One of the most interesting things I did while at the Treasury was to help develop the program for the first G20 meeting in Australia, which was a workshop on Demographic Challenges and Migration, held in Sydney in August 2005, and chaired by my Executive Director, Dr Martin Parkinson. The workshop made it abundantly clear to me that the growing demographic imbalance in the world, between the developed economies, with slowly growing or declining populations, and the developing economies, with much faster growing populations, implied a huge win-win opportunity for greater labour mobility (see chart above).
In coming decades, the rich, developed economies face a shortage of workers, particularly taking into account the growing demand for carers associated with ageing populations, while developing economies will have a surplus of workers, who could fill jobs in developed economies and benefit their home nations through remittances and eventually knowledge transfer. This, of course, requires a more enlightened attitude and more liberal policy settings regarding international labour mobility and migration.
Hence, I welcomed the news I read in the Sunday-Mail this morning that the Commonwealth Government has asked the Productivity Commission to investigate the merits of boosting migration, permanent and temporary, to meet future labour needs, particularly in aged care, child care and disability care (see Importation of migrants considered for aged, child and disability care roles).
A high-level discussion of the issues relating to enhancing international labour mobility as a means of correcting demographic imbalances is contained in the summary note Treasury prepared on the G20 workshop in Sydney, a note I had a part in drafting:
Queensland Economy Watch 
Economists have long expounded the benefits of free trade and free movement of capital between countries as a means of boosting global GDP. The argument would appear just as strong for free movement of people between countries through the removal of all restrictions on immigration. While such a policy is unlikely to gain support in wealthy countries because of the likely impact on wages, I imagine the potential benefits in terms of both efficiency and global equity would be very large.
Yes, thanks Paul. I recall Lant Pritchett estimated gains from full mobility in the order of a percent of world GDP when he was at the World Bank.
What about robots Gene? And I’m not joking http://www.afr.com/technology/here-come-the-robots-20140501-iwug6. Many low skilled jobs will vanish if it’s cheaper for robots to do them. Of course you’ll need a human touch, but still gets rid of the need for a lot of workers unless wages are kept low, e.g. to lift, wash, clean, etc.
Yes, good point, Lau, thanks. They’ll certainly substitute for heavy lifting, routine tasks but you’ll still need people to give the human touch.
Given technology changes and the impact on labour requirements (less miners, less retail, less low level white collar, less manufacturing etc.), I’m sure there will be sufficient under-utilised capacity in the labour force to meet the growing demand in sectors like aged care and child care.
I don’t think the key issue is whether we actually need more workers (migration being the answer). I think the key issue beyond some immediate shortages in key areas (e.g. child care) is how do we create a labour market that distributes the available labour capacity towards growing labour needs. This will also require some readjustments in wages expectations.
Jim, good point. I’m a great believer in flexible markets, but why bid resources away from other uses internally when you can import low-skilled labour from overseas and increase total output domestically (to the benefit of us and source countries)?
Gene
You ask “but why bid resources away from other uses internally?”. Because many of those other internal resources will be unemployed, underemployed, or commercially unsustainable in the future due to technology.
Aren’t we therefore better to ensure those internal workers can transition into new jobs in the future rather than the alternative (internal workers are left underemployed while we fill the new jobs with immigrants)? Surely transition is a lower social cost for Australia and a lower fiscal cost for government?