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INTERNATIONAL MIGRATION

Problem

In theory allowing free international migration within global labor markets allows employers to boost productivity resulting in net gains in host country income. In practice, voters in high income countries generally frustrate employer freedom to hire abroad citing net losses to workers. The problem is further complicated by sponsored migrants tendency to distort markets due to their inability to respond to wage signals from other employers.

Partners and Sponsors

United Nations ILO, Geneva. MIGRANT Division. Manolo Abella (Chief of MIGRANT).

Challenge

Find a free market solution to let employers reap the productivity benefit from decreasing their costs while boosting the income of native workers to the point where their interests become aligned with their employers.

Customized Toolkit

For this problem we chose an approach using Coasian analysis which is a mainstay of neo-classical economic theory. We adapted it to the problem at hand by changing the variables of the problem given to us (borders as market barriers to entry, work visas as government issued commodities) to a set of variables which better invited market solution (citizenship as a salable right to invite migrants, tradable work permits as market to be commoditized).

Solution

Native workers will not support programs which lower their total incomes. Yet, migration can be counted upon to produce a reliable net benefit in host countries only  if it is allowed to decrease wages. Thus the solution is to realize that total income must rise  while wage income is allowed to fall. This suggests that any natural free market solution must involve a natural income stream to host country workers which has previously been obscured or hidden. We then discover that if the (highly valuable) right of host country citizens to block access to labor markets is properly converted into a salable right, workers are made better off (since a salable right is always more financially valuable than a non-salable one). We thus convert the rights to preferential labor market access into rights of workers to license migrant work permits to employers. We find that with a little bit of care the market will now return an efficient solution with all parties being made better off.

Publications

'Migration for the Benefit of All' in International Labor Review,  Vol. 141 (2002), No. 3., pg. 225

Contact

If you are interested in this topic, we invite you to contact us at migration@eric-weinstein.net.