The economics of free movement

REGIONAL leaders this month resolved to introduce free movement for all Caricom nationals by March next year.

This decision, coinciding with the golden jubilee anniversary of Caricom, was more than a mere festive bauble. It heralds a profound shift in the economic integration of the region, taking us well beyond the current parameters of the Caricom Single Market and Economy (CSME). The importance of the resolution, given its timing, cannot be overstated.

Global experience has taught us that freedom of movement is an economic good, alongside the free movement of goods, services and capital. But in more recent times, it has become an ideological lightning rod. Leaders all over the world now rise (Donald Trump) and fall (Mark Rutte) depending on the politics of immigration within their respective countries.

In this context, Caricom’s decision is bold. Not since the attempt at a West Indies federation has a more substantial move been made towards integration.

Given how much the issue of the movement of workers overlaps with immigration and, unfortunately, xenophobia, there is a need to return the focus on the economic realities that undergird such movement.

Freedom of movement is not just a nice thing: it results in concrete benefits to all countries that bring it about.

This kind of movement increases employment rates for participating nations, results in higher productivity, boosts income levels (remittances) and has a positive impact on the flow of taxes.

A 2019 analysis by the European Parliamentary Research Service found that between 2010 and 2018, employment increased in the European Union (EU), unemployment rates fell, and there was an estimated productivity gain because of the reallocation of labour resources within an open labour market.

The EU experience also suggests that because a substantial proportion of the people who take advantage of free movement are young and overqualified, they are also less likely to be a drain on public services and, in fact, are more likely to be net contributors through taxation and social contributions. As a result, young and old-age dependency rates are lower.

But it cannot be assumed that the mere introduction of freedom of movement will result in Caricom citizens taking advantage of it. For a start, unlike the EU, which, like the US, is an integrated continental economy, Caricom nations are disparate islands or countries separated by seemingly interminable transport infrastructure woes.

Yet Caricom does have certain advantages that the EU never had. Crucially, most of its members speak one language. While each island has its own unique culture and history, member states nonetheless also share a common trait of each being a part of the history of European colonialism.

Much will depend on the details of how free movement is implemented. For example, will it also include vocational workers?

Locally, if TT is to avoid a deficit of skilled workers, it must do what it can to attract and encourage such workers to come here and remain.

This could be a crucial boost to local productivity and to the economy.