Aging is a global phenomenon,
that is it exists in may parts of the globe. This paper argues it is also a globalisation
phenomenon, that is it involves the increasing interaction between national and
regional economies My Marsden funded book, The Globalisation of Nations, to be
published next year, argues that this integration is driven by the falling cost
of distance, which means that today information is readily available just about
anywhere, that technology is internationally mobile but local conditions have
to be receptive for it, that capital is similarly mobile while, of course, land
is immobile.
The pattern for labour is
more complicated. It could be said that it was more mobile in the nineteenth
century, when globalisation began, than it is today. Then there were very few
artificial restrictions on labour mobility, although the possibility of international
migration to the New World countries was only really available to Europeans.
As soon as Asians showed any substantial propensity to migrate – towards
the end of the nineteenth century – restrictions were placed on them.
Moreover, the costs of distance for migrants were not insignificant. So the
first migrants to the New World came from more affluent Western Europe and it
was only as the living standards of other Europeans rose, that they joined the
flood.
The magnitude of the flows
were extraordinary. Some 60 million people left Europe in the century after
1820 for the New World of which 36 million went to the United States. In 1820
Europe’s population was about 220 million people, rising to 320 million
in 1913, so around one in five of the population migrated. Over the same period,
the population of the countries they mainly went to – the United State,
Canada, Australasia, South Africa, and the Southern American cone – rose
almost tenfold from about 14 million to 134 million. The migrants and their
descendants were the main source of this spectacular growth.
Of course, migration has
happened since the beginning of human history. This time it was (largely) not
coerced – slaves and convicts – or indentured (contracted) labour.
While some migrants were primarily refugees of war, terror, religious persecution
and famine, much was ‘free’ labour. It driven by greater opportunities
in the New World compared to those in the Old World, and the increasing affordability
of passages and communications home.
Although many of the migrants
faced hardship and death, those who survived generally ended up better off than
had they stayed at home. Meanwhile those left behind also materially benefited.
Had there not been the migration from Europe, the continent might have had an
extra 100 million souls by 1913 – probability less, given higher mortality
from greater disease, poorer nutrition, and civil disability. Possibly the continental
wars would have been earlier and even more horrendous.
Thus the New World contributed
to the development of the Old World – by taking surplus population and
supplying food and other resources. It was land (and other resources) rich,
but it lacked the labour to work them. The (relatively) free flow of labour
utilised the land for the rising demand for food in Old World countries.
There was a rising trend
of intercontinental migration through the nineteenth century. Typically, 300,000
left Europe for the frontier societies annually from 1850 to 1880; 600,000 in
the remainder of the century; 1,300,00 at the beginning of the Twentieth Century.
Numbers fell away after the First World War to below 200,000 in the 1930s. Net
international migration to the more developed regions rose from almost nothing
in 1950 to around 2.5 million a year in 2000. Even so, in comparison to the
more than 700 per million of the world’s population that was migrating
each year at the beginning of the Twentieth Century, there was only 300 per
million at its end.
The fall-off was the result
of restrictions imposed by the destination countries, for the descendants of
the earlier migrants had settled in and saw themselves culturally and economically
threatened by further arrivals. One of the themes of the book is that the nation
state is a relatively recent development – no earlier than the nineteenth
century. As it reached maturity it both identified a community self-interest,
and gathered the powers to pursue it. One of its greatest powers, even today,
is the nation-state determines who are citizens and who may be residents, by
controlling entry in its economic and cultural interests.
Thus nation states restrict
the migrants by number and also by mix. Where a rich destination is involved,
a higher proportion of the migrants are skilled, filling in gaps in the labour
force more cheaply than by training. There are still unskilled and refugees,
but the restrictions has led to reductions in their importance.
The pattern of migration
changed too. These days over 100,000 net people leave annually from each of
China, Mexico, Pakistan, India, Iran, Philippines Indonesia and Kazakhstan.
Europe is now a destination for migrants rather than a source, although the
United States remains the largest single destination.
Curiously, despite in 2000
there being around 2.5 million migrants a year to the more developed regions,
the UN projects that the rate will be just under 2 million a year for the next
fifty years. Had they continued the trend of the previous 50 years, they would
have projected close to 5 million migrants in 2050. The underlying assumptions
reflect those of individual countries – often wary of migration for cultural
and political reason. But is the UN projection realistic?
Economic Theory
An application of economic
theory challenges this. One way of interpreting standard international trade
theory is that is shows that when labour mobility is limited between economies,
some of the loss of economic output from the restricted labour mobility may
be regained by trading goods instead. In effect instead of the labour migrating,
labour embodied goods do.
Thus one of the justifications
for the North American Free Trade Agreement was it would discourage Mexican
migration by relocating their potential US jobs south of the border. The apocryphal
illustration is of a Mexican who sneaked across the border, lived illegally
in the margins of California society, got documentation as the result of an
amnesty, to find that following NAFTA the factory where she worked was moved
south, because labour was cheaper in Mexico.
As attractive as the economic
theory is, it applies only to those jobs and products which are internationally
tradeable – goods and those services which can be delivered by telecommunications.
They make up less than half of a modern economy, and perhaps nearer a quarter.
Land cannot be moved from California to Mexico, so there remain opportunities
for Latino workers on American farms. Nor can personal services move far, unless
the consumer shifts too. While there is a little of such flexibility, as when
Americans retire in Mexico, there remains many low skilled service jobs to the
north. Despite creating some jobs south of the Rio, NAFTA has not eliminated
opportunities for Latino migrants in America, nor has it staunched the illegal
migration.
The Aging of the
Rich Countries
Serious population aging
is initially currently to the rich economies, the significant exception being
China. The shift is spectacular. The projections have roughly the same proportion
of the over 80s in rich countries in 2050 (9.6 percent) as there are over 65s
today (9.9 percent in 2000). They predict that just over a fifth of the population
will be over 65 in 2050, roughly the proportion that is over 55 today.
The figures for the entire
world do not shift as much. Its proportion of over 65s rises from 6.9 percent
to 11.0 percent, and over 80s from 1.1 percent to 4.1 percent. The aging problem
in the next 50 years is mainly in the more developed world, China aside.
In a world in which all
commodities are tradeable, one might envisage the elderly building up savings
during their working lives and use their accumulated wealth to provide their
needs in retirement. But this does not say where the commodities are produced.
(nor where the savings are invested). It assumes that it does not matter whether
the products are produced locally, elsewhere in the nation-economy or offshore.
It assumes that the retired can purchase them from wherever they are produced
for their local use.
However, many personal services
can only be consumed close to where they are produced. That means that the retired
need workers living close to them. When the population is aging, there are relatively
fewer local workers. Will there be enough?
A further complication is
that in most rich countries the retired depend upon transfers from workers as
a part of their retirement consumption. (Even in the US for the poorer retired
and medial care for all, together with – more contentiously – the
private subsidies to be given to underfunded private superannuation schemes).
The problem of the rising ratio of non-workers to workers as the population
ages, is a well debated issue. It reinforces the analysis being developed.
So there is a double squeeze.
First, aging means a relative reduction of workers to provide public retirement
support and, second, but second the retired are not dependent upon public support,
there is a relative reduction of workers who can provide the services they require.
Suppose population trends
followed the UN projections, in which case the squeeze may be strong. Indeed
it may be sufficient to undermine the restricted migration that the UN projections
assume if the elderly insist on additional migration to meet their needs. (This
assumes that the Japanese ambition to create robots which can replace personal
care workers will not be overly successful.)
What happens if instead
of migration flattening out, even falling a little, the rising trend of the
last fifty years continues, doubling to a net annual flow of about 5 million
migrants to the rich world, or about 400 migrants per million – only about
half the rate of the peak at the beginning of the twentieth century?
Fortunately, UN population
projections can be rejigged to track this migration assumption. If, in addition,
we assume that people in rich countries work five years longer than they do
today, we find that the non-work to work age group ratio will be much the same
in rich countries as it is today. So rich countries can resolve the economics
of their aging challenge by migration trends more similar to what has been happening
in the past, rather than the official agencies projection (together with slightly
longer working lives, but not long enough to reduce total retirement years).
The New Zealand
Challenge
I want to illustrate the
general principle by migration from the Pasifika peoples to New Zealand. (It
is not my intention here to be insensitive to the national and cultural aspirations
of the Pasifika and I welcome the rich contribution they already make to New
Zealand. life. I got thinking about these issues because Samoa is an exemplar
in The Globalisation of Nations. It, The Cooks and Nauru .are the three Pacific
Island exemplars in my next project, a New Economic History of New Zealand –
I have a Claude McCarthy Fellowship for 2007 to pursue this task.)
The Pacific Islands have
a different demographic expectation from aging New Zealand. As a rough approximation,
the fertility rate of women in Samoa averages about two daughters per woman,
compared with about one daughter in New Zealand. (Samoan women in New Zealand
have about 1½ daughters each, half way between the rate where they come
from and where they now live.) This means that while New Zealand will be experiencing
an aging population from increased longeivity, Samoa may not, depending on its
rate of out-migration.
I am pessimistic of the
Islands’ ability to survive economically, without contribution of migrants’
remittances. (Hawaii is the exception.) This suggests that their survival is
likely to depend upon out-migration of their youth which lowers population pressure,
while the migrants’ remittances will support the home economy, as they
already do.
What has to be considered
is the sort of skills are required from these migrants. The international preference
is for highly skilled migrants, it being cheaper to import them than to produce
the skills locally. However the jobs the elderly need are often relatively low
skilled – perhaps illustrated by nurse aids in retirement homes. Pacific
Island migrants are attractive for this purpose . Sadly they do not have the
opportunities in their home islands to obtain advanced skills. But by coming
to New Zealand, their low skills with good character are ideal for the provision
of many of the required personal services.
Working in New Zealand generates
higher incomes than staying on in the Pacific, although the margin diminishes
when remittances and the costs of visiting are deducted. Being in New Zealand
may offer them more opportunity for self-improvement and almost certainly there
will be greater opportunity for their children.
Why cannot these services
be supplied by those already living in New Zealand? First, because of the aging
population there is not going to be enough of them. Second, the upskilling of
New Zealanders means that they will tend to be over-skilled for these services.
I do not know the magnitudes.
My guess is that the Pacific Islands can make a significant contribution to
our aging population needs, but they may not be sufficient by themselves, especially
if the draw-off is limited so as not to undermine the Pacific Island nations.
It may be that New Zealand will have also to draw on migrants from Papua New
Guinea and Asia. The next research stage might be to start systematically modelling
the magnitudes.
The cultural consequences
are not unimportant. New Zealand can probably absorb unlimited quantities of
Pasifika peoples, because they are already an integral part of the nation. Unskilled
migrants from Melanesia and Asia may provide a bigger cultural challenge.
The Global Migration
Challenge
New Zealand’s story
is similar to other ageing rich countries, As the age structure transition works
its way through, there will be a demand for migrants to provide the services
for the elderly, which the local workforce does not. This new migration will
on average be less skilled than has been the implicit assumption in the UN projections.
It will also be ethnically
different. That was true in Nineteenth Century, when the descendants of migrants
dominated those of the First Peoples in the New World. But with the exceptions
of Latinos in the US, the new migrants are unlikely to constitute a major population
sub-group in most of the Rich Club – not by 2050 anyway – but they
will be changing their new country’s ethnic composition.
The ethnic composition of
the international migrants will change. The UN projections may over-estimate
the first ranking of Chinese migration, given that China will also be suffering
aging, and underestimate Africa as a potential source of migration, given its
burgeoning population growth. Of course the composition will vary by destination:
Latinos will generally go to the US; East and South Asian to most parts of the
world; Africans and West Asians to Europe.
How countries will deal
with the economic and ethnic problems will vary. Canada will no doubt celebrate
the challenge, while Japan is more closed to the gaijin (foreigners). The US
with its tradition of migration may be more responsive than Europe whose tradition
is of out-migration. An interesting possibility is to be selective by culture.
Canada balances its English and French speaking arrivals. If Europe is really
concerned about the Moslem intake it may switch to African Christians, who may
not fit easily into secular Europe either.
There are various means
of reducing migrant’s ethnic impact, including temporary work permits
and pepper-potting (not allowing the migrants to cluster in neighbourhoods).
But they are likely only to delay any cultural impact rather than eliminate
it.
So while greater international
migration can resolve – with a slightly later effective age of retirement
– the economic problems posed by the rich world’s ageing, it poses
a considerable cultural challenge to nation-states predicated on some notion
of cultural commonality. Where this paper is innovative is the argument the
migrants will have to included relatively unskilled workers in order to supply
the personal services to the aged and others.
As a result the magnitude
of the international migration in the Twenty-first Century may be greater than
current thinking allows. We may be sure that the ethnic composition of each
member of the Rich Club will be very different a century on from what it is
today. In a way the labour market in the globalised Twenty-first Century may
have a labour market more like the Nineteenth Century than like the Twentieth.
Author Brian can be contacted |
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