The global economic implications of freer skilled migration

Trade and technology driven increases in skill premia in the older industrial regions since the 1980s have raised the spectre of “skill shortages”, one consequence of which has been freer migration of skilled and professional workers from developing regions. The links between demographic change, migration flows and economic growth are here explored using a demographic sub-model that is integrated within an otherwise standard model of the global economy in which regional households are disaggregated by age and gender. New matrices of global migration flows are developed and disaggregated by skill level to support this modelling. Skilled migration flows are assumed to be motivated by real wage differences to an extent that is variably constrained by immigration policies. A uniform relaxation of these constraints is shown to have most effect on labour markets in the traditional migrant destinations, Australia, Western Europe and North America, where it restrains the skill premium and substantially enhances GDP growth. Skill premia are raised and GDP growth slowed, however, in regions of origin, and particularly in South Asia, where the wage gap with the West is particularly high. On average, therefore, global wage inequality is exacerbated by expanded skilled migration.