The good economics of migration


Punjab Chief Minister Charanjit Singh Channi had to withdraw his derogatory comments against migrant workers from Bihar due to opposition from the people of the state. Maharashtra Navnirman Sena leader Raj Thackeray has made similar derogatory comments against immigrants and his party has also been ostracized by the people of the state. This is not exceptional as labor migration is beneficial to both provider and host state.

During economic growth, an imbalance appears between the endowments of the different states. Some states have more demand for labor while others have less and therefore migration creates a balance between them, just as if one person has more rotis and the other person has more dal, then exchanging some rotis and dal between them creates a balance for both people. In this context, the International Monetary Fund (IMF) has stated that the migration of skilled and unskilled labor is beneficial to both economies.

Most developed countries welcome highly skilled immigrant workers. A requirement for the popular H1B visa in the United States is that applicants must have certain technical skills that are not readily available in the country. The migration of these highly skilled people contributes to the economic growth of the United States. About a third of the engineers in the US National Aeronautics and Space Administration and frontline tech companies like Microsoft are from India. The migration of unskilled workers also makes a positive contribution to the host economy.

The IMF said that the migration of low-skilled workers to a developed country relieves the local population for high-skilled work. For example, if an unskilled worker from Mexico emigrates to California, he drives a tractor, picks oranges and does other manual work. This frees the highly-skilled farmer from those low-skilled jobs and he can spend his time researching the market price, getting better seeds, growing vegetables, etc. Similarly, if an unskilled laborer from Bihar migrates to Punjab, he drives the tractor, harvests paddy and does other manual labor. This frees the highly skilled farmer in Punjab from having to do these low skilled jobs and he can spend his time researching the market price and so on. Another advantage is that the migration of unskilled workers allows farmers in Punjab to cultivate a larger area. Immigrant workers can plow and harvest larger areas than the farmer himself.

Yet another advantage is that wages in the host state go down. Currently, the daily wage of an unskilled worker in Manipur is Rs 1,200 per day compared to Rs 800 in Punjab as Bihar workers are less inclined to migrate to Manipur while they are more inclined to migrate to Punjab . Hence, salaries are relatively low in Punjab. Hence, the cost of producing goods is also less and Punjab businesses can be competitive in the domestic market. Thus, the migration of skilled and unskilled workers is beneficial for the State and the host countries.

Migration is also beneficial to the provider state or country. Unemployment is reduced. Daily wages in Bihar today are around Rs 400 per day as a large number of Bihar workers have migrated to other states and the availability of labor in Bihar has become less. The supply of workers in Bihar would be higher and wages would rise from the current Rs 400 to say Rs. 300 if the workers did not migrate. Migrant workers also send large sums of money to support their families. For example, Kerala’s economy has become largely dependent on remittances from workers who migrated to Gulf countries. Therefore, the migration of workers is beneficial both for receiving States and countries and for supplying States and countries. This is the reason why Channi had to withdraw his comments and MNS and Raj Thackery were shunned by the people of Maharashtra.

Indeed, migrant workers impose a certain burden on the infrastructure of the host countries. Punjab’s health and education system has been strained to meet the needs of migrant workers. However, I think the cost of such infrastructure development is very small compared to the benefits that migrant workers bring to Punjab. Migrants oppose it despite these benefits mainly for short-term political gains. Politicians may exaggerate some emotional issues to their advantage, but this is not beneficial for the people of the host states.

The main negative impact of migration is the brain drain from provider states. There are a large number of IAS officers from Bihar who have built houses in Delhi and migrated permanently to Delhi; thus, they deprived their State of origin of their knowledge which they could have contributed for the development of Bihar. Similarly, a large number of engineers are migrating from India to the United States, depriving India of this advantage. The question is how to stem this brain drain? This brain drain that is taking place is due to the lack of good governance of supplier states.

The businessman from Bihar is now emigrating to Surat and setting up a textile factory there. Bihar workers are also migrating to Surat and working in the factory set up by a Bihar businessman. So, the businessman and the worker are both from Bihar but they are unable to unite to produce something in Bihar.

They have to migrate to Surat to connect with each other. This is happening because of poor governance in Bihar. The bureaucracy there is more interested in extracting money from businessmen than supporting them. This results in migration from Bihar to Surat. The solution is for supplier states to improve their governance so that business people and skilled workers stay in the state and contribute to the economic development of the state. It will do no good for states and provider countries to oppose migration when their own governance is poor. We should welcome migration and focus on improving governance in provider states and countries.

(The author is a former Professor of Economics at IIM, Bengaluru)

(The opinions expressed in this column are those of the author. The facts and opinions expressed here do not reflect the views of The Hans India)


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