foster growth: IMF

Migration to advanced economies increases output and productivity both in the short and medium-term.

By Rahul Vaimal, Associate Editor
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International Monetary Fund IMF
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United Nations specialized agency to promote global economic stability, the International Monetary Fund (IMF) has encouraged migration as a key component towards economic growth and productivity in host countries.

IMF’s most recent ‘World Economic Outlook’ report which is set to be released on June 24th, implies that supporting migrants now and ensuring migration trends continue beyond the pandemic will help the global economy recover, according to economists from the global monetary organization.

Immigrants in advanced economies increase output and productivity both in the short and medium-term, the IMF stated. “While the Great Lockdown is temporary, the pandemic may add to a general sentiment of reticence and disbelief in openness and have long-term effects on countries’ willingness to receive migrants,” the report asserted.

Flow of Migration 

270 million people in the world were migrants in 2019. The migrant population has grown by 120 million since 1990. However, the share of migrants in the world’s population has remained constant at about 3 percent over the past 60 years.

“Strikingly, the share of immigrants in the total population of advanced economies has risen from 7 percent to 12 percent, while the share of immigrants in emerging market and developing economies has remained at around 2 percent,” IMF remarked.

Migrants often reside within their home region. However, a notable portion of international migration takes place over long distances (for example, from South Asia to the Middle East) and, in particular, from emerging markets and developing economies towards advanced economies.

The primary rationale for why people relocate is the income differences between origin and destination countries. Richer countries attract more immigrants, especially from countries with younger populations. Countries with lower per capita income witness more emigration, but only if they are not too poor.

According to the IMF, when per capita income at the origin is below $7000, countries with lower incomes have lower emigration toward advanced economies. This implies that people get trapped in poverty since they are deprived of the support required to manage migration costs.

Economic Impact of Migration

Settlers in advanced economies increase output and productivity both in the short and medium-term.

“Specifically, we note that a 1 percent rise in the inflow of immigrants relative to total employment boosts output by almost one percent by the fifth year,” IMF responded, continuing, “That’s because native and immigrant workers bring to the labor market a diverse set of skills, which complement each other and enhance productivity. Even reasonable productivity increases from immigration benefit the average income of natives.”

But for the multiple benefits migration brings in, there are hurdles too. Migration may also produce distributional challenges, as regional workers in specific market segments could suffer economically, at least momentarily. Fiscal and labor market policies should, therefore, be applied to maintain the income and retraining of those natives facing labor market difficulties, IMF heeded.

According to the IMF, streamlined labor policies and language training could increase the economic gains from migration. “Active labor market and immigration policies geared toward integrating immigrants, such as language training and easier validation of professional titles, can help build even better outcomes from immigration in recipient countries,” it stated.