Immigration and Governance....

Immigration is one of those lightening rod issues about which hardly anyone is without an opinion. That, of course, is a key element in understanding why the issue is so intractable. Major foreign policy crises such as the Ukraine and the apparent unravelling of Iraq have overshadowed developments in long-simmering debates about immigration in the United States. In the last several months, a bizarre crisis has been unfolding along U.S.-Mexico border as thousands of children, most from Central America, have crossed into the U.S. unaccompanied by their parents (See Link). Since October 2013, some 47,000 children have crossed the border and immediately surrendered themselves to U.S. immigration officials who have then shipped them off to make-shift detention centers to await processing. What's going on? It's simply people responding to incentives.....
The proximate cause of the strange wave of would-be migrants crossing the U.S. border is an executive action by President Obama. In June 2012, the Obama Administration announced deferred action on the deportation of young people as a means of marshaling scarce law enforcement resources to higher priorities (see DHS Memo). The policy shift was intended to relax removal proceedings for young people who entered the U.S. with their parents (the actual law-breakers). However, word traveled fast that the United States was no longer deporting young illegal immigrants. A shockingly large number of families in Guatemala, Honduras, and El Salvador have concluded that this shift in policy might be a way to provide their children with a chance, albeit a profoundly risky one, at a brighter economic future. If the kids could just get to the U.S. border, Obama would not deport them.

The precise fate of the thousands of children currently in temporary detention centers has yet to be determined. No one seems to have anticipated what has transpired, but it is complicating an already messy politics of immigration reform in the United States, the recent history of which is neatly summarised in the Washington Post (see Link).

Yet, what interests me here is the idea of incentives and the responses to them. Think for a moment about the decision-making process involved in having your sons and daughters embark on a solo journey from Central America to the United States? In my mind, any parent contemplating such a move is also offering a profound critique of the economic opportunity and quality of governance in their home countries. The literature and rhetoric of international development are rife with references to "good governance." National aide agencies and international institutions now distribute aide on the basis of "good governance" criteria. A quick look at the latest United Nations' Human Development Report starkly reveals that those countries in which human development is highest are also characterized by multiple elements of "good governance." In the case of Central American children showing up at the U.S. border, people are literally walking with their feet from zones of bad governance where opportunity is scarce and toward zones of good governance where it is more plentiful.

In fact, one could argue that the restrictions on immigration (mostly imposed by rich countries) are a major impediment on both development and governance reform in developing countries. Why? Because without the capacity for populations to walk away from zones of bad governance, there is little incentive for significant reform. If rich countries were to liberalize immigration rules, free up the mobility of labor to move where governance is good and opportunity highest, poorly governed states would instantly have significant incentives to reform or effectively face an exodus of both labor and capital.

This is not a new idea. In the January/February 2001 issue of Foreign Affairs, Bruce Scott tapped into this argument as part of the explanation for why incomes between rich and poor countries were diverging (the rich getting richer and the poor, poorer). Among the evidence presented by Scott in support of his argument is a comparison of North and South in antebellum America. Through 1860, the U.S. South was quite wealthy, even when compared with many European countries. However, the divergence of income growth between the North and South was growing and anchored, Scott argues, in a closed labor market (slavery) that stunted innovation, entrenched the South in inefficient, labor-intensive agricultural production, and undermined its relative economic power within the Union. That divergence in economic performance ultimately became an important cause of the Civil War itself. It was only after the Civil War "liberalized" the American labor market that the South began a long and (thanks to setbacks like Jim Crow), in many ways still incomplete, process of convergence with the North.
 
Expanded and efficient labor markets are part of the rationale behind the neoclassical stages of integration. Eliminate the importance of borders in economic terms (eg. the free flow of capital and labor), as has been done in parts of Europe, and you effectively have a single labor market and the population free to move about in search of opportunity, often the byproduct of good governance. In fact, Europe continues to wrestle with how best to address labor mobility restrictions among EU members and between the EU and non-members (See report from the Migration Policy Institute). As the February 2013 MPI report on European migration makes clear, "opportunity differentials are at the heart of most migration" (p.12).

None of this is to suggest that blowing the doors off of immigration restrictions is the silver bullet for international development. The MPI also concludes that the impact of migration on source and receiving countries is mixed and generates short-term adjustment challenges (pg. 17-18). Moreover, the short-term consequences of policy changes we are seeing along the U.S.-Mexican border today may be fueling a politics favoring more restrictions rather than liberalization.

A Little Can-Con....

Two final thoughts about the liberalization of labor markets and the neoclassical stages of integration. First, students of Canadian history will now that much of Canada's past has been about the struggle to knit together a large land mass and small population together politically and economically. In many ways, that process is ongoing. There are, for example, still a number of limitations on labor mobility with Canada itself. Indeed, one of the major rationales for the 2010 New West Partnership agreement negotiated between British Columbia, Alberta, and Saskatchewan was to eliminate inter-provincial barriers to the movement of factors of production, including labor.

Secondly, Canada has recently announced new limitations on its Temporary Foreign Worker Program. Think for a minute about the impact on the North American labor market if the United States and Mexico were to successfully conclude some kind of labor mobility pact? The NAFTA did nothing to liberalize labor mobility except for a select group of business professionals (see NAFTA Chapter 16). While the current political climate in the U.S. makes the possibility of significant additional labor mobility remote, imagine if the U.S. and Mexican labor markets were to converge due to reforms that "regularized" more legal crossings; something Mexico has been pushing for more than a decade? It seems farcical, but would Canada's more restrictive, immobile labor market then become less dynamic and diverge (more expensive, less efficient) from its most important trading partner? Canada is certainly not a badly governed jurisdiction. But, how long could Canada afford to be an outlier in an increasingly integrated North American labor market?