MIGRATION AND THE ECONOMY Economic Realities, Social Impacts & Political Choices Citi GPS: Global Perspectives & Solutions September 2018 Citi is one of the world’s largest financial institutions, operating in all major established and emerging markets. Across these world markets, our employees conduct an ongoing multi-disciplinary global conversation – accessing information, analyzing data, developing insights, and formulating advice for our clients. As our premier thought-leadership product, Citi GPS is designed to help our clients navigate the global economy’s most demanding challenges, identify future themes and trends, and help our clients profit in a fast-changing and interconnected world. Citi GPS accesses the best elements of our global conversation and harvests the thought leadership of a wide range of senior professionals across our firm. This is not a research report and does not constitute advice on investments or a solicitation to buy or sell any financial instrument. For more information on Citi GPS, please visit our website at www.citi.com/citigps. Citi GPS: Global Perspectives & Solutions September 2018 Ian Goldin is the Oxford University Professor of Globalisation and Development, the Director of the Oxford Martin Programme on Technological and Economic Change and the founding Director of the Oxford Martin School. Ian previously was World Bank Vice President and the Group’s Director of Policy, after serving as Chief Executive of the Development Bank of Southern Africa and Economic Advisor to President Nelson Mandela. Formerly Ian served as Principal Economist at the EBRD and Director of Programmes at the OECD Development Centre. Ian has a BA (Hons) and BSc from the University of Cape Town, an MSc from the London School of Economics, and a MA and DPhil from the University of Oxford. Ian has been knighted by the French Government and has published 21 books, including Age of Discovery: Navigating the Storms of Our Second Renaissance; The Butterfly Defect: How Globalisation Creates Systemic Risks and What to Do; and Exceptional People: How Migration Shaped our World and Will Define our Future. He has been a non-executive Director on numerous boards, the Senior Independent Director on CDC, and is an Honorary Trustee of Comic Relief and the Chair of CORE-Econ initiative to modernize the teaching of economics. See https://iangoldin.org and @ian_goldin. Andrew Pitt has been Global Head of Citi Research since 2008 where he manages all of Citi’s independent research activities across 30 countries and through around 70,000 publications per annum. Andrew joined Citi in 1996 but in total he has 27 years’ experience in investment research, first as an Equity analyst covering the financial services sector and, since 2003, as a manager. Prior to investment research, Andrew started his career as a Lecturer in Modern History at Keble College, Oxford. Andrew launched the Citi GPS series in 2011 to address the major challenges and opportunities of the 21st century through publically available, inter-disciplinary analysis, often in partnership with leading academic institutions and external experts. A major focus of the Citi GPS series has been to promote an inclusive economic debate between the public and private sector on key societal issues such as the impact of technology on employment, income inequality, gender equality and attitudes to migration. Benjamin Nabarro is a Senior Associate in the Global Strategy and Macro Group at Citi Research. He joined Citi in July 2016, previously working in Global Thematic Research and is currently based in the London office. Ben holds a degree in Politics, Philosophy and Economics from the University of Oxford and has also studied at Stanford University. +44-20-7986-2056 | [email protected] Kathleen Boyle, CFA is the Global Head of Citi’s Global Perspectives & Solutions thought-leadership publication product (Citi GPS). She is a member of the Citi Research Executive Committee. Prior to taking on this role in 2011, she spent six years as the Associate Director of U.S. Equity Research with primary responsibility for the Basic Materials, Energy, Healthcare, Industrials, REIT, and Utility sector teams. She joined Citi in 1999 to cover ADR Research and was promoted to Director of Global Product in 2004. Prior to that, Kathleen was with BT Alex Brown in Institutional Sales and was a Vice President at NatWest Markets in their Global Specialist Sales group. Kathleen received a BA in Economics from Franklin & Marshall College, is a CFA charterholder, and is a member of the New York Society of Security Analysts. +1-212-816-3608 | [email protected] Contributors Catherine L Mann September 2018 Citi GPS: Global Perspectives & Solutions 3 MIGRATION AND THE ECONOMY Economic Realities, Social Impacts & Political Choices Andrew Pitt Former UN Secretary General Ban Ki-moon defined migration as “an expression of Global Head of Citi Research the human aspiration for dignity, safety and a better future. It is part of the social fabric, part of our very make-up as a human family”. In recent years, however, and especially in the aftermath of the global financial crisis, immigration has become a toxic issue in election campaigns and the political debate in many advanced economies, with politicians and other interested parties trading insults and soundbites but leaving a proper evaluation of the real impacts of migration on the economy and society often absent from the noise. In this report, we have sought to take a detailed and balanced perspective on the impact of immigration on advanced economies, and particularly on those in Europe and North America where the popular concerns regarding migration appear to be especially acute. This report forms part of a wider series of work in our Citi GPS series where we have looked at complex societal issues that have a profound impact on global growth and the performance of the wider economy. The originality of this report is both in providing fresh evidence of the implications for growth and the dynamism of economies and also in our consideration of the fiscal costs and benefits of migration in terms of taxes and expenditures. In addition, we have attempted to understand, explain and analyze the political debate around migration through reviewing much of the available literature and opinion polls to assess where and how the fault lines have occurred in the public discourse on migration. This report is focused on economic migrants who have not been compelled to migrate either as refugees or through force.1 Although economic migrants may come from extreme poverty, by and large they migrate as a matter of choice. Their destination countries also have a choice whether to accept them or not. In this report we use the term migrants and immigrants, or migration and immigration, interchangeably to refer to the movement of people across national borders. To produce this report, Citi Research has partnered with Professor Ian Goldin who not only has worked with us for over five years through our research partnership with The Oxford Martin School but who is also a specialist on migration and who is an author of the highly acclaimed 2011 book Exceptional People: How Migration Shaped our World and Will define Our Future. Professor Goldin is currently the Oxford University Professor of Globalisation and Development. His full biography can be found in the author block of this report. In the preparation of this report, we have conducted a very extensive literature review of the research written on migration, updated the data sets from Professor Goldin’s 2011 work, and undertaken a number of new data modelling exercises. While some very clear conclusions emerge as we outline below in this introductory summary, we have also sought to highlight areas of acknowledged academic or public dispute in the narrative on migration. We have also tried to balance economic analysis with social impacts and an understanding of the drivers of the political debate. 1 We are grateful to Jodi Lee Nelson and her team at International Rescue Committee for sharing ideas during the preparation of this report. In the case of refugees, recipient countries have an obligation under international law to accept people whose lives are threatened. And international law also dictates that forced migration should be prohibited. There are about 26 million refugees today, with in recent years this including over 6.3 million people being forced to leave Syria and over 1 million Rohingya fleeing Myanmar, with over 95% of these refugees seeking shelter in neighboring countries. © 2018 Citigroup 4 Citi GPS: Global Perspectives & Solutions September 2018 Part of the objective of this report is to provide a more granular approach to throw light on the growing disconnect between public perceptions regarding migration and the actual trends. This disconnect is illustrated, for example, in the change in negative perceptions regarding immigration in different European countries, which suggests that there is almost no direct correlation between the number of migrants (and refugees) that a country accepts and the attitudes to migration. We recognize, of course, that the implications for many other global regions, and not least developing countries as both the source and destination of migration, are also very significant, not least in terms of the implications of the so called ‘brain drain’ which suggests that the benefits migrants bring to the advanced economies may be at the cost of undermining development in their countries of origin. This need not be the case as migrants typically contribute materially to their destination country, while at the same time contributing to their dependents and countries of origin and advancing their own lives. The volume of remittances sent home by migrants to low and middle-income countries has grown rapidly in recent decades and in 2017 was estimated to exceed $466 billion, over three times foreign aid.