I enjoyed this EconTalk podcast with Michael Clemens of the Center for Global Development. Host Russ Roberts talked with Clemens about two of Clemens’s publications on foreign aid and migration.[1]
A few interesting extracts with policy implications.
Roberts and Clemens start with the big question of how to solve the problem of poverty. One approach is through foreign aid from rich to poor countries. Clemens puts the amount of foreign aid in surprising context by pointing out that it is dwarfed by the amount of money migrants send back to their home countries: “Right now, globally, foreign aid is a little over $120 billion a year. … Just the portion of international migrants’ earnings that they send home is about four times that.”[2]
So we let the tail wag the dog when we focus our attention on foreign aid’s effects while giving relatively little attention to money sent home.
But if migrants are in a position to help the poor so much more, what if we allowed and encouraged more people to move to where the better-paying jobs are? Clemens gives the example of taxi drivers in Washington, D.C. “A lot of those drivers are Ethiopian, Eritrean men. And they earn hundreds of percent more, in real terms, doing the exact same job, driving a cab, here than they would if they were in Addis Ababa, Ethiopia.” So there is a huge arbitrage opportunity: What would the estimated net gain in economic value to the world be if poorer people to move from the low-paying to high-paying parts of the world? Clemens: “It comes out to something in the tens of hundreds of trillions of dollars” (though he notes that the estimates are to be taken with a grain of salt as “nothing like free labor mobility has happened in recent history around the world, and so [the estimates] are all modeling exercises.”)[3]
But, people worry, wouldn’t the increased immigration force native-born, low-skilled Americans out of work? Clemens notes that “in 1905 [the USA] was a country with just over 75 million people in it. A hundred years later in 2005 it was over 300 million people.” 
Not only have “all we had an astonishing increase in the real living standards of essentially everybody in the country,” we have also had no change in unemployment: “unemployment in 1905 and 2005 were both about 5%.”[4]
A reason is that in the USA the demand for low-skilled work greatly outstrips the domestic supply. Demand: “if you take the U.S. Bureau of Labor Statistics projections for increase in employers’ demand for certain occupations over the coming decade … it comes out to about 3 million more people.” Supply: “if you look at the Census Bureau’s projections for how many working age Americans there are going to be entering the labor force in the same time period, it is 1.7 million people.”[5] So even if every new working-aged American entering the workforce did only unskilled work, we would still have 1.3 million unskilled jobs to fill.
I love these data-driven discussions of long-debated policy matters.
Sources:
[1] Clemens, Michael A. 2011. “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” Journal of Economic Perspectives, 25(3): 83-106. Clemens, M. A., Radelet, S., Bhavnani, R. R. and Bazzi, S. (2012), “Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth.” The Economic Journal, 122: 590–617. doi: 10.1111/j.1468-0297.2011.02482.x
[2] Clemens at 0:33.
[3] At 28:26.
[4] At 34:10.
[5] At 48:48.
Related:
Paul Theroux on ending aid to Africa.