Want to reduce inequality between countries? Increase migration

Depending on your perspective you can argue that the last 25 years have been a period of unprecedented human progress or a great disappointment. The positive case focuses on the 50 per cent reduction of the proportion of people living in extreme poverty since 1990, major improvements in health indicators such as life expectancy and child survival as well as other social indicators. The negative case argues that the absolute number of people living in poverty has barely changed since 1980, inequality has soared and our use of the global environment is unsustainable.

Inequality levels between countries have risen sharply since the 1950s, as western economies grew strongly while those in the developing world faltered. Since 2000, growth in the “Rising Powers” (particularly China) has checked this increase, but the fact is that inequality between countries remains at historically high levels. The continuing fallout of the financial crisis in rich nations may see the gap narrow, but this depends on strong growth in the emerging economies. However, with the end of the commodities super-cycle and the global economic slow-down pushing counties like Brazil into recession, this appears less likely.

Country of birth remains the key determinant of an individual’s life chances. As Branko Milanovic pointed out in Global Inequality of Opportunity, more than 97 per cent of people live out their lives in the country where they were born and more than two-thirds of global inequality between individuals is simply due to national income differences.

Research continues to demonstrate the perils of such inequality within countries—both in the rich world and in developing countries. Studies have shown that increasing levels of inequality not only act as a brake on economic growth, but also bring greater social problems, affecting the wellbeing and mental health of both rich and poor. As Pickett and Wilkinson showed in The Spirit Level, being well off in a highly unequal country results in a lower quality of life than being well off in a more equal society.

As part of the UN-brokered Sustainable Development Goals, all countries have signed up to tackling inequality both within and between countries. So if wealthier countries are serious about reducing global inequality, what should they do? As I set out in my book Should Rich Nations Help the Poor?, there are a range of practical options, which go beyond the traditional solution of simply providing more aid.

One consideration is that whilst rich nations have been enthusiastic to open up global markets for goods, services and finance, the labour market remains the one they are keen not to liberalise. Yet the vast wage differentials between rich and poor countries mean that opening up the cross-border mobility of low-skill labour even moderately would raise the annual earnings of low-income citizens by more than $51 billion. Much of this would also flow “back home” as remittances. So if richer countries are serious about promoting growth and reducing poverty in poor countries, then promoting international migration is a win-win policy.

As a concrete example, let’s take Bangladesh. In a land-constrained country that will suffer greatly from climate change, many poverty issues could be solved at a stroke by increased emigration. Increased remittances would help generate economic growth, while lower numbers of people would improve delivery of public services and reduce environmental pressures.

Around 3 per cent of Bangladeshis currently live abroad. If this was increased to 10 per cent of the population, the remittances generated would rise to well in excess of $40 billion. That represents 15 times more than Bangladesh receives in aid each year.

Moreover, if the multiplier effect of this extra income is included, the increased national income is estimated to be around $84 billion—more than Bangladesh’s Gross National Income. No wonder Milanovic has declared that “migration is probably the most powerful tool for reducing global poverty and inequality.”

Last night, 800 million people went to bed hungry and 19,000 children will die today of easily preventable causes. But harnessing migration to tackle poverty and reduce inequality between countries means facing serious political challenges. The growing reluctance of rich nations to accept labour migrants, the rise of anti-migrant political parties and the lack of protection of migrants’ labour rights may appear insurmountable.

However, a gradual opening up of rich world labour-markets to migrants from low income countries would also be “good” for rich nations: creating a more prosperous and stable world so sustainable growth becomes a possibility; creating the labour force that will be needed to care for our increasingly aged populations. If we’re serious about reducing global inequality, we must make the case.