Friday, March 31, 2006

Immigration supply

A Reuter's story (through Yahoo) relates a discussion on the supply side of immigration. The context of course is the raging debate on the US on immigration - though Mexican immigrants are the biggest group affected, lots of Filipinos illegals stand to benefit as well.

Per capita income is a good indicator of local wage rates. The disparities are indeed enormous. The case of Spain and Portugal are held up as examples of how tackling the supply side - evening out the income disparities - will do much to ease immigration pressures.

What happened to Spain? Well way back in mid-1980s its US$ per capita income (PPP-adjusted) was 10,435; today it stands at 25,100. That is per capita income rose by a factor of nearly 2.5. That can be done by plodding along at a decent growth rate of about 4.5% per year (in per capita terms). Once your economy is that size, you don't need Tiger economy growth rates (in the rate of 7% and above) to double hit developed country levels in a short time. All Mexico needs to do is to trundle along at about that pace; in fact its per capita growth has been in the range of 1%-2% in the last couple of decades. So the US can expect a lot more migration from the South in the medium term - that how that entry is managed is their call.

What about the Philippines? At about US$ 1,000 per capita, even doubling income will still keep us at a poor country level. If we can make our per capita income grow by 3% per year (around the growth rate last year) then in 20 years we can hit US$ 2,500. Pretty impressive, no? That's about Thai standards now. What we need is really fast growth (Tiger - standard). At 7% per capita growth (9.5% in GDP terms), we quadruple income in 20 years. But that's only about Malaysia standard (these days). In fact, the past couple of decades our per capita growth has been lower than Mexican standard!

So we can expect lots of migration from the Philippines over the next several decades. Slow growth and employment generation at home has been a major "push" factor behind all that worker migration. If we can rack up decent growth rates, there will eventually be a slowdown in the rate of growth of overseas remittance - and even a reversal. I do not believe that overseas remittance growth has contributed in a significant way to slowing down our growth rate - my gut feel is that the effect has been positive.

3 comments:

apalin said...

May we then refer to historical analysis? At what point did the European Migration to the Americas trickle down in the last century? Was it primarily economic? If so, then we can probably construct an immigration threshhold -- and the predict a point at which it would no longer be beneficial for one to migrate.

Econblogger said...

apalin,

Not quite sure about history of immigration. While there were some political or religious motivation for resettlement, I think the declining land:man ratio in Europe initially drove immigration to the Americas. However in the late 19th century I surmise that industrialization (rising capital: labor ratios) were generating a demand-pull. So historical circumstances are probably different across different periods, making generalization over the long term difficult.

Amadeo said...

So while decent growth rate can be expected in PI, no such vision for greater growth to put it at par with some comparable economies.

Inward remittances of Mexicans abroad now contribute more (many reports claim)than revenues derived from its main industry, oil. And its overall economy is nowhere near being declared as healthy.

And this appears also to be the same future for PI with its expected acclerated emigration.