7 June 2009

The Great U-Turn ~ Fleeing the West...

Capital flows and people flows are reversing....interesting article on the flight from the advanced back to the developing economies.

Brígido de Jesús González lived in Queens, N.Y., for the past 20 years, working as a landscaper to support his wife and kids back in El Salvador. But with the recession clobbering his business, the illegal immigrant decided to pack up and return to his native country -- for good.

"I was thinking [of opening] a mechanic's shop for cars, or maybe a gas place, where my neighbors can come and fill up their propane tanks," says Mr. González, 50. The new businesses could be a good way to help his two sons, who now live in New York, if things get worse north of the border. "I can give them jobs if they want to come home," he says.

The developed world, which for decades has offered a difficult but promising path to upward mobility, appears to be losing its allure. Unemployment is rising, and backlashes against foreign workers are mounting.

The result is potentially the biggest turnaround in migration flows since the Great Depression, economists say.
On the Move

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Review the countries losing and receiving the most immigrants in recent years.

Going Home: See more on global migration shifts

Full migration numbers for most countries are only available after a long lag, and so don't yet capture all the effects of today's economic crisis. But anecdotal reports and data from government ministries and outside organizations indicate that the flow of immigrants from poor to wealthier countries is slowing significantly for the first time in decades while more people are returning home. Among the returnees: road builders from Bangladesh, domestic servants from the Philippines, factory workers from Indonesia and Vietnam, construction workers from Mexico, as well as bankers, lawyers and real-estate professionals from around the world who were working in Singapore and Dubai.

Emigration from Mexico to the U.S. dropped 13% in the first quarter of this year compared to the same period last year, with more Mexicans leaving the U.S. than coming in. Indonesian authorities expect 60,000 or more citizens to be sent home from Malaysia, South Korea and other wealthy neighbors this year, as immigrant workers lose their jobs. Tens of thousands of Indians are washing their hands of Dubai as jobs there dry up and work permits expire. And in the U.K., the number of registered workers coming from new European Union member nations like Poland and the Czech Republic dropped 55% in the first quarter of 2009 compared to the same quarter a year earlier.

A growing number of migrants are returning home to places as diverse as Nepal and Tajikistan, while many are deciding not to emigrate to begin with, says Dilip Ratha, an economist and migration expert at the World Bank in Washington, D.C., citing reports from ministries and embassies. Mr. Ratha calls this reverse migration "very new" and "unprecedented."
Drop in Remittances

Such migratory shifts could have profound consequences for developed nations, especially in places where domestic populations aren't growing fast enough to fill jobs or pay for social needs. High-skill immigrants are an important source of tax revenue in some cities, and their kids fill the classrooms of universities and private schools. In the developing world, remittances sent home by migrant workers are also slowing, meaning less income -- and potentially, less growth.

Some analysts question whether the latest migration reversal will outlast the current recession, or turn out to be as big as migration experts predict. Many immigrants have worked hard to establish themselves in their adopted countries and will be unwilling to leave, even if jobs disappear. Others say the trend could be more long-lasting, especially if returning workers help give developing economies a boost or if rich-world economies take many years to recover.

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Bangladeshi Mohammed Sohid at the Dhaka airport after returning home from Dubai, where he lost his job.

Workers like Mr. González are going home voluntarily, betting that for all the problems back home, their native countries offer better options than the U.S. and Europe. Many developed economies are contracting, but some developing-world countries including China and India are still growing.

In the past, "when you came to the United States, you came on a one-way ticket on the Mayflower or Air India," says Vivek Wadhwa, a senior research associate at Harvard who recently completed a study on migration trends. "But now, there are many lands of opportunity."

Mr. Wadhwa himself emigrated to the U.S. from Australia in 1980, working at Xerox Corp., then First Boston, before becoming an academic. "In other words, I have been one of the people I am now researching," he says.

His study found that among Chinese nationals who emigrated to the U.S. and later returned home, 72% said they thought professional opportunities were better in their own country. Among Indians who returned home, 56% said so. Mr. Wadhwa estimates that as many as 200,000 skilled workers from India and China will go home over the next five years, compared to roughly 100,000 over the past 20 years.

Kong Weipeng is one example. A native of Shandong province in eastern China, Mr. Kong followed a well-worn path of dreams to the U.S. after graduating from Beijing University in 1997. He got an advanced degree in financial studies at Pennsylvania State University and landed a job as a trader at Bear Stearns in 2004. When J.P. Morgan assumed control of Bear Stearns last year, he says he had the option of staying, but decided to go back home.

"I think the capital market in China is just rising," says Mr. Kong, 33, who found a job at an investment fund in China and left New York last fall. "It's hard for Chinese to fit in to the local community entirely" in the U.S., he says, and besides, "my parents are still in China."

Economists generally believe the biggest surge in world migration came in the late 19th century, when millions of people fled Eastern Europe and the Mediterranean to resettle in North America, Australia, South Africa and South America.

Thanks to advances in communications technology and the ease of international travel, a second and possibly much larger wave of migration began a hundred years later, around the time the Berlin Wall fell in 1989.

Migration levels soared through the end of the 20th century and into the early years of this decade, as rapid economic growth led to rising demand for foreign workers. The U.S., U.K. and Canada once again became big receivers of foreigners, as did the U.A.E. and other newly wealthy countries. The percentage of immigrants in America's labor force rose to nearly 16% in 2007, from about 9% in 1990, according to Mr. Wadhwa.
Handling the Influx

Now, some of the world's biggest magnets for foreign labor can no longer accommodate the influx. The population of the United Arab Emirates and especially Dubai have swelled in recent years from the hundreds of thousands of Indian, Pakistani, Bangladeshi, Filipino, and Sri Lankan workers who came to build gleaming new skyscrapers and staff malls, as well as western professionals who moved there to work as lawyers and bankers.

But as growth in the U.A.E. slows and more migrants return home, economists expect the Emirates' overall population will stay flat or decline this year after growing more than 6% per year in 2007 and 2008.

Singapore's push to attract immigrants has had as much to do with a construction boom as with a bid to add vigor to a slow-growing population. More than 75% of Singapore's population increase between 2003 and 2008 was attributable to foreigners, including many high-skilled workers attracted by the country's booming economy and low taxes, according to Credit Suisse. But with job opportunities dwindling, as many as 200,000 foreigners may leave Singapore this year and next, Credit Suisse said recently. If that happens, it could have far-reaching implications for the local economy, including a drop in property prices. Enrollment in local international schools has already started to dip, according to local media reports.

An official at Singapore's Immigration and Checkpoints Authority had no comment. In the U.A.E., the country's Minister of Labor said recently that he doesn't think the country's population will shrink this year. The country issued 662,000 new labor visas from October 2008 to March 2009, outpacing the 405,000 canceled cards for the period, he said.

In the U.S., long a lure for Latin American immigrants, the number of undocumented workers from the region appears to have peaked, and may now be falling, according to a recent study by the Pew Hispanic Center. The population of South Americans, for example, has declined by as much as 400,000 from a peak of about three million in 2006, says Pew demographer Jeffrey Passel. Much of the declines are among high-skilled workers from Colombia, where the security situation has improved, and Brazil, whose economy has seen huge growth in recent years.

"What we're seeing is the normal outflow" of migrants leaving the U.S. to go back home, and "a huge drop-off in the inflow" coming into the U.S., says Mr. Passel.

In the case of Mexico, Latin America's largest supplier of new immigrants to the U.S., data released this week by the Mexican government shows emigration to the U.S. dropped 13% in the first quarter of 2009. In the same period, more people returned to Mexico than left Mexico for the U.S., about 139,000 and 137,000, respectively.
Incentives to go Home

The migratory shifts are likely to continue as governments increase visa restrictions or otherwise make it harder for immigrants to enter and stay. Spain and Japan have offered cash incentives for immigrants to go home. Australia recently announced that it intends to cut its intake of skilled migrants this year by 14%. Malaysia has frozen work permits for foreign workers in some sectors of the economy and is asking employers to lay off foreigners before they lay off native-born residents.

Abdul Rahman, a 28-year-old migrant from Bangladesh in Malaysia, recently found himself out of work, out of money and doubtful that staying in a more-developed country will lead to financial security for him and his family back home. After living in Malaysia for two years, he lost his job at an electronics factory months ago, and was sleeping under a bridge in downtown Kuala Lumpur. He didn't even have money for a plane ticket home.

The shift in migration poses a new challenge to the promise of globalization. Many economists and policymakers have long argued that widespread labor movement is a win-win because it boosts opportunities for people from poor countries while giving rich-world employers more options for labor, allowing them to increase efficiency and keep costs low. That, in turn, can keep inflation in check and contribute to higher standards of living. Many economists still believe that, but it's becoming harder to make their case as unemployment surges, income gaps widen and home-grown workers increasingly view foreigners as competitors for scarce jobs.

Fewer migrants could indeed help ease competition for jobs and take pressure off social services in well-off countries. But it will also create new challenges. Many countries, including Mexico, the Philippines and Vietnam, rely heavily on money sent home from overseas workers. Such remittances are expected to decline by up to 8% this year, according to the World Bank, after rising to $305 billion in 2008, more than double the level of 2002.

Rich countries could feel a pinch, too. Immigrants make up a significant portion of the home-buying market in communities from Sydney, Australia to Phoenix, Ariz. The loss of foreign workers could lead to inflation when economies recover and some employers are forced to raise wages to attract native-born labor. A diverse pool of immigrants can also add to countries' vitality, bringing with them new ideas and innovation, says Mr. Wadhwa of Harvard. According to his research, immigrant inventors contributed a quarter of global patent applications from the U.S. in 2006, while 52% of all Silicon Valley start-ups between 1995 and 2005 were started by immigrants.
Where is it Worse?

The question for many immigrants now is "Do I want to spend the downturn here in the U.S., or do I want to spend it back home where it's worse, especially if it's going to be hard to get back into the U.S. later?" says Gregory Watson, a remittances specialist at the Multilateral Investment Fund of the Inter-American Development Bank in Washington, D.C. who is skeptical that large numbers will return home.

For now, Santiago, a 37-year-old Mexican migrant who declined to give his last name, is placing his bets on his home country. On a recent flight from the U.S. to Mexico City, Santiago wore a black leather jacket and cowboy boots, and described how he had crossed illegally into the U.S. four times since 2000. The most recent trip was in the fall of 2007 to get from Mexico City to his job as a truck washer in Tacoma, Wash.

Donning heavy coveralls, a face mask and thick gloves, Santiago would crawl inside the mixing drums of cement trucks and use an acid solution to scrub down the chambers that carry wet concrete to construction sites. Overtime paid $16 an hour, and until recently he could rely on getting at least 32 hours of overtime weekly, pushing his take-home pay to close to $800 a week.

But the slowdown in local construction meant fewer concrete deliveries, and less demand for truck cleaners. His employer cut overtime in January, causing him to reconsider his status in the U.S.

Santiago had already been sending excess cash home to support a business there, a small fumigation service he started with his brother in 1997. Fingering a roll of cash in his pocket he estimates is worth around $12,500, he says he is now returning home himself, "with my capital."


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