Global Migration Can Make a Positive Impact on Supply Chains

The question of whether the United States and the EU will be able to replace their labor forces to remain economically viable in the global market is closely tied to immigration.

By Patrick Burnson, Executive Editor
December 15, 2015 - SCMR Editorial

Lost in some of the more passionate (often inflamed) dialogue on global migration and the challenge it poses to social stability, one can also make a good argument that immigration can mean positive long-term outcomes for supply chains both here and in the EU.

If strong supply chains translate into stronger national security – as we believe they do – then it’s time to step up and champion policies that ensure that Western World nations continue to welcome highly-motivated emigres to their shores. Two recent studies make compelling cases in support of this position.

The McKinsey Global Institute – the business and economics research arm of McKinsey & Company – posits in its paper “A Window of Opportunity for Europe,”that the EU has a solid platform for renewal, based largely on its ability to absorb a new generation of young workers. Here in the U.S., a Brookings Institution paper, “The Rise of New Immigrant Gateways,” examines trends in immigrant population growth through an updated metropolitan immigration typology, with special attention to the working age population, and the impact of immigrants on population change in metropolitan America.

Mobilizing the Workforce 
McKinsey analysts note that because ageing can erode the available labor pool, immigration can be a key driver in mobilizing the work force.

“Immigration can be a contentious political issue, but viewing policy on immigration—particularly from outside Europe—through a pro-growth lens can have significant economic benefits,” analysts allow.

“Such immigration can drive growth by expanding the workforce, increase demand and investment as more people need housing or local services, contribute to more sustainable debt levels as debt is carried on more shoulders, and reduce some of the pressure from ageing because immigrants tend to be younger and within prime working ages.”

To achieve higher immigration of people with needed skills across Europe, countries could introduce open and transparent immigration systems contingent on employment (as Sweden has done), use shortage lists (as Germany does), set up welcome centers abroad to attract skilled immigrants, and create a pan-European immigration portal, while enhancing education and integration of newcomers.

Enhanced Flexibility
At the same time, however, enhanced labor-market flexibility may be required, caution McKinsey analysts.
A number of European economies have successfully reformed their labor markets over the past decade and, as a result, reduced unemployment or increased the employed share of people of working age in other ways.

Initiatives to drive impact might include a reduction in employment protection, where
 it seems excessive, as well as in labor taxes to incentivize hiring, particularly in the 
case of younger workers (Spain used both levers in its labor-market reform), adopting more assertive active labor-market policies at the expense of passive benefits, or making wage-bargaining mechanisms more flexible. Analysts also urge EU supply chain managers to help intensify efforts to make the single labor market work in reality.

Nurturing an ecosystem for innovation, creating a single digital market, and ensuring effective education-to-employment pathways will all help Europe to ride the wave of new technologies such as next-generation genomics, advanced materials, and Industry 4.0, McKinsey analysts conclude. And by taking a pro-growth view of immigration policy, the EU can improve the competitiveness of the continent’s cities.

Metropolitan Shift
The competitive strength of U.S. cities is also examined in depth by Brookings researchers, who arrive at many of the same conclusions.

Today, more than one in three immigrants live in one of six metropolitan areas, all of which are located in the West or the South: Dallas-Ft. Worth, Houston, Los Angeles, Miami, Riverside, San Diego, and Washington, D.C. But across all gateway types the foreign-born population is growing faster than the native-born population, and in new emerging gateways, increases in the immigrant population outpace the U.S. average.

The fastest contemporary growth rates belong to the major-emerging gateways (Atlanta, Austin, Charlotte, Las Vegas, Orlando, and Phoenix); together they comprise 8 percent of the total foreign-born population in 2014. Together, these cities grew by 39 percent, three times the U.S. average, with their U.S.-born populations growing by 35 percent, and their immigrant populations by 74 percent.

At the same time, Brookings says, “minor-emerging gateways” experienced the fastest increases in their foreign-born population, including Nashville, Indianapolis, and Cape Coral, FL. Analysts say it is worth noting that while the nine minor-emerging gateways together have doubled their foreign-born populations, the major-emerging immigrant gateways have the fastest growing overall populations across the 2000-2014 period, with natural increase, in-migration of U.S.-born people, and immigrants all playing a role.

“Re-emerging gateways experienced slightly higher total and U.S.-born growth rates on the whole, relative to the total U.S. population, but immigrant growth was stronger, in particular in Baltimore and the Twin Cities,” Brookings analysts observed.

Reproductive Years 
As the large cohort of U.S.-born baby boomers enter retirement age, immigration will become ever more important, analysts agree. Indeed, the difference in the age composition of the immigrant and the native population is evident already.

While 53 percent of the total U.S. population is in the prime working ages (25-64); only 50 percent of the native born population is in this age range versus 72 of the foreign-born population.

Being of working age, however, doesn’t guarantee employment or economic success. The integration of immigrants, especially when it comes to education, occupational training, and English language ability remains critical for supply chain managers to make the most of our immigrant population and their mostly U.S.-born offspring.