THE REGIONAL MIGRATION STUDY GROUP Evolving DEmographic anD human-capital trEnDs in mExico anD cEntral amErica anD thEir implications for rEgional migration By Aaron Terrazas, Demetrios G. Papademetriou, and Marc R. Rosenblum THE REGIONAL MIGRATION STUDY GROUP Evolving Demographic and Human- Capital Trends in Mexico and Central America and Their Implications for Regional Migration Aaron Terrazas Demetrios G. Papademetriou Marc R. Rosenblum May 2011 Acknowledgments This report was produced for the Regional Migration Study Group convened by the Migration Policy Institute (MPI) and the Latin American Program/Mexico Institute of the Woodrow Wilson Center for Scholars. The Study Group, a three-year initiative, will act as a virtual think tank to the region’s policymakers and civil-society officials who manage day-to-day migration relations and other issues related to human capital and global competitiveness. The Study Group’s mission, membership, and research can be found at: www.migrationpolicy.org/regionalstudygroup. The authors thank Kate Brick and Doris Meissner of MPI for their comments on earlier drafts of this report. This research has been made possible through the generous support of the Tinker Foundation, the MacArthur Foundation, and the Open Society Foundations. © 2011 Migration Policy Institute. All Rights Reserved. Cover Photo: Modified version of North American map (2725801) – BigStockPhoto.com Cover Design: Burke Speaker, MPI Typesetting: April Siruno, MPI No part of this publication may be reproduced or transmitted in any form by any means, electronic or mechanical, including photocopy, or any information storage and retrieval system, without permission from the Migration Policy Institute. A full- text PDF of this document is available for free download from: www.migrationpolicy.org. Permission for reproducing excerpts from this report should be directed to: Permissions Department, Migration Policy Institute, 1400 16th Street, NW, Suite 300, Washington, DC 20036, or by contacting [email protected]. Suggested citation: Terrazas, Aaron, Demetrios G. Papademetriou, and Marc R. Rosenblum. 2011. Evolving Demographic and Human-Capital Trends in Mexico and Central America and Their Implications for Regional Migration. Washington, DC: Migration Policy Institute. Table of Contents Executive Summary .........................................................................................................................1 I. Introduction ..................................................................................................................................2 II. Population Growth and Age Structure ..................................................................4 III. Labor Force Characteristics and Education ......................................................9 IV. Conclusions and Future Prospects ...........................................................................15 Appendices ............................................................................................................................................19 Works Cited .........................................................................................................................................21 About the Authors ..........................................................................................................................24 MIGRATION POLICY INSTITUTE Executive Summary Over the past half century, migration from Mexico and Central America to the United States has been driven by complementary regional demographic and human-capital trends, among many other factors. As the US labor force became better educated, fewer native workers accepted many of the low-wage but essential jobs at the bottom of the labor market. These changes in the United States coincided with a population boom in Mexico and Central America that resulted in a near tripling of the region’s population. Economic growth was unable to keep pace with demographic change, however, and many of the region’s youth sought opportunities in the United States. By 2009, immigrants from Mexico, El Salvador, Guatemala, and Honduras accounted for nearly one-third (31.5 percent) of all US workers without a high school education, up from just 1.3 percent in 1970. Yet the demographic and human-capital profiles of Mexico and Central America are evolving rapidly, as are economic conditions in the United States. (For a summary, see Table 1.) In Mexico and El Salvador, the demographic transition initiated a half century ago is running its course, translating into slower population growth, declining numbers of youth, and aging societies. By contrast, population growth is expected to remain at relatively high levels in Guatemala and Honduras for several more decades. The countries of the region have made substantial progress in expanding access to education, with Mexican youth in particular converging with their US peers on key indicators such as years of schooling. Mexican students still lag behind US students on indicators of the quality of education, however; and access to education and test scores lag even further behind in Central America, suggesting the need for a focus on quality of education now that access to education has been so significantly expanded. At the same time, the recent US economic crisis has accelerated longstanding shifts in the US economy and labor market. Unemployment and underemployment are approaching record levels; and labor force participation is rising among the elderly, youth, and other groups that may compete with immigrants in the labor market, especially in industries such as hospitality and personal services. The retirement of the baby boom generation, which experts have predicted will lead to severe labor shortages, may be further in the future than was previously expected. It is not clear if these trends will last, or if US labor force and consumer behavior will revert to prerecession patterns once the economy starts growing again. Taken together, these changes mean that policymakers can no longer rely on the conventional wisdom about regional labor mobility that has guided their decisions in the past. Table 1. Summary of Demographic and Human-Capital Trends El Salvador Guatemala Honduras Mexico Real Gross Domestic Product per capita (2009) $2,566 $1,858 $1,380 $6,099 Rapidly Rapid aging, Gradual aging, Growing expanding slowing or Demographic transition slowing population population, high population, high declining growth. fertility rates. fertility rates. population. Rapid expansion Limited access Limited access Rapid expansion Access to education and student of access at and poor and no evidence of access, poor outcomes primary and outcomes. of outcomes. outcomes. secondary levels. Source: World Bank, “World Development Indicators.” Online database. Evolving Demographic and Human-Capital Trends in Mexico and Central America 1 MIGRATION POLICY INSTITUTE I. Introduction Over the past four decades, migration has emerged as one of the unavoidable, defining issues dominating relations between the United States and its southern neighbors. Between 1960 and 2009, the number of immigrants to the United States from Mexico and the Central American countries of El Salvador, Guatemala,1 and Honduras grew over twenty-fold, from just under 600,000 in 1960 to 13.9 million in 2009. Migrants in the United States now account for a large share of the region’s total population ranging from2 6 percent for Guatemala and Honduras to 11 percent for Mexico and 19 percent for El Salvador. Many factors have contributed to the dramatic increase in migration from Mexico and Central America to the United States. The massive opportunity differential spurred by economic growth in the United States and stagnation in Mexico and Central America has certainly played a central role, as have social and political conditions in the region, geographic proximity, and the social networks that have been established since migration flows began within the region. Economist Giovanni Peri estimates that a typical uneducated Mexican male can increase his salary by 2.53 times by migrating to the United States, even after accounting for differences in the cost of living. For better or worse, demographic and education trends in the region are among the most important features of the regional migration system, and they have enormous implications for migration flows to the United States and for the well-being of the entire region. Overarching trends in theth United States, Mexico, and Central America have been complementary. Over the second half of the 20 century, the United States invested heavily in educating its population, which was then4 booming due to a wave of postwar births that came to be known as the “baby boom” generation. Rising educational attainment led to increased prosperity, but also to rising employment expectations. Native-born workers in the United States became increasingly reluctant to accept many of the poorly paid but essential jobs at the bottom of the labor market. And as the US economy shifted away from industry and toward knowledge-based services, demand for highly skilled workers5 increased rapidly while demand for less-skilled workers remained constant or even fell slightly. More recently, the pending6 retirement of baby boomers has caused some alarm regarding the prospects of a labor shortage, though high unemployment since 2008 mitigates these concerns. 1 Throughout this report, we refer to El Salvador, Guatemala, Honduras, and Mexico as “Mexico