Real Leaders

Migrants: Economic Meltdown or Boon For Your Business?

Demographics is the quantifiable study of populations based on factors such as age, race, sex, economic status, level of education, income level and employment, among others. It’s typically one of the slower moving forces of change, but as we look to the near future, demographics will become the most potent force of disruption.

Demographic changes are impacting all level of talent acquisition, succession planning, age and gender management and availability of labor. Many near-term demographic changes will challenge business leaders and HR professionals to the full and require them to think carefully through the strategies and policies they develop and support. The big five demographic issues facing today’s business professionals include the impact of globalization, an aging workforce, growing gender and cultural diversity, the impact of migrant workers and managing multi-generation teams (in particular the integration of Gen Y). An aging workforce and migrant workers will have the most significant effect although it is the integration of Gen Y that usually gets the most attention. This focus needs to shift especially in Europe and the US where a tsunami of demographic changes is starting to crash on the shores of the largest economies.

Between 2025-2030 the global workforce will decrease by 12 million workers per year. Much of this impact will be felt in an aging Europe, in particular, Germany, Italy, Greece, Spain, France and Belgium. A seismic demographic shift of retiring workers has the potential to collapse each of these economies. Over the next 15 years, Germany alone will lose almost 30 percent of her workforce as 8 million workers retire. Italy will lose over 20 percent, Greece, Spain and Austria will each lose between 15-20 percent; and France, Belgium, Netherlands Switzerland’s workforces will all shrink too. Of the large EU economy’s only the UK’s workforce will grow due to more liberal migrant policies.

But as the growing sentiment against migrant workers increases the UK may find its borders closing too. The impact of this across Europe will then be catastrophic. Migrant workers provide a genuine and necessary source of low and high skilled workers. Business leaders and in particular HR professionals need to be lobbying for greater access to migrant workers, here is why.

Today as millions of desperate people flee the ravages of civil war, drought and regional unemployment a “migration crisis” has become headline news and a political hot potato. US-presidential wannabe Donald Trump talks about building a wall and the World Economic Forum ranked large-scale refugee flows amongst its top-5 global risks for 2016. Concerns about economic migrants and civil-war refugees are an ax to grind for the leave-EU movement.

Migration is as normal for humans as the air we breathe. Humans are obsessed with seeking better pastures. It is hardwired within the survival of our species. Extra-terrestrial migration to Mars will happen this century, and while we may look in wonderment at the technology that gets astronauts to Mars, humans will be fulfilling the very same need our ancient ancestors felt when they trekked north branching out from the cradle of humankind in Sub-Saharan Africa. Looking back over the ages, it’s clear that homo sapiens have not only survived but thrived because of their ability to migrate and more importantly take the knowledge they have and use it to adapt fit in and shape the new surrounding environment rapidly.

One trend we can be sure of is that migration will increase as the world’s economy becomes more connected, and environmental and demographic demands bite. Mass migration, from rural-urban areas and from dearth economies to those with more relative abundance will be a central theme played out during the first half of the 21st century.
Migration is a hugely emotive subject, but it need not be. Scientific studies are beginning to supply very factual answers and they reveal that many fears and wide-spread apprehensions do not hold up to examination. “Concern about immigrants falls sharply when people are given even the most basic facts,” says Peter Sutherland, the UN Special Representative for migration.

So, what are the facts?

The media spotlight is on the millions of Syrians fleeing the now ravaged landscape that they love. In 2015 over a million desperate people from Syria fled to Europe, and nearly 4,000 died trying to escape their war-torn country for a better life. This statistic includes the young Alyan Kurdi who drowned wearing his favorite “mystery space riders” t-shirt. Alyan’s who’s likeness to my own son is so striking that it leaves a sickening pit in my stomach and rips through my heart. For had my wife and I not hit the citizenship jackpot we too could have found our dreams washed up on a Turkish beach. Images of a gentle policeman carrying the sleeping angel of Alyan were flashed around the globe. But his tragedy is just a small part of a bigger picture. 240 million people worldwide are international migrants. Refugees account for less than 10% of that total.

Although the Industrial Revolution and globalization has lifted billions of people out of poverty, it has not been able to create enough jobs where there are people in need of work. This forces people to leave their families, cultures and countries they love to find work elsewhere. I have first-hand experience of this. For I too am an economic migrant who left South Africa to take advantage of the globalized world we live in albeit I was fortunate to arrive in the UK on a jetliner and not a waterlogged sinking dingy.

Migration is a profoundly human characteristic, one that has strengthened our species, ensured our survival and allowed humankind to prosper. However, today people who need to migrate are hindered by artificial boundaries of national borders and the castrating fears that an influx of refugees and migrant workers will mean less work for those already here. More crime and social strife is a growing perception.

Reality reveals a very different picture. Immigrants contribute massively to growing an economy’s GDP. Germany’s premier Angela Merkel is no saint, she knows the positive impact migrants will offer her aging and shrinking population. This is why Merkel agreed to allow a million migrants into Germany. Falling fertility rates and a retiring workforce mean that by 2050 Germany will drop from being the most populous European country to third. France too is shrinking, and Italy is already classified as “old” demographically with more people over the age of 60 than under the age of 20.

It is difficult to assess the practical impact of a migrant workforce in the EU due to the freedom of movement allowed within member country borders. However, Giovanni Peri a professor at the University of California, conducted a study of non-EU member Switzerland as at times different parts of the country have allowed free access to EU workers. While the workforce grew by 4 percent, he discovered that wages for natives did not drop and that educated Swiss people enjoyed wage increases for jobs that involved supervising the newcomers.

Besides, Peri’s studies of US-migrant workers concluded: “Immigrants expand the US economy’s productive capacity, stimulate investment and promote specialization, which in the long run boosts productivity.” The big concern of anti-migrant movement is that migrants crowd out the native workforce pushing up unemployment. Peri found no evidence, in the short or long term to support this position. In fact, he calculated that native workers in the US were better off as a result of migration with average wages boosted by $5100 between 1990-2007, a quarter of the wage increase over this period.

A study by the UK Migration Advisory Committee undertaken in 2012 concluded that migrants from within and outside the EU “who have been in the UK for over five years are not associated with the displacement of British-born workers low-skilled migrants also do dirty, dangerous and difficult jobs” which natives do not want. Economic and social added value is not restricted to low-end workers, highly skilled migrants reduce chronic labor shortages in essential sectors such as healthcare, education and IT.

Immigration is also good for the Treasury. According to recent trends, the UK should conservatively expect 140,000 net immigrants a year for the next 50 years. Doubling this number would, according to the Office for Budget Responsibility, cut government debt by almost a third, allowing for the reduction of taxes or improvement and extension of existing services. On the contrary, stopping immigration would up the debt by nearly 50 percent. The current UK government speaks of reducing immigration and balancing the books at the same time, but they can not do both.

Benefiting from benefits is often seen as a reason to limit migrants. But because most migrant workers are younger on average, research shows they bring in education and skills paid for by their native countries and return home before they become a drain on social security. “On purely economic grounds, immigration is good for everyone,” says Douglas Nelson of Tulane University in New Orleans, “The overwhelming majority of research finds small to no effects of migration on employment and wages.”

Professor Ian Goldin, director of Oxford University’s Martin School, a world” leading center of pioneering research for a sustainable and inclusive future, confers. “More people expand the economy,” he says. “A study by the International Labour Office for the UN found that because people are moving from where they cannot work productively to where they can, for every 1 percent increase in a country’s population caused by immigration, its GDP grew between 1.25 and 1.5 percent.”

The World Bank estimates that if immigrants increased the workforces of wealthy countries by 3 percent, that would boost world GDP by $356 billion by 2025.
And if global leaders were bold enough to remove the artificial barriers of their national boundaries, migration could have a massive effect. The combined analysis of several independent mathematical models suggests removing border boundaries would increase world GDP by between 50 and 150 percent.

The problems and challenges with migration are therefore not economic, but instead, they are exacerbated by ill-informed perception, untruths spread by fear-mongering politicians wilfully riding a wave of growing nationalist sentiments and the social realities of integrating people from different cultures, with different languages and different ways of doing things. Immigrants can put pressure on local communities and this is often where the pressure points and unpopular feelings are found rising. Sudden and high arrivals of migrants can strain schools, housing and other services in the short-term. “That is what people tend to see,” says Goldin.

To counteract this, governments need to use their immigration induced tax windfalls “to manage the costs and reduce pressures on local communities.” It’s not an insignificant challenge, but it can be done. Since the 1990s, 155 million Chinese have migrated from the countryside to cities for work. “This shows it’s entirely possible to build new homes for hundreds of millions of migrants given a couple of decades,” says Goldin.

Business leaders and HR professionals particularly those in Europe need to get behind the migration movement. Nomad living is inherently part of who we humans are. Millions migrated to the Americas in the 19th Century and built one of the world’s greatest superpowers. The economic benefits are clear. There is a deep-rooted irony in Donald Trump’s wall to keep out migrants. Canadian prime minister Justin Trudeau told the World Economic Forum in Davos, Switzerland, that “diversity is the engine of investment. It generates creativity that enriches the world.”

More diversity and creativity is precisely what businesses of the future need to be more competitive and successful. As we venture into this new world and the realities of the Fourth Industrial Revolution emerge before us, countries and companies that embrace diversity will indeed emerge stronger than those that close themselves off. Migration is here to stay, we should welcome it and the travelers who make long journeys with open arms. Companies should do everything possible within their charitable, CSR initiatives and strategies to make the transformation from migrants to active economic workers as smooth and harmonious as possible. The future of many western economies depends on this.


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