Migration will be win-win for world, finds World Bank report

Philip Schellekens [Georgi Gotev]

There is a clear win-win situation for the world, in both the medium and longer term, for more migration to happen, Philip Schellekens told EURACTIV in an exclusive interview on the day the World Bank published its Global Monitoring Report 2015-16.

Philip Schellekens is Lead Economist with the World Bank Group.

He spoke to EURACTIV’s Senior Editor Georgi Gotev

The Global Monitoring Report 2015/2016 was published today (6 November). It is titled “Development Goals and Era of Demographic Change” and you are its lead author. Can you perhaps explain how such a massive report of almost 300 pages has been written, what are the sources, do you follow any sort of instructions on the policy side, is someone telling you which angle to take?

This Global Monitoring Report is in partnership between the IMF and the World Bank, with contributions from OECD and multilateral development banks. The topic arose in the research department, partly because over the last 30 years we haven’t had a World Bank report on demography. Since then, demographic trends have changed dramatically. Global population used to grow a few decades ago at 2%, now it’s 1%, and by 2050 it will be 0.5%. The world population is ageing a record speeds, never seen before. Global working age population as a share of the total population has reached a maximum of 66% in 2012 and is now declining. And the total number of children around the world is stabilising at around 2 billion.

So there is dramatic demographic change. The trends are very different now than three decades ago, but also our thinking about demography has changed.

In the past, we were concerned about population bombs. Now, because the trends have changed, but also because the theories have changed, we see demography as a vehicle for development. Provided the right policies are put in place, it provides opportunities as well as challenges.

And what is very different is the world itself, it has become much more globalised. Demographic change will interact with certain features of the global environment – the fact that capital flows are now much more liberal, the fact that trade flows we have seen a lot of globalisation, the fact that on the labour market side there is a cross-border flow of people. Even on the labour market side there is more potential than in the past, although it remains the most restrictive area.

So this is why we decided to do a report on demography. In the second part of the report used the very latest UN population projections, from July 2015. The first part of the report focuses on poverty, inequality, shared prosperity. There we used the household survey data of more than 100 countries to come up with conclusions.

You said that demography can be a vehicle for development, provided the right policies are put in place, can you elaborate?

Global demography is on the move. On the surface there is rapid population ageing, slow population growth, but underneath there is a lot of diversity. So we developed in this report a new typology of demographic change. We divided the world into four categories of countries. First, pre-dividend countries, where fertility among women is more than 4, like Niger, were women have currently 7.6 children on average. In these countries the working age population is expected to grow between now and 2030.

Then we have early-dividend countries, these are countries, where fertility has dropped below 4 already and where lots of people are now going to enter the labour market. And there, they have a chance to take advantage of the first demographic dividend, which is all about having a temporary boost in economic activity, because more people are entering the labour force. A good example is Ethiopia.

And then you have late-dividend countries, like Brazil, where is seen a very rapid ageing, where working age population is expected to shrink between now and 2030, and where fertility has gone down dramatically.

And you have the post-dividend countries, where dividends have already been used largely, where fertility has reached below the replacement level of 2.1.

The point is that the world is characterised not only by intensive demographic change, but by extremely diverse demographic change, much more than in the past. The ageing countries are ageing much more quickly than in the past.

The charts in the report illustrate it. Pre- and early-dividend countries occupy about 90% of global poverty. These are the centres of global poverty are in need of development to lower poverty. But the engines of global growth are weakening because of demographics.

One of the points that we would like to make is about country-level policies. For pre-dividend countries an overriding priority is to lower fertility, to ensure better education for girls, awareness about contraception, health programmes, female empowerment, which is absolutely critical.

For the early-dividend countries where the youth bulge is entering the labour market, the overriding priority is to equip these people with skills and to generate jobs for them. Otherwise you generate political and social instability, the Arab Spring being an example.

For the late-dividend countries the challenge is to sustain productivity growth. For example in Brazil, where the declining population growth is producing growth headwinds, you need to squeeze more growth out of innovation.

And for the post-dividend countries the challenge is to adapt the policies and welfare systems to ageing, so that ageing can be productive and healthy. As people are living longer, eventually what will need to change is that retirement age will need to go up, social welfare systems will also have to evolve, in order to prepare for that. And health systems need to adapt. The entire spectrum of social services need to shift, comparatively, from education which is important for younger societies, towards providing healthcare adapted to the changing epidemiology that we see in these countries.

There is a tremendous demographic arbitrage opportunity for the world to work more closely together on capital flows, trade, and especially migration. So this report represents a call for greater openness in those three areas. Because as demographic pressures are going to play out unevenly, there is a great opportunity, particularly in the cross-border flow of people. To open up more would convey massive global welfare benefits, if labour markets would be allowed to globalise more than they have done in the past.

Should then the current unprecedented migrant exodus into Europe be seen as an opportunity?

It is definitely an opportunity from the point of view of the receiving countries, because they face ageing populations and the influx of people, regardless of their motivation to migrate, represents a huge opportunity. It’s not just morally right to accept refugees, it’s also good economics.

But I doubt this is a good thing for the countries from where the migrants originate?

This is also a common misunderstanding. The serious studies on the topic separate between the effects on the non-migrants in the recipient countries, the effects on the non-migrants in the sending countries, and the effects on the migrants themselves. So what this literature finds is that the greatest benefit is for the migrants themselves. Because their incomes triple overnight. Because incomes depend not so much on who you are, but a lot on where you are.

For the sending countries, it really depends if the migrants that are leaving the country are low skilled, and they come from a surplus labour, then the costs are not that big. If it is skilled migration, it’s more complicated. But even there, the question is, to what extent the skilled migration squeezed the productivity for those who are left behind – it’s not entirely clear.

It is not clear if there is going to be a depletion of human capital, because there is something called the brain gain. Once you provide the possibility for migration, it provides an incentive for people to educate themselves better, so that they can make the transition to another country, so that’s a benefit.

There is a clear win-win situation for the world as a whole, in the medium and in the longer term, for more migration to happen, and that’s a clear conclusion of this report, which shows that demographic pressures will become increasingly diverse. We are going to have an increasing tension between the poor countries, the centres for global poverty, and on the other hand, the engines of global growth where we are going to see declines in the working age population. There is a clear opportunity for the world to work more closely together, and migration is a centrepiece of this.

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