Wednesday, June 6, 2012

Globalisation and labour mobility

Free flow of goods and services has been the focus of the GATT and WTO Agreements. Free labour mobility across national borders, however, has been a more contentious issue. Should the barriers of entry to labour across countries be substantially reduced? Should free flow of labour, just as capital and goods, be a natural corollary of globalisation?

Branco Milanovic in his working paper titled "Global Inequality - From Class to Location, from proletarians to Masses" suggests that increased migration, like aid should be encouraged to reduce global inequality. Highlighting the utility of global migration the author states:
"That from the  global perspective migration should be desirable leaves very little doubt, even when we think of it using the simplest economic principles: if people are allowed to move where they think they would do better, it is very likely that total output would increase compared to the situation when people are not allowed to move. For if the reverse were the case,  impediments to migration similar to the ones that currently exist at the international level would be found useful and imposed at the national level as well. As Frenkel (1942, p. 183) writes, ―The movement of men and women from areas where they are poverty-stricken to areas where they can make their full contribution to the world’s income stream is of advantage to all."
However, increased migration across borders is not a politically embracing phenomenon domestically. While it may be theoretically an acceptable point, it faces severe challenges. He outlines some of them:

" While the desirability of both increased aid and greater migration may be established in principle and for the world as a  whole, it does not mean that it would be to the advantage of each particular country, or particular sections of population in each country.  Greater migration may be associated with reduced wages or increased unemployment for the groups of people whose skills are most similar to the skills of migrants.  Thus even if for the recipient country as a whole migration is advantageous, sufficiently powerful economic and political groups may be able to block it or impose tough limits on it.
Perhaps more importantly,  greater migration faces non-economic obstacles that can be vaguely described as belonging to the area of social acceptance of migrants and their effects on domestic culture. These issues have been exacerbated by the current economic crisis and the unexpectedly great difficulties that many European countries have had in ―absorbing migrants, particularly those with Islamic background. Thus, in a close succession, both British and German Prime Ministers have declared the ―multiculturalist model, which was supposed to be Europe’s answer to migration, to have failed. Angela Merkel, moreover, pronounced  such a model unambiguously ―dead."
Concluding about the inevitability of migration, the paper concludes:
From the facts  that (i) most of today’s global income inequality is due to differences in mean incomes between the countries, (ii) in an era of globalization such differences are well known to people in poor countries, and (iii) the costs of moving from one place to another are not prohibitive, it follows that migration, in the absence of significant acceleration of growth in 

poor countries, will be a great 21st century mechanism of ―adjustment. It will be driven by the self-interest of individuals but its ultimate result would be a reduction in global inequality and global poverty. Aid and migration ought to be regarded as two complementary means for achieving these goals.  Policy makers in developed countries shall come to realize that either poor people will become richer in their own countries or they will migrate to the rich countries."
This piece explains the history of pre-20th century migration. 

The inevitability of migration is not disputed. What is disputed is the ease with which migrants can cross national borders. How much will multilateral rules facilitate this? Will the international trade rules venture into this arena? The issue also touches complex areas of cultural diversity, protection of local cultures as well as national security. Relaxation of visa rules and reduction in barriers of entry are challenging issues to be addressed. Is free mobility of labour a mirage in the globalisation debate? What impact can it have in reducing global poverty and inequality? Is it a trade related issue to be taken up by the WTO?

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