The Future Of Immigration

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Fears over immigration are driving populist political sentiment in both the EU and the US. At first glance, the migration pressures on the regions appear similar. Each has absorbed recent waves of economic migrants from poor countries, and each also has large populations of skilled legal immigrants and asylees. Looking forward, however, immigration pressures on the EU and the US will diverge sharply. Europe is directly exposed to immigration from the Middle East and Africa, the primary drivers of future global population expansions, while the Americas are soon to experience uniformly slow population growth. Whether the US chooses to “build a wall” to immigration will become increasingly irrelevant to patterns of international migration, while the decisions the EU makes about policing its external borders will become more consequential.

Net immigration from Mexico to the US, after surging for three decades, has been negative for the past eight years (Villarreal 2014, Gonzalez-Barrera et al. 2015). After adjustment to the Great Recession, the US labour market is picking up, so what will happen to immigration to the US in coming years? Patterns of future macroeconomic shocks, civil conflict, or natural disasters are difficult to foresee with any clarity, but there is one critical determinant of migration pressures that is easy to predict: changes in labour supply. These will arise as a result of differential population growth across countries.

This feature is predictable for two reasons:

Cohorts that will enter the labour force 15 to 20 years from now are already born, and so their numbers require no prediction.The rate of change of future population growth is generally smooth, especially over a one- or two-decade horizon, and is therefore among the most predictable of human behaviours. This smoothness allows us to foresee with considerable accuracy the size of cohorts that will be entering the labour market three to four decades from now.

To get a sense of how differential population growth will drive future migration, we can look to past episodes for guidance. In 1970, the US-Mexican border represented the line between a slow-growing, post-baby-boom population to the north, and the burgeoning labour supply of Latin America (Hanson and McIntosh 2010). This dissonance, accompanied by long-existing migration networks and relatively low migration costs, helped move nearly 15% of Mexico’s population to the US over the following 25 years. This was by far the largest modern international migration in absolute terms to an OECD country.

Figure 1 Population growth heat maps, 1970-80

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All major destination countries contain a mixture of legal (destination-selected) migrants and undocumented (origin-selected) migrants. In recent decades, the composition of immigration in the US has tilted toward undocumented migration, while in Europe there have generally been smaller and more recent influxes of undocumented entrants. Our research has shown that over the past three decades, the presence of large-scale undocumented immigration made movement to the US strongly responsive to demographic shifts in origin countries (Hanson and McIntosh 2012). European immigration, in contrast, seemed less responsive to such demographic pressures (and driven more by EU integration). It is likely that this situation is about to reverse.

What do we foresee for global international migration? Using forecasts from the United Nations, we can map the growth of young cohorts who will enter the labour force by 2050. Like Australia in an earlier era, within a few decades nearly all of the New World will be a low-population-growth bastion surrounded oceans that greatly complicate immigration for low-income individuals. Europe, also contracting demographically, will be ringed by high-population-growth regions, including North Africa, Iraq, Iran, Pakistan, Central Asia, and particularly sub-Saharan Africa.

Figure 2 Population growth heat maps, 2040-50

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Migration effects of population growth changes

In a recent paper, we build a predictive model that studied the interaction between population growth and pre-existing migrant networks (such as colonial and language linkages) to explain migration flows between 2000 and 2010. We then use these parameters to predict country-specific immigration over the coming decades (Hanson and McIntosh 2016). We predict migration destinations that are more exposed to population growth in sub-Saharan Africa – such as the UK, Spain, and Italy – will see large increases in the stock of first-generation immigrants, whereas the US will experience a gradual decline in its newly arrived immigrant population. Inflows to the US will increasingly be from countries that generate legal immigrants, such as India and China.

Figure 3 Predicted counts of first-generation immigrants aged 15-64 (millions)

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This has stark policy implications for both origin and destination countries. The US emphasis on buttressing security along the US-Mexican border against surges in undocumented migration seems misplaced, and concerns about the moral hazard implications of granting amnesty to existing undocumented immigrants, seem less acute than in previous decades. The US has managed large-scale undocumented immigration in part because it has a relatively ungenerous welfare state that moderates the fiscal consequences of immigration, and in part because the children of immigrants have US citizenship and the chance to assimilate. The EU has more generous national welfare systems than the US, and therefore large-scale immigration may pose a more fundamental threat to the social contract between citizens and their states. The power vacuums in the buffer states that sit between the region and sub-Saharan Africa further complicate the EU context. If the EU wants to forestall future immigration, it may be in its interest to fund economic development programmes in Africa.

Cryptocurrencies Future

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t’s been a big year for bitcoin, and it could go bigger soon. As 2018 kicks off with talk of Ripple and other cryptocurrencies soaring in value, Satoshi Nakamoto’s original white paper outlining a decentralized cryptocurrency will celebrate its tenth birthday. What lies ahead of bitcoin as it enters it second decade? Although many talk of bitcoin as a bubble, some analysts believe the price could go 10 times higher over the coming year. Whether that’s a good thing is a whole other question.

While Bitcoin experienced a sudden surge in price towards the end of 2017, reaching a record high of $19,783, it ended the year down all the way to $13,889. In the early days of 2018, alternatives like Ethereum and Ripple seem to be having their own moment instead, with the latter increasing in value tenfold over the past month.

“Investors appear to be taking a breather from bitcoin for now and looking at alternative cryptocurrencies,” technology correspondent Arjun Kharpal said in a CNBC story.

Another area of concern is the futures market. The Chicago Board Options Exchange last month started allowing traders to agree on contracts based on the future predicted price. But following a much-hyped start, concerns have been raised around the low number of contracts — just 1,098 more contracts open from the end of the first week to December 29.

These contracts and the asset class itself seem to be behaving like any normal overbought asset - hardly encouraging for future price action,” Peter Tchir, a global macro expert with years of experience in trading, said in Forbes. “It is also failing to follow the recent pattern of rising after the weekend - indicating to me, that the buying interest at these prices is running out.”

Not everyone is so concerned about Bitcoin’s movement. John McAfee, famed for his role in creating the world’s first commercial antivirus software and a noted cryptocurrency follower, has doubled down on his prediction that Bitcoin could reach unparalleled heights in 2018:

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McAfee isn’t alone in his thoughts that Bitcoin’s price could go further, but some believe it’s because the bubble could go higher before catastrophically popping.

“I think we’re going to see bitcoin hitting the $60,000 mark, but I also think we’re going to see bitcoin hitting the $5,000 mark,” Julian Hosp, a cryptocurrency entrepreneur and founder co-founder of crypto firm TenX, told CNBC. “The question is though, ‘Which one is it going to hit first?’”

A crash in the market would spell disaster, as transaction times have spiked and just 1,000 people own 40 percent of the global Bitcoin supply, giving them the power to pay higher fees and get their money out before others.

“The fact that this is our first global mania will make this the single most speculative bubble of our lifetimes,” Mike Novogratz, a billionaire that’s put 30 percent of his worth into cryptocurrency, told Fortune. “It wouldn’t be crazy if the crypto bubble hit $10 trillion, and that’s 20 times more than what it is today.”

However, pointing to evidence that more people want to buy in, Bitcoin expert Spencer Bogart said that he could see the cryptocurrency hitting $50,000 over the coming year. An October poll by Harris showed two percent of Americans own Bitcoin but 19 percent said they are likely to buy over the next five years, representing a tenfold increase in market size.

“I think we’ll have to force price higher,” Bogart said in comments reported by the Daily Express. “If you think about the supply side of that equation, the majority of Bitcoin is again locked down with long terms holders. So there’s not a lot of supply available. And meanwhile, we have this new uptick on the retail side.”

Whether these predictions prove accurate remains to be seen. After all, analysts at the end of 2016 predicted a price of around $1,500 and $3,000 a year from then. They were wrong then, and they could be wrong again.

The Future Of Oil

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Starkly contrasting views emerged this month about the future of oil. One sees a peak in oil demand as early as 2020. The other sees no peak for at least the next couple of decades.

The early-peak vision comes not from any of the environmental groups advocating soon-as-possible abandonment of fossil energy. It's from the quality-assurance and risk-management firm DNV GL of Oslo.

A flattening market

In its inaugural Energy Transition Outlook, DNV GL projects a flattening of oil supply during 2020-28, followed by a sharp decline. Supply of natural gas peaks in 2035, but gas becomes the biggest single source of energy by 2050, surpassing oil in 2034. Those changes occur as total energy demand flattens in 2030.

The annual International Energy Outlook of the US Energy Information Administration projects a much different scenario. Oil consumption increases through 2040 in EIA's reference-case model projection-and in higher and lower-price cases, as well. Total energy consumption increases. Consumption growth rates for natural gas and renewable fuels exceed that of oil, but gas doesn't overtake oil. Coal use soon flattens and begins a gradual decline about 2025, falling below gas use after 2030. Nuclear energy grows through 2040 at a rate second only to that of renewable energy.

How do two energy outlooks diverge so much? Their assumptions differ profoundly.

DNV GL assumes rapid electrification and major improvements in energy-use efficiency. It assumes that electric vehicles achieve cost-parity with vehicles equipped with internal combustion engines in 2022 and that half of new light vehicles sold globally by 2033 are electric. DNV GL expects a doubling of solar photovoltaic and wind power capacity by 2050 accompanied by cost decreases of 18% for solar PV and 16% for wind. The cost improvement for renewables, DNV GL says, will be "much faster" than that achieved by the oil and gas industry.

What might invalidate assumptions underlying DNV GL's aggressive forecast?

Solar and wind will remain tentative energy sources for as long as they rely on policy-and therefore political-support, high growth rates notwithstanding. They'll make electrification of a commanding share of the energy economy anything but smooth.

A new study by IHS Markit warns of the loss of "cost-effective power-supply diversity," which would make electricity bills high and variable and create "negative macroeconomic impacts that would ripple out through the broader US economy." Government policies threaten to leave some US power systems with minor contributions from coal and nuclear energy and diminished contributions from hydroelectric resources. "They will rely on a tripling of the current 7% reliance on wind, solar, and other intermittent resources, and on natural-gas fired resources to supply the majority of generation," the study says. Comparing two cases analyzed in the study, IHS Markit Chief Power Strategist Lawrence Makovich, the lead author, says, "Increasing exposure to the challenge of managing the misalignment of intermittent generation with consumer demands-plus the price volatility and deliverability constraints of natural gas-reduces the benefits to households and reduces the competitive position of US businesses in the global marketplace."

Those conditions will generate resistance to government policies essential to energy transformation. DNV GL's study includes an important observation: Even with the dramatic changes it projects, greenhouse-gas emission targets of the 2015 Paris agreement won't be met. How long will electricity consumers endure rising costs and deteriorating service in pursuit of unachievable goals?

Conservative assumptions

EIA uses much more-conservative assumptions: continual improvement of known technologies based on current trends, economic views of "leading forecasters," and extrapolation of current policies interpreted to account for stated targets "judged to reflect an actual policy commitment." From conditions more like the status quo than DNV GL's, EIA models a much less-changed energy future.

So what might invalidate assumptions underlying EIA's projection?

The oil and gas industry has much at stake in the answer, a short version of which would be that DNV GL's assumptions survive political opposition and that the firm's expectations come true.

The Future For Fresh Water

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The next time you open a can of soft drink, consider where the water inside it came from. The H20 in an Indian can of Coca-Cola includes treated rainwater, while the contents in the Maldives may once have been seawater. The water needs to come from such different sources for a reason – it’s because there is a global freshwater crisis.

Given that 70% of the Earth’s surface is water, and that volume remains constant (at 1,386,000,000 cubic kilometres), how is a water shortage even possible? Well, 97.5% is seawater unfit for human consumption. And both populations and temperatures are ever-rising, meaning that the freshwater we do have is under severe pressure.

Water demand globally is projected to increase by 55% between 2000 and 2050. Much of the demand is driven by agriculture, which accounts for 70% of global freshwater use, and food production will need to grow by 69% by 2035 to feed the growing population. Water withdrawal for energy, used for cooling power stations, is also expected to increase by over 20%. In other words, the near future presents one big freshwater drain after the next.

What’s more? Right now, according to a Nasa-led study, many of the world’s freshwater sources are being drained faster than they are being replenished.

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Of the world’s major aquifers (gravel and sand-filled underground reservoirs), 21 out of 37 are receding, from India and China to the United States and France. The Ganges Basin in India is depleting, due to population and irrigation demands, by an estimated 6.31 centimetres every year. Jay Famiglietti, senior water scientist at Nasa, has warned that “the water table is dropping all over the world. There’s not an infinite supply of water.”

Meanwhile, Mexico City, built on ancient lake beds, is now sinking in some areas at a rate of nine inches a year. As the city draws on the aquifer below, the effect is like drinking a milkshake through a straw. Once horizontal streets now undulate like BMX tracks. The city imports 40% of its water, and Ramón Aguirre Díaz, director of the Water System of Mexico City, has blamed “heavier, more intense rains, which mean more floods, but also more and longer droughts.”

Much of the same is happening in California. From 2011 to 2016, the state suffered its worst drought in 1,200 years. Its major aquifers receded at a combined rate of 16 million acre-feet per year, and roughly 1,900 wells ran dry. Then, in the first three months of 2017, rain fell at 228% more than its normal level, thanks to climate change, scientists say. Lake Oroville in the northern part of the state swung from being at 41% of capacity to 101% in just two months, causing dams to be overwhelmed and 188,000 local residents to be evacuated.

Yet even when a drought ends as spectacularly as California’s, the aquifers below aren’t suddenly refilled. According to Nasa’s Famiglietti, it would take four years of above-average rainfall in California for that to happen. And even then, “California will still be losing water [because the] state simply does not have enough water to do all the things that it wants to do.”  

But what else could all this mean, beyond the fact that our freshwater supply could soon be very strapped?

Some hypothesise that increased water shortages around the world will lead to wars. The current Syrian civil war has been cited by many, including Dr Peter Engelke, senior Fellow at Washington-based think tank Atlantic Council, as a recent example. “Between 2007 and 2010, Syria experienced one of the worst droughts in recorded history, the effect of which was to decimate rural communities and drive hundreds of thousands off the land and into Syria’s cities, where they were marginalised," he says.

Anders Berntell, executive director of 2030 Water Resources Group, a multi-sector water resources body, also suggests a link to Boko Haram and Al-Shabaab, whereby young people “realise that, as a result of the lack of natural resources, degraded land and lack of water there are no livelihood opportunities… There is no future for them. They become easily targeted.” They are more easily radicalised.

All of which would predict a bleak future – but some nations have worked out solutions. And they’re impressive ones that the rest of the world can learn from.

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For example, Australia survived its “Millennium Drought” from 1997 to 2009 by rapidly implementing measures that halved business and residential water use.

“Australia is the gold standard," says Richard Damania, global lead economist in the World Bank's Water Practice, and formerly of the University of Adelaide. The key was putting a price on water and making it a tradable commodity.

“[Suppose] I had water, but I'm only growing wheat. Whereas you’re growing grapes or something of higher value [than wheat, but don't have water]" he explains. "Then I can sell you that water instead of irrigating my lower value crop. This way… Australia survived the Millennium Drought extraordinarily well.”

Another ‘gold standard’ is Israel, which views water availability as a national security issue.

By recycling effluent water, including household sewage, the Shafdan Wastewater Treatment Facility near Tel Aviv supplies approximately 140,000,000 cubic metres of water per year for agricultural use, covering 50,000 acres of irrigated land. Over 40% of Israel’s agricultural water needs are now supplied by effluent water. The waste sludge is also sent to an anaerobic digestion plant, which uses the methane as a fuel to produce renewable energy.

“If Israel can do it," says Anders Berntell, executive director of 2030 Water Resources Group, a multi-sector water resources group, “a country located in a desert, it proves that with the right technology, economic resources and political determination, you can make it happen."

Even more mind-blowing? Israel’s water treatment systems recapture 86% of the water that goes down the drain – the next-best performer, Spain, recycles just 19%.

Israel is also a global leader in desalination – turning seawater into potable drinking water. Over half of Israel's drinking water now comes from desalination.

So can the world simply desalinate its way out of the freshwater crisis? It’s unlikely, says Damiane: “On average it's about five to seven times more expensive. The energy footprint is huge, and you've got to do something with the salt. If you look at aerial images around the coasts of Kuwait and Dubai [areas that are highly reliant on desalination] you’ll see the havoc that is caused to marine ecosystems.” Given the costs, both economic and ecologic, “it is only a boutique solution in very rich places”, he says.

Coca-Cola say it uses desalination at around 30 coastal plants. But Greg Koch, whose title at Coca-Cola is senior director of Global Water Stewardship, explains: “We don't see for us, nor for most places in the world, desalinisation as a solution… the capital costs are going to be higher than a treatment plant to treat freshwater.” One tactic the company uses is, where it uses desalination currently, dumping the brine out at sea via “pipes that take it away from nearshore areas".

A simpler and cheaper solution is rainwater capture. It’s an old idea whose time may have come: Beneath Istanbul, Turkey, the Basilica Cistern built by Caesar Justinian (A.D. 527 - 565) can hold 80,000 cubic metres of rainwater. One and a half millennia on, many cities are now emulating it.

Melbourne's largest stormwater harvesting tank can store four million litres of partially treated water. Authorities including Kerala, Bermuda and the US Virgin Islands require all new buildings to incorporate rainwater harvesting, while Singapore meets up to 30% of its water needs through rainwater capture.

Even in Manchester, England, where it rains on average 12 days every month, efforts are being made to capture the rain.

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Manchester Metropolitan University’s Birley Campus, built in 2014 to house some 6,500 students and staff, aims to be entirely water self-sufficient through rainwater capture, waste water recycling, and a borehole into the sandstone aquifer below.

Rainwater is collected in a 20,000 litre tank below the building and is used for showering and toilet flushing. John Hindley, the university’s assistant director of estates, explains: “This is about the sustainable use of resources. In October we had storms that led to a lot of flooding; the University was flooded in several different buildings. These [events] aren’t just one-offs anymore, so having more sustainable systems not just in consumption, but slowing down run-off, capturing it, taking pressure off the system… is becoming of increasing importance to the university and to businesses in the city.” The Birley Campus water bill is 60% lower than if using water from mains.

Due to cost pressures, business could be an even greater driver of water efficiency than governments. Anders Berntell believes that "many of the big multinational companies are way ahead of governments when it comes to understanding and acting on the challenges that we are facing.” At Coca-Cola, Koch agrees there is “a vested interest. We just opened a $100m (£79m) plant in Phnom Penh in Cambodia, a $60m (£48m) plant in Bangladesh – we want those plants to be there for decades and serve a contiguous marketplace, so we have to act." This has included installing the latest drip irrigation techniques in farms that share the same aquifers as Coca-Cola, irrespective of whether they are direct suppliers. 

“In most places around the world the [agriculture] irrigation techniques are pretty inefficient," says Engelke. “Very efficient irrigation techniques do exist. Thermal power sources [nuclear, coal, natural gas] require vast amounts of water for cooling. Renewables for the most part – solar and wind – do not. It all has to do with policies to encourage, incentivise, and invest.”

“If we want to become water-efficient societies, there are ways in which we can do it," concludes Engelke. “Either through increasing the efficiency with which every drop of water is used, or simply shifting away from water-intensive uses altogether.”

Whichever effective model of conserving freshwater we come up with, we need to come up with one – and sooner rather than later.