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Limitations and Validity ... 134
Additional Data Sources ... 139
Findings... 147
Age Composition ... 151
Determinants of Immigration ... 153
Determinants of Departures ... 154
Determinants of Arrival ... 155
Chapter 4: ANALYSIS ... 165
Evaluating the Data Sources ... 165
The NAFTA Connection ... 185
Other Considerations ... 194
Chapter 5: SUMMARY AND CONCLUSIONS ... 207
NAFTA's Role ... 216
References ... 230
Appendices ... 246
iv
LIST OF ACRONYMS
CPS Current Population Survey
FDI Foreign Direct Investment
FTA The Canada-U.S. Free Trade Agreement
GDP Gross Domestic Product
NAFTA The North American Free Trade Agreement
OECD Organisation for Economic Cooperation and Development
RRC Reverse Record Check
UBC University of British Columbia
v
Chapter 1: INTRODUCTION
The Problem
The rapid growth of international trade in Canada, in the wake of expansion
of freer trade throughout the world over the past two decades, have made
improved competitiveness a crucial objective for the Canadian government at all
levels. In this context, a growing concern for many Canadians is that skilled
workers with higher education credentials (knowledge workers) are moving south
to the United States in increasing numbers. In fact, increased globalization and
the emergence of knowledge- based economies have greatly increased the
demand for skilled workers throughout the world. Canada is no exception, and the
Canadian government is investing heavily in providing skills for the future work
force. The retention of these workers is vital to the global success of Canadian
firms. Under conditions of increasing international demand for skills and growing
economic linkage between Canada and the United States, there is pressure for
mobile workers to take advantage of other opportunities. Indeed, the growing
concern is that Canada is currently losing key segments of its highly educated and
productive workforce to the United States, the issue of the so-called "brain drain."
This issue has received extensive media coverage in recent years. Anecdotal
evidence seems to point to a large exodus of skilled labor from Canada, but the
available data give mixed messages leading to a wide range of opinion about the
1
general subject. For example, in studies sponsored by the C.D. Howe institute in
1995, it is suggested that there is a growing shortage of skilled labor in Canada,
and that graduates who moved to the U.S. are more likely to have Master's or Ph.
D's and more likely in the health, engineering, or mathematics fields. On the other
hand, in seeking to substantiate the existence of a brain drain, Roy, Henson and
Lavoie (1996) stated that they could draw no conclusions about a shortage of
skilled workers in Canada because so little was known about current or future skills
imbalances. They also noted that employer-based surveys do not provide reliable
estimates of market shortage situations. Gingras and Roy (1998) also concluded
that there was no evidence of a broad-based shortage of skills.
Nevertheless, many observers have concluded that the preponderance of
evidence leads to the general conclusion that during the 1990s Canada suffered a
net loss of skilled workers to the United States in several economically important
occupations, although the numbers involved have remained small in an historical
sense and small relative to the supply of workers in these occupations. Compared
with the general population, however, emigrants are over-represented among
better-educated, higher-income earners and individuals of prime working age.
Further, there was an upward trend during the 1990s in the number of people
leaving Canada for the United States and other countries.
2
In any case, there are three issues central to the debate. How many people
are moving to the U.S? Are they among the most highly skilled workers? And, why
are they leaving Canada? Moreover, what is the bottom line in regard to the
socioeconomic situation of Canada if there is such a "brain-drain?" In the latter
category, a steady loss of highly educated and skilled workers is perceived by
some observers to present a long-term problem for prospects of economic
development and international business competition for Canada. This concern
has been heightened by the view that a growing shortfall of human capital as a
result of emigration is no longer being fully offset by a traditional immigration inflow
into Canada nor by any other effective measures which could help to staunch the
outward flow. Followed to a logical conclusion then, this line of thinking, and some
ongoing confusion about what research data into the problem really means,
suggests that there are as yet undetermined social dynamics at play which
foreshadow a time when the a outflow of human capital will severely impact the
Canadian economy at all levels.
To the casual observer, the two most salient factors that tend to draw
Canada's knowledge workers south are more and better job opportunities, and
higher wages. First, the larger U.S. economy offers more opportunities in key
knowledge sectors, where Canadians may find work better-suited to their
qualifications. When conditions are not right at home, skilled people begin to
3
consider moving elsewhere to ply their trade. In the case of health professions in
Canada, for example, the outflow of workers to the United States reflects
restructuring of the Canadian health care system and slow employment growth for
health professionals in Canada. Additionally, the greater availability of research
funding and more advanced research facilities in the United States may also be
enticing Canadian scientists and engineers to head south. Thus, the concern that
Canada is currently losing key segments of its highly educated and productive
workforce to the United States is, in part at least, a realistic and valid one.
Moreover, available evidence suggests that those workers who are emigrating are
some of Canada's most qualified workers. Finally, although the two most obvious
factors that tend to draw Canadian workers south are more and better job
opportunities, and higher wages, higher Canadian taxes also apparently play a role
for recent graduates and entry-level positions, and have a even larger effect on
high-income positions. Are these the only factors, however? And if so, why are
they perceived as being more influential today than they have been in the past?
In terms of economic determinants, one striking feature is prominent from
statistical studies that relate to the brain drain phenomenon, and this is the extent
to which interprovincial and interstate mobility of labor in Canada is many times
higher than that between countries. Another interesting finding extrapolated from
4
the data appears to be that those born in Canada are more willing to move, either
interprovincially or internationally, than are those born in the United States.
Helliwell (1998) provided a study in which interprovincial, interstate and
Canada-U.S. population mobility was estimated on the basis of data from the
Canadian and U.S. censuses. It was noted that in the Canadian census
respondents report their current province of residence and their province or country
of birth. The U.S. census collects similar data for state of residence and states or
countries of birth. For each of the two countries, it is therefore possible to estimate
the relative likelihood of cumulative internal and international migration, after
adjusting for the separate influences of distance, size and per capita incomes as
determinants of migration. Results showed that for both countries there is a
sharply higher probability that a migrant to a state or province comes from another
part of the same country rather than from the other country. Based on all
cumulative migration up to the 1990-91censuses in the two countries, a resident
of a Canadian province was 100 times more likely to have come from another
province than from the United States, after adjusting for economic size and
distance. The corresponding results for residents of the United States shows them
to be seven times more likely to have migrated from another state than from a
Canadian province of similar economic size and distance. This suggests that
internal migration is much more likely than international migration, and also shows
5
that Canadians have traditionally been much more likely to migrate to the United
States than vice versa.
One explanation for the greater likelihood of finding Canadian-born in the
United States is that the Canadian-born are more mobile than the U.S.-born,
whether moving within their country of birth or moving to the other country. Another
reason for the greater flows of southbound migrants is that the 49th parallel
provides a membrane through which northbound information travels much more
readily than southbound flows. The average Canadian has all the U.S. channels
on his or her TV set, along with much U.S. information and programming on the
Canadian channels. In the U.S. media, and on the U.S. cable systems, there is
almost nothing about Canada. Thus, Canadians regard the United States as
known territory, while most residents of the United States have no reason to ever
think what it might mean to live in Canada. Since information and familiarity spur
migration, this asymmetry of information may help to explain migration patterns.
The greater familiarity of Canadians with the United States and its job
opportunities may also provide part of the reason why Canadian migrants to the
United States earn incomes that exceed the U.S. average by more than is true for
U.S. migrants to Canada. For both countries, however, international migration
remains far less likely than internal migration. Among those who do migrate,
whether domestically or abroad, there is a preponderance of the highly educated,
6
partly because they are more likely to have skills in demand, but also because they
are more likely to have contacts in and knowledge about the possible places to
move.
To the extent that migration of the highly skilled may be triggered by
different factors, survey data suggests that job opportunities and challenges are
even more important for the highly educated. It is also true that for many such
workers, particularly in health care, education, and government-supported
fundamental research, the 1990s have seen large cuts in government spending
induced by budget pressures. As federal and provincial finances are returning to
balance, both levels of government are starting to rebuild their diminished
capacities to provide health care, higher education and research. In addition to this
likely restoration of financial support, job opportunities for new entrants to the
knowledge professions, especially those employed by universities, will be
enhanced by the large bulge of retirements in the next ten years. It is noteworthy
that the coming retirement surge is the echo of the massive hiring by universities
in the 1970s (larger in Canada than in the United States), which itself was largely
responsible for ending the earlier and much larger exodus of highly educated
Canadians in the 1960s.
7
Purpose of the Study
This paper examines available empirical evidence about the loss of
knowledge workers from Canada to the United States, and about the gain of
knowledge workers in Canada from the rest of the world. The evidence available
leads to the general conclusion that during the 1990s Canada suffered a net loss
of skilled workers to the United States in several economically important
occupations, although the numbers involved have remained small in an historical
sense and small relative to the supply of workers in these occupations. Compared
with the general population, however, emigrants are over- represented among
better-educated, higher-income earners and individuals of prime working age.
Further, there was an upward trend during the 1990s in the total numbers of people
leaving Canada for the United States and other countries.
However, while losses of highly skilled workers to the United States
accelerated during the 1990s, so too did the influx of highly skilled workers into
Canada from the rest of the world. This is particularly true of high-technology
industries where immigrant workers entering Canada outnumber the outflow to the
United States by a wide margin. Indeed, immigrant high-technology workers
represented an important part of employment expansion in these industries in the
1990s. Evidence also suggests that the labor market does not discern a quality
difference between immigrant and native-born high-technology workers, as
8
estimated lifetime earnings of immigrant versus Canadian-born computer
scientists are nearly identical. Emigrants to the United States are more than twice
as likely to hold a university degree than are immigrants to Canada. However,
because of the overall greater number of immigrants, there are four times as many
university graduates entering Canada from the rest of the world as there are
university degree holders of all levels leaving Canada for the United States. The
number of master's and doctoral graduates alone entering Canada from the rest
of the world is equal to the number of university graduates at all levels leaving
Canada for the United States.
The real question becomes then, just what primary dynamics are and could
be at play when it comes to prompting Canada's knowledge workers to move
south? We can rightly say that higher wages, better opportunities and lower taxes
are always of interest to highly skilled workers, or for that matter, all workers, but
what is really at the heart of the current trend of movement among Canada's skilled
workforce? It is the hypothesis of this study that the primary dynamic contributing
to increased emigration southwards of Canada's most skilled and educated
workers is the introduction of the North American Free Trade Agreement of 1994
(NAFTA), and that the movement southward has become much more prominent
since its implementation. The corollary to this hypothesis is that this increase in
9
emigration is not being offset by other factors, including the immigration of skilled
workers from abroad.
In the late 1980s and early 1990s, a massive wave of plant closures and
layoffs hit Canada. Tens of thousands of workers permanently lost what had once
been secure and decent jobs. NAFTA has added to the high Canadian
unemployment rate and job insecurity. Similar to the United States, after NAFTA,
Canada lost jobs as its trade deficit with Mexico grew from $2.9 billion to $4.3
billion. Also, like the United States, Canadian workers' pay has not kept up with
inflation and wages have been much slower to rise when compared to gains in
worker productivity.
NAFTA has also contributed to undermining Canada's strong social
programs, particularly unemployment insurance and national health care. The
Canadian Manufacturers Association and the Canadian Chamber of Commerce
are trying to cut Canada's social programs while blaming cuts on international
competition. Rather than maintain Canada's "high road" social safety net, they
want to reduce social welfare benefits by forcing Canadian workers to lower their
expectations.
In truth, however, some critics say that NAFTA has actually put the need for
Canadian economic development and expansion on a fast track. The normal push
and pull factors that determine mobility for Canada's knowledge workers should
10
therefore be equally heightened so long as there are differences in regional
equality, taxes, employment opportunities and remuneration. The connection
between the two, however, is not entirely clear, nor is the long-term prognosis for
how current emigration/immigration differentials do or will impact the Canadian
economy. Accordingly, this study examines the depth of the "brain drain" problem
as it relates to NAFTA and seeks to verify or dismiss the contention that NAFTA
has had an overall negative effect on the outflow of human capital from Canada.
Interestingly, in this respect, in order to promote trade in goods and
services, Chapter 16 of the NAFTA facilitates the cross-border movement of
business persons who are citizens of member countries to the NAFTA. The
original idea was to ease restrictions on business travel back and forth between
participating countries, but this easing of restrictions may also have had the effect
of increasing across-border migration of workers.
Traditionally, most people leaving Canada for the United States applied for
permanent immigration. Temporary visas had limitations, such as restrictions on
the number of renewals possible. However, under NAFTA, Canadian workers in
qualifying professional occupations can readily gain entry into the United States,
needing only to show proof of their qualifications and a job offer from an employer
in the United States. Further, while the maximum validity for NAFTA visas is one
year, there is no limit on the number of renewals. Hence, under NAFTA there may
11
be more people remaining in the United States for an extended period of time
without converting to permanent resident status. One might expect that a large
increase in temporary migration, if it were a precursor to staying on in the United
States, would eventually lead to a noticeable increase in permanent migration to
the United States. The stability of the data on permanent emigration, 1997 being
the most recent year for which data are available, suggests there have been no
such conversions on a large scale.
For these reasons, it is important to examine both permanent and temporary
migration when estimating the magnitude and characteristics of outflow from
Canada to the United States. The U.S. Immigration and Naturalization Service
(INS) provides reliable information on permanent migration from Canada to the
United States. However, its data on temporary migration, while meeting the
administrative purposes for which they were designed, do not provide a reliable
count of people leaving Canada to live in the United States on a temporary basis.
The literature on this possible "fallout" aspect of the treaty has not been fully
investigated, but there is enough data to indicate that further investigation is
warranted. DeVoretz (1992) also notes that in the 1990s, the United States
instituted two major immigration policy measures which both led to changes in the
skill content and size of Canadian emigration flows to the United States. First, the
1990 United States Immigration Act increased the number of employment-based
12
slots ("E" and "H" visas), which meant highly skilled Canadians no longer had to
line up in the overcrowded family reunification entry category. Next, the mobility
provisions of, at first, the Canada-US Free Trade Agreement (1989) and then North
American Free Trade Agreement (1993), which inaugurated the "TN" visas for
Canadians with a Bachelor's degree or higher, altered the filter that Canadians
faced when contemplating temporary emigration to the US. In addition to these two
immigration policy measures, the "L" visa, which allowed intracompany transfers
to the United States by Canadian-based companies, kicked into effect with a
vengeance in the post-NAFTA era. This dramatic transformation of the way the
U.S. immigration policy regime affected Canada could mean that reference to the
pre- 1989 era for evidence of a Canadian "brain exchange or drain" is largely
irrelevant.
In any case, given the substantial taxpayer subsidy inherent in the Canadian
educational system, and the long-term economic growth and productivity
consequences of this one-way movement to the United States, important policy
issues arise. These include the tradeoff of an accessible, subsidized post-
secondary Canadian educational system against the loss of productive, highly
subsidized immigrants to the United States. There is also the question of how best
to address the short-run or public finance issues: by reducing selected educational
subsidies for potential émigrés or by imposing an exit tax on emigrants, or perhaps
13
both? In addition, should Canada try to replace skilled workers with immigrants,
with their attendant productivity and administrative costs, or should it instead bribe
highly skilled workers to stay or to return home, as was done in the 1970s? Finally,
how does the short-run loss in reduced tax revenues compare to the resulting long-
run economic growth gained by using tax rates to persuade the "best and the
brightest" to return?
Rationale
There is an obvious "push" of emigrants out of Canada as the numbers
show that workers moving to the U.S. has increased steadily, especially since
1994. This push has been attributed to both political and economic factors with
the economic factors usually stated as the major reasons. In various studies
conducted during the period prior to and since 1994, for example, respondents
voiced four major reasons for moving: 1) No suitable work for their specialty areas;
2) a desire for a more prosperous life in another country; and 3) high rates of local
taxation. The "pull" to the U.S. was attributed to: 1) expectations of a better life; 2)
proximity of the U.S. to Canada; 3) a perception of greater economic opportunity;
and 4) higher income potentials. Such reasons might be expected to be cited, as
they are fairly obvious. However, the full ramifications of a person's opting to
emigrate or immigrate may not be as transparent as one might expect.
14
Accordingly, it is important for government to understand the dynamics of
migration in order to design and implement effective long-term development goals.
Migration to other places to secure better economic status has always been viewed
as a natural activity for rational individuals. There are key determinants, however,
which can account for greater mobility of certain groups of individuals. Better
educated segments of a population can be expected to exhibit a greater mobility,
because of a broader range of employment alternatives. On the other hand, a
higher propensity to move may also be explained by greater differentials of quality
between one's current employment and that expected in the destination locus.
Therefore, all other things being equal, a less educated labor segment in a given
population will often exhibit a greater incentive to move, but that is not the same
as having the actual ability to relocate. Accordingly, if mobility is associated with
the cost of information and a capability of coping with constraints, then it is the
representatives of the better educated segment of the workforce for whom
relocation will be most feasible.
Worker mobility has long been observed to play a critical role in
implementing the goals pursued by economic systems. In this regard, the ultimate
objective is the efficient allocation of scarce resources and the maximization of
each person's utility. Therefore, if individuals are perceived as human resources,
the labor market would then be expected to function so as to secure free movement
15
and exchange of the labor force across entire regions, thereby matching the
resources to their best employment opportunities, for the benefit of both the
individuals and their employers.
Mobility often comes at cost, however. On the one hand, labor market might
be far from homogeneous. Different varieties of human capital, depending on such
things as education, experience, and other parameters, might enjoy potential
access to some niches, while being effectively sealed off from the others. In that
case, migration across the segments is largely determined by the cost of
transforming these parameters, which may involve reeducation and other
qualitative augmenting. On the other hand, information regarding employment
opportunities can be imperfect and/or asymmetric, in which case search is costly
and employment optimization cannot be conducted indefinitely. Insider knowledge
or networking possibilities may facilitate job search for some and slow it down for
others. These circumstances effectively impose a gap on the employment
opportunities for high-income/high-wealth categories as opposed to those
belonging to the lower and mid class.
Furthermore, depending on ties with a former employer and familiar
surroundings, such as friends, family, infrastructure and culture, relocation may be
more or less difficult to implement. A highly-experienced employee who has
dedicated a long time to a single job, may well have developed assets, such as
16
personal reputation and retirement benefits, that are only of high value in a
particular location. Upon transferring to another area then, their value may
deteriorate, which is one common feature of "specific" assets, whose value is
contingent upon geography, position, project, or timing.
Scope
In order to get at the heart of the question, this study examines literature on
the general question of Canada's "brain drain," and delves into extant longitudinal
studies which appear to provide meaningful insight into the nature and causation
of the phenomenon. Both sides of the issue, whether there is such a brain drain or
not, are investigated. First, we present the broad outlines of the controversy,
drawing from current literature and media reports. Second, we explore historic and
current literature that appears to provide some insight into how predictions about
the impact of worker mobility on economic systems are derived. The objective
here is to isolate and identify "push-pull" factors which prompt and sustain worker
mobility. Third, we take a look at demographic data relating to both immigration
and emigration in Canada, focusing primarily on statistical data provided by a
number of governmental and independent studies on the subject. The objective
here is to establish some type of historical baseline to see whether or not there
have been any significant demographic shifts since 1994, the year of the
introduction of the NAFTA treaty. Fourth, we explore and discuss newly emergent
17
factors, such as the advent of information technology and globalization in an effort
to better identify market dynamics which have heretofore been largely ignored in
statistical studies. Fifth, we formulate a measurement methodology, based on the
statistical data examined, which will delineate and define both the depth and nature
of the perceived problems associated with Canada's "brain drain." The objective
here is to provide an instrument which will clarify the broad ramifications of the
data, and furnish greater insight into the real and imagined parameters of the
problem. Sixth, we undertake an analysis and evaluation of the findings derived
from the data and draw some conclusions about how well or how poorly extant
demographic data supports the hypothesis. Finally, we comment on the evaluative
process, and offer some suggestions for the direction of future studies of this type.
Definition of Frequently Used Terms
1. Brain Drain - A term referring to the emigration of skilled and highly
educated workers from their home country to another country; the term also
connotes the commensurate loss of a country's most valuable segment of human
capital.
2. Immigration - A term referring to an inflow of foreigners into a country for
the purpose of securing permanent residence (Black 750).
18
3. Knowledge Workers. For the purposes of this study, this term shall refer
to those engaged in one of the learned professions, the information technology
industry, or other occupations requiring a high level of training
and proficiency.
4. Emigration - According to Black's Law Dictionary, emigration means
"The act of removing from one country to another, with intention to not
return. It is to be distinguished from `expatriation,' which means the
abandonment of one's country and renunciation of one's citizenship in it,
while emigration denotes merely the removal of person and property to
another country" (522-523).
5. NAFTA - The North American Free Trade Agreement
6. FTA - The Canada-U.S. Free Trade Agreement
7. Push-Pull Factors - A migration theory that suggests that circumstances
at the place of origin, such as poverty and unemployment, repel or push people
out of that place to other places that exert a positive attraction or pull , such as a
high standard of living or job opportunities.
8. Migration - A "generic" term which is used here to indicate the mass
movement of populations within geographic locales.
9. Net Migration - The net effect of immigration and emigration on an area's
population in a given time period, expressed as an increase or decrease.
19
10. Permanent Emigrants - people who have left Canada with no intention
of returning, and those who had resided outside Canada for at least two years but
whose intentions about returning are unknown.
11. Rate of Natural Increase - The rate at which a population is increasing
or decreasing in a given year due to a surplus or deficit of births over deaths,
expressed as a percentage of the base population.
12. Temporary Emigrants - persons who have resided outside Canada for
at least six months with the intention of returning, or have resided outside Canada
for no more than two years if their intentions are unknown.
20
Chapter 2: REVIEW OF THE LITERATURE
Mobility and Human Migration
World population grows as a result of net migration is the difference
between the number of people entering a geographic area (immigrants) and those
leaving (emigrants). Over time, migration contributes more than just the initial
number of people moving into an area, because the children and grandchildren
born to the immigrant population add several times the original number to the
population base. There is also an increase in the number of deaths as a result of
in-migration. Most Americans are immigrants or descendants of immigrants who
arrived here over the past 200 years. Only a small fraction of the population is
related to the American Indians who were here when the first European settlers
arrived in the 1600s. Australia and Brazil are other countries whose current
populations consist primarily of descendants of persons who immigrated there
during the past two centuries.
International migration is at an all-time high in terms of absolute numbers.
About 145 million people lived outside their native countries in the mid-1990s, and
the number is increasing by anywhere from 2 million to 4 million each year. In the
mid-1990s, the largest immigration flows were from Latin America and Asia into
North America, and from Eastern Europe, the countries of the former Soviet Union,
21
and North Africa into Northern and Western Europe. The Middle East draws
migrants from Africa and Asia and hosts millions of refugees from within
the region. There is considerable migration within Asia, Africa, and Latin America.
Most people move for economic reasons, but some migrate to escape
political or religious persecution or simply to fulfill a personal dream. Some experts
divide the many reasons people leave their homes for a new one into push and
pull factors. Push factors might be widespread unemployment, lack of farmland,
famine, or war at home. The Great Depression (19291939) is a good example of
a push factor, as hard times encouraged more residents to leave the United States
than move in. In the 1980s and 1990s, hundreds of thousands of Africans were
pushed out of their homelands to neighboring countries because of famine and
civil war.
Factors that attract migrants include a booming economy, favorable
immigration laws, or free agricultural land in the area to which the migrant is
moving. The labor shortage in Japan is pulling record numbers of legal and illegal
immigrants to fill the low-status, low- paying, or dangerous jobs that Japanese
natives reject. The United Nations estimates that to keep a working population of
87 million through 2050, Japan would have to accept 609,000 immigrants a year.
Between 1990 and 1999, the number of legal foreigners increased from 1.1 million
22
to 1.6 million. Estimates of illegal migrants in Japan range from 150,000 to
300,000.
The majority of migrants to the United States in the past 200 years were
European. During the first decade of this century nearly 9 million immigrants
entered this country, and more than 90 percent were from Europe (see chart,
"Regional origins of immigrants to the United States, selected years,"). By mid-
century, just half of the migrants were from Europe. The total number of immigrants
fell to around 1 million in the 1940s. In the 1980s the number of migrants increased
to levels similar to those at the turn of the century. But 84 percent of these migrants
were from Latin America and Asia, and just 10 percent were from Europe. The
volume of legal immigration and the prevalence of migrants from Asia and Latin
America will continue in the new century.
The origins of immigrants change over time, as do their numbers and the
effect that they have on U.S. population growth. According to one estimate, about
42 percent of the U.S. population in 1900 resulted from immigration during the
preceding century. Immigration was an even greater factor in growth between 1900
and 1950, when 20 million people entered the country. Natural increase added an
average of 1 percent of the population increase per year during that period. At that
rate the population would have doubled in about 70 years. But it took only 50 years
to double. Migration stepped up the doubling by 20 years. The volume of legal
23
migration has fluctuated since the 1930s. Immigration has accounted for an
increasing portion of population growth as American women began having fewer
children. Today one-third of the U.S. population growth is from net migration. The
U.S. Census Bureau projects that the U.S. population will reach 403,687,000 by
2050. Of this projected growth, 36 percent may result from immigration, with
46,691,756 new immigrants being added in the next 50 years.
Of the three
components of population change, migration is the most difficult component to
predict and is most affected by government policies and government policies.
Because nations can control their borders, they may regulate the flow of legal
immigrants. The oil-producing countries in the Middle East offered financial
incentives to attract immigrants, just as the United States and Australia once
offered free land. In 1990, Japan permitted employment rights and residence for
ethnic Japanese from Latin America. In 1998, 660,477 immigrants were admitted
legally to the United States. Many foreigners also enter the country illegally each
year. The exact number of persons migrating illegally to the United States is
unknown, but estimates range from 100,000 to 500,000 per year.
In today's rapidly expanding world economy, the rule appears to be that
geographic mobility of the global workforce has become an essential ingredient for
economic success. Nowhere is this more obvious than in the flow of knowledge
workers from third world countries to the major industrial nations of the West. For
24
example, according to one study, of the 5 million people who migrated to another
country from 1975 to 1980, two thirds went to the US, Canada, or Australia
(Ehrenberg and Smith, 1999). This tendency for skilled workers to travel abroad
in increasing numbers could reveal the relative importance of current economic
factors among the forces underlying international migration.
According to U.S. census data, immigrants constituted 7.9 percent of the
population and 9.3 percent of the labor force over the period of 1991-1993 (Byerly
& Deardorff, 1995). Within the United States, just over 2.5 percent of all those
employed in 1996-1997, moved between states, and nearly half of them to a
different (nonadjacent) region. About 70 to 85 percent of movers cite economic
over any other reasons for their relocation.
In seeking to determine the direction of such migratory flows, human capital
theory predicts that migration will direct resources away from areas with relatively
poorer earning possibilities and into regions affording superior employment
opportunities (Massey, 1993). When it comes to South-North type migration
(between regions with highly asymmetric developmental statuses), this prediction
clearly finds support. However, North-North (among regions of comparable and
superior opportunities) or South-South type mobility (between the poorer regions)
should exhibit some peculiar patterns not readily accounted for by the simple
reasons surmised previously (Bellante, 1979).
25
Empirical literature observes that the "push" factors turn out to be stronger
determinants as compared to the "pull" causes. In other words, while the labor
force is definitely strongly attracted in directions of superior employment and
earning opportunities, immigrants do not necessarily come from the poorer
regions. One might expect that it is not only the absolute superiority of earning
opportunities, but also their relative probabilistic qualities (the likelihood of actually
landing better employment) that affects relocation choice on the margin. One
way of assessing such likelihoods would be to look at the unemployment rates in
the specific locations. However, along the lines of the aforementioned
segmentation principle, specific professions should target specific niches. Due to
this fact, as well as because the number of people moving with job offer at hand
far exceeding that of people moving to look for a job, no significant relationship has
been found between unemployment and in-migration. Furthermore, even though
the poorest regions would impose the highest propensity to move on their
populace, they also feature a labor force of the lowest class, with the lowest income
and inferior education and skills, which provides for the lowest mobility. To draw a
tentative bottom line, above and beyond the conventional question of where people
move, the other issue of complementary importance is who tends to move,
accounting for the ever-greater role of demography or personal characteristics of
migrants.
26
Age appears to be the single most important factor in driving the migratory
pattern in Canada, and indeed, in most countries around the world. Young adults
in their 20s have shown a 12 percent regular migration rate within the country
(Statistics Canada, 1995). By age 32, the rate of migration declines to about 8
percent, and sags to about 4 percent by age 47. Among the explanations for this
is the fact that age is a major factor of human capital deterioration. Moreover, the
second most important constraint on migration is the psychic costs that are also a
direct function of age. The latter has to do not only with the alleged sentimentality
of the elderly, but also with the aspect of specificity of assets, such as community
and interpersonal ties as a function of time period in residence. Of course, the age
dimension is intimately intertwined with, and should properly be studied in isolation
from, the marital and children statuses which both impose additional constraints
on migratory propensity and ability.
Education could be regarded as by far the better predictor of who will likely
move within a certain age group, other things being equal. According to the US
Bureau of Census, more and better education does indeed render individuals more
likely to move into superior employment environments (Byerly & Deardorff, 1995).
Such education might reveal or signal lower specificity of the individual's human
capital, which opens up wider and better opportunities for employment across
segments as well as geographically.
27
Distance also contributes to the cost of migration in two major ways. For
one thing, it is easier and less costly to acquire information on employment
opportunities closer to home or in adjacent regions. Networking ties also tend to
deteriorate with geographic distance. For another, the transportation cost is also a
function of distance, which thus affects the psychic costs of not meeting with family
and friends for a long period of time. However, several important caveats are due
here to highlight the important dimensions of migration oftentimes overlooked by
literature and more importantly by the conventional census/survey practices.
Migration from rural areas to urban locations and back, or the so-called
circular migration, is one important, and often underestimated, source of
demographic information. Whereas the common approach has been to study
permanent switch of residence from rural areas to urban centers, especially
exhibited by the migratory flows originating from low-income locations, for a whole
family, one profitable way of looking at the actual relocation patterns would be to
study "mixed strategies," whereby part of the family shifts permanently to the city,
with the remaining part residing in the rural locus of origin. While the migrant will
tend to support the rural half upon finding a job, the rural dwellers would tend to
help him in transition period while unemployed. On the other hand, higher quality
of transportation could be studied, at least formally, as a proxy for lower distance.
Better commuting possibilities are one realization of such a solution to the distance
28
problem, whereby the circular migration could be analyzed as a regularly
occurring, oscillatory pattern, on a lowest (marginal) level, qualifying it as
migration.
More importantly, this dimension of transportation quality and/or distance
now permits a splitting of the two dimensions of migration, whereby the
employment or occupational mobility need no longer be viewed as complimentary
to residential decision, and these two aspects of choice are thus not synchronous
as they used to be. Therefore, one tentative prediction that could be inferred based
on the above would be as follows: The higher the distance and the lower the
quality of transportation, the more likely migration would be permanent if at all.
Otherwise, it might well be oscillatory or circular, thus affording better opportunities
for both the factors and the recipient regions without actually affecting the latter's
demographic structures.
One final dimension of the distance factor amounts to measuring distance
other than geographic. Indeed, people have exhibited a tendency to migrate in
directions where their friends or relatives have previously moved. That could be
viewed as pertinent to psychic costs, largely derivative of personal or cultural
complementarities. Such complementarities do impose constraints on the
maximum allowed distance in the broader, non-geographic sense, and may well
account for the role of interpersonal and cultural causes possibly affecting spatial
29
mobility. On the other hand, it might also suggest some interesting implications
concerning the clustering and concentration of human resources and factors of
production at large, while at the same time rendering the purely geographic
distance per se of secondary importance.
All of the determinants mentioned thus far are primarily related to domestic
migration. Although do they carry over on an international level, global mobility has
been subject to many additional and heterogeneous constraints, and moreover
has exhibited highly specific dimensions of its own. Thus, the relative distribution
of earnings between the sending and the recipient regions allow us to predict what
skills will be most rewarded, likely employed, and thus reveal the most mobility
expected. For instance, some countries with more sophisticated social safety nets
will tend to exhibit more compressed earnings gap between the skilled and
unskilled labor, unlike in the US where the educational differentials are more
pronounced. The skilled and highly educated labor in these countries will therefore
face higher incentives to migrate to the US where their differentiation actually
provides them with a competitive edge. Moreover, since the US economy
represents a full-blown scope of sectors, it also suggests better, in average or
expected terms, employment to all parameters of human capital. However, while
migrants from the economically advanced regions with more compressed social
security will tend to be positively selected with respect to skill, the less-developed
30
regions will provide all of its labor stock with significant incentive to seek better
employment. Therefore, as a model example, the US economy will receive
disproportionately unskilled labor from countries with less equal earnings
distributions.
Although most individuals who migrate to a country like the US primarily do
so in the search to improve their well-being, the latter may not confine to better
employment opportunities only. What sets the overall quality of life captures other
options, such as the cultural and societal institutional framework, public goods,
overall social security, and ethnic comfort to name but a few. When societal
institution start playing a major role in the individual's choice, which might as well
be function of one's age or status, religious or political association, and so forth,
migration might shift away from its economic constituent and closer to the political
component. Again, along the lines suggested before, the distance factor, in the
broader sense, is in play, with the choice aimed at reducing this distance at the
lowest cost. Political background in status terms alone might not be sufficient to
force into switch of environments, however. What might likely drive such a choice
is the political uncertainty or volatility in the country of origin. Because return
migration is not an option for political migrants, they will more likely invest in human
capital whose parameters are specific to the host country, while the economic
migrants will tend to have an incentive to preserve the parameters valued in their
31
home region. Since their investment will primarily be focused and more
concentrated in time) on their human capital, political migrants might and do show
to outperform the natives in job search and earnings growth rate, as well as longer-
term social status.
Studies in migration can be viewed as an important part of what is called
the "modern economic geography" looking into the underlying principles of the
allocation of productive resources, including the historical emergence of urban and
rural centers. One critical area in which our findings on migration of human capital
could come in handy is the so-called economies of agglomeration. It has long been
maintained, in particular, that the genesis of large metropolitan areas can be
explained by the scale economies accruing to concentrated capital. If certain
production or operation processes display increasing returns to scale, then the
maximum output and efficiency could materialize via geographic or temporal
concentration. However, since human capital could engage in complimentary
relationships with other factors, spatial concentration of capital will also trigger that
of labor. Of course, such benefits could only be realized if the human capital is (a)
mobile enough over a short run, (b) largely nonspecific. (Note that specificity could
stem from complementarities with factors or institutions in the present, or status
quo, locations). Over and above the concentration of intra-firm activities, positive
32
externalities frequently occur across firms as well, whether it be in terms of
common transportation facilities, marketing channels, or institutional infrastructure.
Lucas (1998) suggests some findings on patterns and consequences of
internal migration. Although these observations were originally proposed for the
lower-income or less developed economies, they could, all else equal, apply as
well to the less developed regions in the otherwise advanced countries and could
be used in projecting the effect of social stratification on the patterns of mobility.
Evidently, basic trends tend to second those in the advanced societies, in that the
majority of migrants are young adults in their 20s to 30s, and educated rural
inhabitants have a higher probability of migrating even though, the proportion of
rural dwellers with education is rather low. Although the wage differentials do
matter the most when it comes to migrating decisions, there is insufficient evidence
for the underdeveloped economies and their labor markets of actually offering high
probabilities of employment in the first place.
One alternate explanation, according to the Harris-Todaro model, would be to
expect people to move from rural areas to urban centers in order to try to find a job
since employment information could be qualitatively superior in the adjacent
locations (Preston, 2000). In contrast, tax incentives have not been found to
significantly affect the migration decisions, which might imply that individuals are
more sensitive to the employment probabilities than to residual ratios as applied to
33
their disposable incomes. Sensitivity to infrastructure factors, such as availability
of better schooling, clean water, or health security, has remained largely
unobserved or overlooked for the less developed societies. Property rights issue
has been found to be significant with respect to the basic rights affecting political
freedoms and criminal situation. Given such agglomeration externalities,
spillovers, and scale economies in infrastructure provisions, the general
presumption is that human capital exhibits a higher mobility than do other factors.
One important consequence of migration is the predicted convergence of
wages across regions and countries. For instance, the famous Heckscher-Ohlin-
Samuelson theorem argues that, as a long-run result of free trade in commodities
based on comparative advantage, the scarcities of, and prices for, underlying
factors will converge across the trading regions, without actual exchange of these
factors (Preston, 2000). However, such indirect convergence would only be
possible for the so-called tradable commodities and services whose production is
underlain by general factors, while non- tradables will require explicit exchange
(migration) of their underlying specific factors, for even partial convergence to
occur. Moreover, wage convergence would depend on the actual skill mix, long-
term shifts in productivity, and the actual wage-setting process. Finally, while
respective convergence could be expected across regions, there's no prior reason
to claim a similar convergence of income across social strata.
34
Permanent emigration of high-quality human capital is of special
importance for any economy, as it exercise a long-run impact on its productivity
and standard of living. This phenomenon has been studied in the literature as the
"brain drain" issue. One should note, however, that brain drain does not capture
the migratory flows of the relatively unskilled labor, or temporary migration of highly
educated persons who seek better education opportunities abroad or somehow
have no firm plans to enter the domestic active labor force anyway .
Statistics Canada (1999) reports that about 1.5 percent of young persons
who graduated from the higher education institutions in Canada in 1995 moved to
the U.S. Although this proportion might not appear very high in absolute terms,
the reference base constitutes the human resources of the highest quality. In fact,
the percentage of Ph.D. migrants is higher than that of master's graduates (12
percent as compared to 3 percent respectively). In a sense, that could second the
maintained tendency for the upper-class (higher-income or professional)
representatives to be more mobile, as shown by the previously analyzed studies.
The statistics show a distribution of the migration pattern, whereby the weak stay
ratio ex post (over a five-year stay period) constituted about 7 out of 10, with only
3 of 10 intending to return to Canada at some point in the future. It is further
reported that economic (work-related) reasons account for about 57 percent of the
incentive, with 23 and 17 percent relocating for educational and marriage purposes
35
respectively. Better opportunities, in absolute and probabilistic terms, and higher
expected wages prevailed over the tax incentives. One caveat that might
undermine somewhat the 1995 migratory pattern is the profound changes
occurring in Canada's healthcare system at the time, and obviously affecting its
labor market.
The pattern of the Canadian out-migration to the US labor market exhibits
a particular geographic concentration, with Texas, California, New York, and
Florida accounting for some 45 percent of the destination, particularly for Ph.D.
graduates. Ontario (57 percent) and Quebec (11 percent) were the primary origins
accounting for the most out-migration. In light of these figures, and as a promising
direction for further research, it could be profitable to construct and solve a
transition (Markov) matrix with initial and directional probabilistic states. Identifying
the high-probability directions (sticky states) with highest propensities to stay (once
entered) could provide some useful insights into the geography and demography
of concentration and its stability; for example, where and why migration and
mobility is most and least pronounced.
On the whole, the structure of the US labor force with Ph.D. degrees,
immigrants constitute some 29 percent of those conducting R and D in the industry,
business, and academia. About 22 percent of foreign S and E doctoral recipients
remain in the US for postdoctoral study, and 17 percent accept employment. The
36
weak stay ratio was on the order of 63 percent, with the confirmed ex post plans
claiming about 40 percent. This again could be explained along the lines of a full-
scope economy approach, whereby human capital moves to whatever locations
promise the best and fullest possible utilization for its parameters.
However, to see whether those who originally planned on staying eventually
did remain in US residence over a prolonged period of time, one would need to
take a look at the ex ante-ex post stay propensity gap, and its distribution over
time. One can see, in particular, no significant evidence for high net return rates
for scientists and engineers over a 10 to 20 years' time span. However, for this
particular group of specialists, possibilities for networking with colleagues in their
home environments. have shown to be particularly high. Another prospective
dimension of research would be to arrive at duration of stay that is optimal to the
host economy's long-run productivity.
There is an extensive empirical literature researching into the factors and
demography of internal migration. Treyz et al. (1993) derives a net migration
equation and estimates it using time-series data for 51 regions over the period
1971-1988. This study finds that the dynamic response of net migration is
significantly sensitive to amenity differentials, relative employment opportunities,
and industry compositions. This attests to the probability that interregional
migration cannot be restrained over a prolonged time span: Even if it is socially
37
costly, the private benefits may accrue to the migrants and reflect the fact that
migration is a `natural' and historically observed propensity. Frey (1996) suggests
that, over and above the factors contributing to the gap if any between the
migration patterns of professionals versus lower-class workforce, an important
distinction need be spotted to ethnic origin, with domestic migrants tending to favor
areas not attracting immigrants. Massey (1994) obtains that the geographic
concentration of poor blacks should properly be attributed to the residential
segregation of African Americans in urban housing markets, rather than caused by
the outmovement of non- poor blacks or net movement of blacks into poverty.
Boehm (1991) argued that the driving forces behind migration do differ from those
underlying intra-urban mobility, which is routinely affected by the tenure
(housing/renting) availability. Although this study does not specifically address
human smuggling and related issues of mobility, Nicholson (1990) suggests an
important qualification to the conventional research practices drawing on census
data. The latter tend to omit a considerable amount of movement due to
aggregation, and might thus prove little more than mere artifacts of the actual data.
Wilson (1988) studies migration patterns both within and between
metropolitan and non- metropolitan areas, and finds that socioeconomic
transformations of the periphery since the Great Depression have reduced
differences in migration patterns between the periphery and core regions. This
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