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The great migration that never was

The great migration that never was
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First Published: Mon, Nov 29 2010. 08 45 PM IST
Updated: Mon, Nov 29 2010. 08 45 PM IST
Migration has for long been a word that brings a blush to the societal cheek. An important, but unstated, underlying theme of our development discourse is the belief that migration leads to unqualified bad outcomes and should therefore be discouraged. This is all the more surprising since capital, the other major factor of production, moves unhindered across state and regional boundaries without policy restraints.
This belief about migration may have its roots in the socio-economic and political history of the country. In order to assuage local sentiments, welfare benefits have been restricted to locals, with migrants excluded. In both popular belief and among policymakers, migration is associated with distress and flight to fight deprivation and starvation. It brings back pre-independence memories of famines and human misery.
Besides, there are the stereotyped negative externalities of urbanization —unhygienic and congested slums, hobbled civic infrastructure, inadequate housing, rising street crime, and so on. Modern public policymaking remains entrapped among these prejudices and stereotypes, and, therefore, disapproves of migration. Accordingly, many development policies have an inherent bias against movement of labour. In fact, over the years, both state and Central governments have implemented several programmes intended to prevent migration from rural areas. These have ranged from direct provision of employment to institutionalized disincentives on migration.
The Mahatma Gandhi National Rural Employment Guarantee Scheme is the latest to offer direct employment support. Most prevailing welfare programmes explicitly discriminate against and discourage migration. Apart from government employment opportunities, migrants are denied even the more commonplace welfare benefits such as pensions, public distribution system rations, school and college seats, hospital care, housing schemes, and so on.
Further, albeit unwittingly, policies such as housing and certain self-employment benefits that involve bank loans yoke people to locations and hinder mobility. In this context, a unique identification number would enable portability of welfare benefits and help overcome the difficulty of administering benefits to migrants.
The case for migration, especially rural to urban, is supported by many recent studies. A World Bank study by Martin Ravallion and Gaurav Datt shows how, in post-liberalization India, cities have not only become the engines of national economic growth, but are also the driving force in overall poverty reduction. For the post- reform period, they find stronger evidence of a feedback effect (through trade, migration and transfers) from urban economic growth to rural poverty reduction (and living standards), and distributional effects from urban growth benefiting the country’s rural poor.
Labour mobility, both across geographies and occupations, has historically been a defining characteristic of all societies. In fact, migration from one area or occupation or employer to another, whether in search of better livelihood opportunities or to satisfy lifestyle needs, is a fundamental urge, even right, of an individual. Culturally and politically it does, more than anything else, promote national integration.
Classical economic theories, validated by long-term experiences from across the world, teach us that unrestricted capital and labour mobility are fundamental for efficient allocation of scarce resources. Such unhindered labour migration, in search of the most suitable economic opportunities, enables frictionless matching of supply and demand, and ensures efficient labour market outcomes.
Migration promotes economic efficiency and growth in more ways than one. At a personal level, people access opportunities that enable them to enhance capabilities and provide the greatest value for their skills. Regulatory restrictions or restraining incentives against migration generates micro-inefficiencies and distortions. People with greater skills, abilities and a desire for personal capability development remain entrapped in the low-level skill equilibrium, leaving massive human resource potential unexploited.
From a macroeconomic perspective, a constant flow of such migrants stimulates the growth of cities and industrial clusters, and drives business investments. An integrated labour market reduces search and coordination costs, and thereby lowers unemployment and the cost of doing business. In the absence of adequate labour supply, economic growth is constrained by both higher cost of production and also deferred investments (caused by labour shortages). It also prevents industries from exploiting operational economies of scale and results in capital being misallocated to less beneficial activities such as financial market speculation.
Migration from backward areas benefits the remaining workforce —they have access to increased employment opportunities arising from the vacated jobs and reduced competition. Further, migration sets in motion a process of skill upgradation and economic mobility—migrants pick up newer skills at the workplace and move up the labour value chain. The externalities generated by this trend, both on the remaining labour and on the local economy, have a profound long-term impact.
Such mobility is of greater significance for countries such as India whose economic growth engines are clustered around cities and industrial zones, whereas labour supply is concentrated elsewhere. With skilled labour shortages already visible across sectors, it is important that the inefficiencies created by labour movement restraints are expeditiously resolved.
None of this is to contest the many formidable challenges posed by migration, which have to be addressed with appropriate policies. However, restraining migration based on ideological beliefs is tantamount to throwing out the proverbial baby with the bath water.
Gulzar Natarajan is a civil servant. These are the author’s personal views
Comments are welcome at theirview@livemint.com
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First Published: Mon, Nov 29 2010. 08 45 PM IST