Capped Borders, Lost Billions: The Truth About Migration controls

Migration is often incriminated as a humanitarian dilemma or a cultural flashpoint, leaving it unappreciated for what it truly is: the unsung key to global economic prosperity. Economists like Michael Clemens have long argued that restricting migration from poor to rich countries represents a massive economic inefficiency. Clemens argued that the world is “leaving trillion dollar bills on the sidewalk” by restricting labour from easily penetrating the borders. He estimated that a 5% increase in labor mobility could generate more economic gains than eliminating all tariffs and capital movement barriers.(1) In other words, allowing people to work where they are most productive would be more economically rewarding than trade liberalisation. This argument is rooted in the concept of “the place premium”, the idea that a worker can multiply their PPP adjusted earnings by merely crossing a border without necessarily having to increase their human capital.

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The pattern is unmistakable as it reveals that countries with high migrant shares, such as the Gulf States, are among the richest in the world. This positive association, rather than appearing sporadically or by chance, is a consistent global pattern. If migration inherently depressed wages, slowed growth or exploited resources, we would expect wealthy nations to have smaller foreign born populations. Instead, the world’s most productively efficient economies are also most open to migrant labour. This alone is a powerful rebuttal to political narratives that frame migration as an economic threat as wealth multiplies in those societies that act as magnets for global talent rather than those that have closed themselves off.

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Yet, governments continue to tighten borders in ways that directly sabotage their own success. A recent report from the Home Office estimates that the UK government’s clamp‑down on overseas skilled workers and international students will cost businesses over £40 billion over 10 years, creating a net societal cost of around £26.5 billion.(3) These costs are not only representative of lost tuition and visa fees, but carry the weight of foregone productivity, stalled innovation and the compounding effects of excluding high potential workers who would have otherwise been strong assets to the economy.

 

Migration as a Money Multiplier

Migration is not only beneficial to origin, but also destination countries. For developing economies, emigration improves their balance of payments status through remittances, which can often exceed aid and act as resilient income streams. Rather than leaving permanently, migrants may return with up-to-date and essential skills, savings and international connections which will boost entrepreneurship and long-term productivity. Instead of hollowing out fragile economies, outward migration strengthens them both economically and financially, which is what economists refer to as a “brain gain”.  

 

This is far from a zero sum game as destination countries do not lose out in any way during this process. It is indeed a common misconception that “cheap labour" has the potential to drive down wages and “steal” jobs from locals. In fact complementary labour effects are gained as migrants typically help fill up lower status roles, such as care work and construction, that domestic workers avoid.(4) This frees natives to move up the job ladder, improving labour market efficiency rather than displacing domestic workers. Hence, the fact that immigration and prosperity move in the same direction in Figure 1 is further supported. As migrants go where opportunities are abundant, their presence helps bolster these opportunities by expanding productive capacity and innovation potential. 

 

The Hidden Costs of Migration Restrictions

Governments treating migration primarily as a risk rather than an opportunity is economically equivalent to imposing tariffs on labour. In the same way that protectionism in goods markets raises prices and reduces efficiency, migration controls create a deadweight loss by preventing mutually beneficial exchanges that will help global output reach its maximum potential. A concrete example of this is the caps on H-1B visas in the United States. Firms, especially start-ups in the tech sector, have been hurt with rising costs and growing hiring delays.(5)  This is driving innovation and investment away from the US, let alone negatively affecting future prospects in terms of competitiveness of frontier industries as talented workers relocate to more open economies such as Canada and Western Europe.(6) 

 

Europe faces similar challenges which are compounded by demographics. Many countries are ageing rapidly, with shrinking workforces and rising dependency ratios. Meanwhile, developing countries are facing youth bulges due to the abundance of young workers with limited economic opportunities. The World Bank’s analysis shows that whether a youth bulge becomes a “dividend” or a “bomb” depends partly on mobility.(7) Restricting migration between young, labour-abundant regions and ageing, labour-scarce ones is economically irrational as it entrenches inefficiencies on both sides. 

 

Migration controls are often justified in the name of protecting native workers, but the long-term effect is to sacrifice growth, innovation and demographic stability.

 

The Story the Data tells

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The pattern is striking in its neutrality as the fitted line is almost perfectly flat, directly refuting the political claim that “letting migrants in slows growth”. If anything, there is a faint positive relationship that shows that countries that opened up did not fall behind. 

 

Running the regression, 

 

                    growth=α+β1​Δmigration+β2​ln(GDPpc2010​)+ε, 

 

using the same data, also reinforced this argument. Controlling for income adjustment, which is an essential adjustment considering convergence effects between rich and poor countries, migration changes remain uncorrelated with slower growth. The coefficient being slightly positive (0.0005878) shows that growth is strongly linked to where countries started, showing that poor countries may grow faster due to migration as they have a vast amount of unexplored potential. This is a data-driven rebuttal to the claim that migration imposes long-term economic burdens. 

 

Why is Migration Politically Unpopular?

Public perception plays a major role. Across the OECD, citizens dramatically overestimate the number of migrants in their country and believe that migrants use more welfare than they do.(8) Events such as terrorist attacks fuel this fire, leading to the “securitisation” of migration. Politicians, especially from populist parties, often frame migration as a "crisis" or "threat" to gain support. This erodes public trust and further politicises the issue. In the US, debates about border control intensified even during periods of record-low unemployment, contradicting claims that migrants “take jobs by crowding out native workers”.(9) Such claims can obscure the economic reality shown in the figures and regression results.

 

All this data points towards a single conclusion: The world’s wealth isn’t trapped in oil fields or tech patents, it’s trapped behind borders. Figure 1 shows that countries with higher migrant shares are consistently richer which is evidence of the place premium and the massive productivity gains unlocked when people can work where they are most effective. Figure 2 and Regression 3 confirm that increases in migrant share between 2010 and 2024 did not slow growth; if anything, the relationship is slightly positive even after controlling for initial income. 

 

This means the economic case for easing migration barriers is overwhelming. Smarter mobility policies including portable visas, bilateral migration agreements, and targeted pathways that match workers to shortages would reduce deadweight losses and help ageing economies grow.(10)(11) Instead of putting up high walls in a world of productivity stagnation and demographic decline, people must be allowed to climb over them to help realise the true potential of globalisation. If the 20th century was defined by free trade in goods, the 21st could be defined by free trade in people.

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References:

1. https://www.cgdev.org/media/migration-and-trillion-dollar-bills-sidewalk-michael-clemens.
2. World Bank. “World Development Indicators.” https://databank.worldbank.org/source/world-development-indicators.
3. Financial Times. “AI and Immigration: Article Title.” https://www.ft.com/content/e2df11f7-062f-437c-8ff9-6076ed8262a8.
4. Peri, Giovanni. “Do Migrants Take the Jobs of Native Workers?” IZA World of Labor. https://wol.iza.org/articles/do-migrants-take-the-jobs-of-native-workers/long.
5. TIME. “How Trump’s H-1B Reform Could Harm American Tech Innovation.” September 23, 2025. https://time.com/7319507/h1b-trump-tech-innovation-ai/ TIME
6. BBC News. “BBC News Article Title.”  https://www.bbc.co.uk/news/articles/cdjzrl9kkkmo

7. World Bank. “Youth Bulge: A Demographic Dividend or a Demographic Bomb in Developing Countries?” https://blogs.worldbank.org/en/developmenttalk/youth-bulge-a-demographic-dividend-or-a-demographic-bomb-in-developing-countries.

8. CaixaBank Research. “The Phenomenon of Immigration in Advanced Countries: Perception.” https://www.caixabankresearch.com/en/economics-markets/labour-market-demographics/phenomenon-immigration-advanced-countries-perception.

9. NBC News. “NBC News Article Title.” https://www.nbcnews.com/news/nbcblk/trumps-anti-immigration-black-jobs-reactions-presidential-debate-rcna159375.

10. ETIAS. “Digital Nomad Visas: Global Impact.” https://etias.com/articles/digital-nomad-visas-global-impact.
11. UK Government. “Common Travel Area Guidance.” https://www.gov.uk/government/publications/common-travel-area-guidance