The time is now for investors to address migration myths
This is Part I of a 3-part MCAF blog series that draws inspiration from a private investor roundtable with Dutch academic and author of ‘How Migration Really Works’ Hein de Haas. All comments below reflect MCAF secretariat perspectives and do not represent Working Group member views or any position of Professor de Haas.
MCAF hosted Dutch academic and author Hein de Haas to discuss his new book ‘How Migration Really Works.’ The book reviews 22 myths of migration, and the roundtable highlighted a number of areas for future research and analysis by Working Group members. The dialogue on de Haas' book is part of the process MCAF is leading to clarify how large asset allocators and other interested stakeholders in the institutional investment chain can address potential blindspots in their long-term market outlooks and investment strategies. The roundtable brought together representatives from pension investors, sovereign wealth funds and asset managers interested in the financial materiality of migration policy to their portfolios.
Why do investors need to know how migration works?
Migration is a matter of fact and migrants play a central role in the functioning of labour markets in the major economies where MCAF investors are headquartered. Key industries that drive the global economy, including technology, agrifood, transport, and healthcare, rely heavily on labour mobility to flourish.
Addressing migration myths peddled by politicians
De Haas argues that politics has hijacked the public dialogue on migration and, as a result, important civil society stakeholders have lost sight of how migration really works. These concerns prompted Professor de Haas to write his book. MCAF was launched to support investor education and engagement on these same themes, to inform investor risk management processes at the security and country-level and to support better long term decision-making based on an accurate understanding of human mobility as a value driver across industries.
Top 3 migration myths for investors to debunk
Professor de Haas started the roundtable by addressing a number of migration myths detailed in his book. Understanding these myths is a first step in order to be able to inform fact-based research, policy engagement and investment strategy that corresponds to reality. Key myths flagged during the roundtable include:
1. Myth: migration is out of control. The reality is that the global population of immigrants - people living outside their country of birth (voluntarily and involuntarily) - has averaged about 3% of the global population for the past 50 years. While there are ups and downs in migration in response to sudden onset disasters and conflict, the average numbers of people on the move over time remains relatively stable. This matters for investors who want to advocate for safe, stable migration pathways required to enable a Just Transition and economic resilience across the economies they invest in [1].
2. Myth: most migrants are coming to Europe or the US. In fact, mobility happens within countries, and Global south countries host and manage the vast bulk of refugees. Countries that account for just 1.3% of the global GDP are hosting around 40% of all refugees. According to the IRC, just three countries - Turkey, Colombia and Pakistan - host nearly a quarter of the world’s refugees [2]. For investors with emerging market allocations, investing in local resilience and supporting formal labour mobility across international borders is important. The World Bank estimates that remittances hit US $860 billion in 2023, an important source of investment capital and financing for SMEs in low and middle income countries. Remittance volumes vastly outstrip foreign direct investment in almost all countries [3]. Global welfare gains from increased cross-border labor mobility are estimated to be several times larger than those from full trade liberalization, an important opportunity that investors need to understand and highlight. The relatively small number of refugees that do arrive in G7 countries are a fraction of the global refugee population. Large investors in advanced economies have an important role to play in clarifying the reality of global refugee flows, and articulating the opportunities to facilitate rapid resettlement and integration of relatively small numbers of refugees into local labour markets. Refugees arriving and settling in host economies are an important part of the human capital story that drives innovation and economic resilience.
3. Myth: More border controls and the externalisation of borders will stop migration. Academic research shows that when governments announce plans to tighten border security and limit international worker flows, more migrants come and seek to settle in advance of the harsher regulatory regime. Examples from Spain - where EU membership ended open migration pathways with Morocco - and Mexico, demonstrate how hardening of borders tends to increase permanent migration and relocation. When labour markets encourage seasonal workers, and borders are more open, people tend to move back and forth, and maintain family in their home country. When the walls and fences go up, and borders are hardened, people make the decision to permanently relocate and bring their families with them as they do not trust that borders will open up again.
In contrast to the border externalisation processes currently pushed in Europe and the US, the response to the Ukraine war and resulting refugee flows into Europe demonstrate an approach to resettlement that is rapid and effective. The EU granted more than 4 million arriving Ukrianians residency and work permits upon arrival, demonstrating a thoughtful and impactful means of turning refugees into formal workers contributing to local communities economies and tax systems almost immediately [4].
Migration facts for investors to promote
Alongside addressing myths that get in the way of proper research and investment strategy development, investors can speak up for what is needed to make migration systems work better, including:
Safe, stable migration pathways that are critical to the future of labour markets in all countries. Investors should understand how policy decisions impact the stability and robustness of labour markets.
The importance of remittances support economic resilience in low and middle income countries, with around US $86 billion being sent to origin countries each year, according to the World Bank.
Enabling human mobility supports resilience and provides resources for rebuilding in response to sudden onset disasters, from hurricanes to war, and will be an important part of the Just Transition and climate adaptation process in emerging economies.
Are you an investor wanting to build a human mobility research and strategy? Get in touch with the MCAF Working Group today.
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[1] ILO (2022) 'Human mobility and labour migration related to climate change in a just transition towards environmentally sustainable economies and societies for all:' https://www.ilo.org/publications/human-mobility-and-labour-migration-related-climate-change-just-transition
[2] IRC (2021) 'Which countries host the most refugees?': https://www.rescue.org/article/which-countries-host-most-refugees
[3] World Bank (2023) 'Remittance Flows Continue to Grow in 2023 Albeit at Slower Pace:' https://www.worldbank.org/en/news/press-release/2023/12/18/remittance-flows-grow-2023-slower-pace-migration-development-brief
[4] European Commission 'Migration management: Welcoming refugees from Ukraine:' https://home-affairs.ec.europa.eu/policies/migration-and-asylum/migration-management/migration-management-welcoming-refugees-ukraine_en