The Economics of Migration Through History

Migration is labor market arbitrage. A worker in Connaught in 1848 facing starvation, a Sicilian peasant in 1905 facing agricultural wages of fifty cents per day, a Portuguese worker in 1965 seeking factory work in Germany — all are responding to the same underlying economics. The wage differential between where they are and where they could be exceeds the cost of moving, so they move. The cultural narratives of migration — the suffering, the courage, the displacement, the community formation — are real, but they are organized around an economic skeleton. Understanding the economics of historical migration is not a reduction; it is the precondition for understanding why particular waves happened when they did, who participated, and what the consequences were for both origin and destination.

The push-pull framework that dominates migration economics is, at its core, a supply-and-demand model for labor. Push factors are the forces that lower the opportunity cost of leaving: agricultural enclosure that destroys smallholder farming, famine that destroys subsistence viability, rural population growth that depresses wages below subsistence, political violence that makes staying dangerous. Pull factors are the forces that raise the expected returns to migration: industrial labor demand in the destination, higher wages than the origin can offer, land availability, established migrant communities that reduce the information costs and social risks of settlement. When push and pull factors are both strong simultaneously, the migration wave is large; when either is weak, the wave is small. This seems obvious stated plainly, but it has significant predictive content.

The Irish famine emigration of 1845 to 1852 is the clearest example of a catastrophic push overwhelming all other factors. Ireland’s population had grown to approximately 8 million by the 1840s on the basis of potato cultivation that could support subsistence farming at very high population density. The potato blight destroyed the subsistence base with extraordinary speed — crop failures in 1845, 1846, and 1848 eliminated the food supply for roughly a third of the population. Approximately one million died of starvation and related disease. Approximately two million emigrated between 1845 and 1852, the largest short-period emigration in the history of the British Isles.

The destination was overwhelmingly North America — primarily the United States and Canada — for a straightforward economic reason: transatlantic passages were cheap. The timber trade from Canada to Britain had created a surplus of westbound shipping capacity, since timber ships returning to Canada after delivering their cargo to British ports had nothing to carry. Timber merchants sold steerage passage on returning timber ships at prices low enough that even impoverished Irish tenants could afford them, sometimes with the assistance of landlords who found it cheaper to pay for emigration than to provide poor relief. The economic logic of cheap transport capacity was doing as much to direct the migration as the pull of American wages.

The great European emigration of 1880 to 1920 — roughly 30 million people crossing the Atlantic, predominantly from Southern and Eastern Europe — was less catastrophic in its push factor but more revealing of the economic mechanisms in their normal operation. The push in Southern Italy, the Austro-Hungarian Empire, and the Russian Pale of Settlement was not acute famine but chronic agricultural poverty: wages in Sicilian sulphur mines and Polish agriculture were far below those in Pennsylvania steel mills and New York garment factories. The pull was American industrial demand for unskilled labor in the period of rapid industrial expansion following the Civil War.

The role of information in enabling this wave deserves emphasis. Earlier European emigrants had faced genuine uncertainty about conditions in America — what wages were actually like, whether work was actually available, whether they could maintain familiar social and religious practices. The letters home from established immigrants, and later the commercial services of emigration agents who had financial incentives to provide accurate information about destination conditions to recruit clients, progressively reduced this information cost. By 1900, a Sicilian considering emigration could consult detailed information about wages in specific American cities, the neighborhoods where Sicilians had settled, the churches that served Italian communities, and the boarding houses that offered temporary accommodation. The information infrastructure of migration had been built by the emigrants themselves.

The economics of remittances — the money that migrants send back to their families in origin communities — is one of the most important and least sentimentalized aspects of migration economics. Remittances are not primarily an expression of familial loyalty, though they often feel that way to participants. They are the returns to a household investment strategy in which one or more family members are sent to higher-wage labor markets to earn returns that flow back to the family unit. The household model of migration — in which migration is a household decision rather than an individual one, with the migrant effectively as an agent of the household rather than an autonomous individual — explains patterns that the individual decision model cannot.

The household model explains why migrants from particular villages cluster in particular American cities: the household investment in a migration required reducing uncertainty wherever possible, and the best way to reduce uncertainty was to send a member to a location where established community members could provide accommodation, employment introduction, and social support. It explains why migration rates from the same region varied sharply by household composition: households with surplus young male labor and tight credit constraints for agricultural investment were more likely to invest in migration than households with adequate land and access to credit. And it explains why remittances declined over time as migrants settled permanently in destination countries — the household investment strategy succeeded when the migrant could eventually bring the whole household to the destination, at which point remittances became unnecessary.

The economic effects of mass immigration on receiving economies have been contested in academic economics for decades, but the historical evidence from the great 1880-1920 wave is fairly clear on the broad outlines. Immigration expanded the labor supply in receiving economies, which in competitive labor market models should depress wages for workers in similar occupations — and there is evidence that recent immigrants competed with each other and with earlier immigrant cohorts for unskilled labor slots, with some wage depression in the most affected occupations. But the aggregate effects on wages for native workers were smaller than simple supply-and-demand models predict, because immigrants were not just labor suppliers — they were also consumers who increased aggregate demand, entrepreneurs who created firms and employment, and contributors to the tax base that funded infrastructure investment.

The skills and capital that migrants carried were as economically significant as their raw labor supply. The Jewish immigrants who arrived from Eastern Europe between 1880 and 1920 brought disproportionate rates of literacy, commercial experience, and artisanal skills relative to other migrant groups from the same period, and their descendants’ economic outcomes reflected this human capital advantage within two generations. The German immigrants of the 1840s and 1850s brought brewing, instrument-making, and engineering skills that left detectable marks on the industrial geography of Midwestern cities. Migration was not the movement of interchangeable labor units; it was the transfer of specific human capital that could be productive or non-productive depending on how well it matched the receiving economy’s needs.

The effects on origin economies were equally complex. The conventional view — that emigration deprived developing regions of their most dynamic workers, creating a brain drain that impeded development — is only partially supported by the evidence. In the short run, emigration reduced labor market pressure in over-populated agricultural regions, raising wages for those who remained. The remittances that flowed back provided capital that could finance agricultural improvement, education, or small business investment. The skills and knowledge that return migrants brought back — and return rates were significant; perhaps a third of Italian emigrants to the United States eventually returned — contributed to human capital development in origin communities.

The longer-run picture depends on whether the emigration was temporary or permanent and whether the emigration process built institutions and networks that facilitated ongoing economic development or merely drained the region of people. In Ireland, mass emigration was so large and so sustained that it produced century-long population decline — Ireland’s population in 1960 was lower than it had been before the famine, a demographic outcome unique among European nations. In parts of Southern Italy, sustained emigration created remittance-dependent communities that invested in consumption rather than productive capital, leaving regions more dependent on migration income than on locally generated economic activity. The development consequences of migration are not automatically positive for origin regions. They depend on what emigrants send back and whether what comes back — money, skills, institutional knowledge — is deployed productively or consumed.

What the full sweep of historical migration makes clear is that labor market equilibration across geographic barriers is a powerful economic force that no set of cultural or political arrangements has permanently suppressed. Walls, quotas, and legal barriers slow migration; they do not eliminate the pressure that wage differentials create. The pressure finds other channels — undocumented migration, guest worker programs, colonial labor mobilization — and the equilibration continues, imperfectly and at great human cost to those who move through the cracks in the barriers.

The economic history of migration is, at bottom, the history of wage differentials and the barriers placed in front of those trying to arbitrage them away. What makes this history worth studying carefully is the precision with which it reveals the relationship between migration costs and migration volumes. When transport costs fell dramatically in the 19th century — steamships reducing the transatlantic crossing from six weeks to ten days and reducing the cost from a significant fraction of a year’s wages to a modest sum — migration volumes responded almost immediately. The post-1880 surge in European emigration was not primarily caused by worsening conditions in Europe, which in many regions were actually improving. It was caused by a dramatic reduction in the cost of migration that brought the United States within economic reach of workers who had previously faced a cost barrier high enough to make the move unviable.

This responsiveness of migration to transport and information costs has a direct implication for contemporary migration debates: the migration pressures observable at any given moment reflect not just current wage differentials but the current cost of crossing the barriers separating high-wage from low-wage labor markets. Reducing those barriers — through technology, through legal channels, through established migrant networks that lower information costs — increases migration volumes. Raising those barriers — through walls, documentation requirements, enforcement — increases the cost that individual migrants must bear without eliminating the underlying economic pressure. History offers no example of a wage differential large enough to motivate mass migration that was permanently suppressed by legal barriers alone. The pressure finds a way, and the workers who move through the most difficult channels pay the highest human cost for crossing a barrier that the economic logic of wage differentials will continue to generate.