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Immigration Brings Economic Prosperity

By Batool Husaini

The topic of immigration has been a hot topic in politics in recent years, from the 2016 US presidential elections to Brexit. In politics and media, immigration has been painted as an evil and a threat to modern and developed economies, where immigrants steal native workers’ jobs and are a tax burden on society. The economics, however, paints a different picture, where the society enjoys a higher GDP per capita and higher standard of living. Economic theory, models and facts should dictate public policy rather than the rise and agenda of right-wing politicians.

A popular misconception is that an inflow of immigrants would result in a rise of labour supply, which would mean that the labour market becomes more competitive and employers are more likely to employ immigrant workers as they would be more likely to work on a lower wage, thus giving evidence to the slogan “Immigrants will steal native jobs.” However, economic theory rejects this argument and can prove otherwise. Economists agree that immigrants add to the labour supply and that wages can fall in the short run. On the other hand, immigrants also add to the labour demand because immigrants will spend the money they earn and so help expand the economy through consumption. This expansion will lead to growth and larger projects which will have a domino effect on the economy. Therefore, a need for a larger workforce, and thus labour demand increases and so wages can increase in the long run. Immigration can lead to a net positive in society as can be proved by David Card’s 1990 study of “Mariel Boatlift,” where during the 1980s there was a huge movement of around 100,000 Cuban refugees coming into Miami, Florida. This case study showed that even though there was a massive influx of new labour supply, there was no short run fall in wages for native workers and did not lead to massive unemployment. On the contrary, the immigrant workers were quickly added into the workforce with almost no effect on native workers. There is a consensus that the supposed negative impacts of immigration for native workers in developed countries are small and short-lived.

Moderate skeptics of immigration would agree that degrees of immigration are tolerable as long as they are high skilled, rather than low skilled immigrants. Harvard economist George Borjas disagrees with the argument with his theory of ‘Immigration Surplus.’ Borjas claims that population growth via immigration would result in greater demand for goods which would lead to more hiring and so higher wages in the long run. Borjas agrees that native workers will lose out in the short run, however the benefit of immigration in the long run will most likely outweigh the costs. High skill immigrants are more productive and tend to bring new ideas and practices to the economy. In 1998, the H1-B Visas (visas that enable employers to easily employ high skill immigrants) quota was doubled in the US which directly led to a 15% revenue increase for the companies that participated. Borjas’ theory, however, does imply that there would be a greater immigration surplus with high skilled immigrants, however the surplus would still exist at a smaller rate with low skilled immigrants. Studies show that an inflow of low skilled immigrants can result in higher participation of high-skilled native women as low skill immigrants can work in child-care and domestic help. Also, an influx of low skill immigrants may incentivize native workers to migrate or specialize in order to become more competitive in the labour market, therefore leading to a higher productivity rate and increasing the GDP of the economy. Overall, it is clear that immigration no matter the form does lead to a net positive to the economy. Borjas’ theory only estimates the positives to the native workers, which would be plentiful. However, it is a given that immigrant households would benefit ten-fold in the developed host country.

The issue of immigration in the 2016 US presidential elections centered mostly around legal and illegal immigration as the US has approximately 11 million undocumented immigrants. In the past few years the US has deported around 369,000 undocumented immigrants which in economic terms would mean tossing aside potential human capital. Several studies show that extending legal status to these immigrants would in fact have a tremendous net positive effect on society. The studies state that wages would increase by 15% which would increase consumption and in turn lead to increased production, which would further increase wages. The legalization of these immigrants would also expand the tax base, which would benefit the government and society as more government services can be provided with taking on less debt. Another study created a research model which portrayed the economic effects of 3 situations; full deportation of undocumented immigrants, full legalization of these immigrants and full legalization with strict border control. The effects found were -0.61% fall in GDP, 0.53% growth in GDP and 0.17% growth, respectively. These studies prove that economics is in favor of immigration and those undocumented immigrants should be legalized as the economy as whole would benefit. However, should people be rewarded with legalization even after breaking the law?

Like all things, immigration has its negatives too. As the study suggests that allowing full legalization with no border control allows for the highest GDP growth, however this may result in a security risk for the native workers and so immigrants should be carefully selected in order for them to be highly skilled and from safe backgrounds. This, however, is unpredictable as how can one judge how skilled or how safe an individual is by just their biodata and a couple of interviews. Needless to say, that security checks must be thoroughly present and detailed, however risks exist in and outside the native country. Another drawback of immigration is that immigrants use too many social services and so are a burden on society. This may be a short-term drawback, like the initial fall in wages, therefore when the immigrants reach a higher wage level (like the native workers) then they may rely less on social services. Also documented immigrants are covered under the tax base and pay the taxes that are required of them (like native workers) and so can use the social services as much as they wish as it is their right.

Overall, immigration has tremendous positive effects to the native workers and to the immigrant workers as well. The current political atmosphere has fueled these baseless arguments that immigrants are a security risk and that they steal the opportunities of native workers. The native workers of the developed economy should take some consideration that these immigrants are not evil and solely wish to catch on to a higher standard of living. The discussion should shift from how to keep immigrants out of the country to how do we make the economy more hospitable that we can accommodate ourselves and others that wish to benefit. The aim should be to expand opportunities for others rather than hide them away from themselves. The entire topic of immigration should be approached from an economic and social stand point rather than a political one.

4 thoughts on “Immigration Brings Economic Prosperity​”

  1. Dear Author,

    A very good narration and fluid point of view. Just to cite the current reverse migration of migrant worker, first in batches of less educated labors and then to middle class office works and then to higher middle class, happening during Covid19 pandemic within India, thus I would term it as “Micro Migration”.
    Now that Industries in tier 1 cities are trying to get back to production capacities, they are falling short of manpower to run the shopfloor and office staff to handle the business.
    On the other hand, skilled and semi skilled manpower that has made a distress run from tier 1 cities to Tier 2 and 3 cities and villages are settling up there, most to whom I have spoken say that they had never imagined that their own native places have so much to offer, they had earlier just followed a rat race to cities.
    Most importantly to observe in the coming days is how would it shape up.
    As rightly said in your article, it is intelligence, innovation and hard word of humans, collectively at once place forming a team that evolves a thriving economy, capital investments will surely follow.
    But it is yet to be observed, but I am very optimistic of Indian economy to change in right direction and shine above all.

  2. Tanveer on Ali

    The US wouldn’t be where it is without immigrants. Same thing applies to UK to large extent. This is a great article by Batool Husaini.

  3. Enjoyed reading the article, which is very much relevant in this day and age. I particularly liked how the author has addressed some of the negative effects and has advised some policy interventions to mitigate some of those effects.
    In the field of development economics this idea has taken quite a lot of acceptance lately. The noble laureate economist couple Abhijit Banerjee and Esther Duflo have also discussed this topic in detail in their book – Good Economics for Hard Times.
    Now thinking about why would democratically elected leaders would actually not take decisions that academic research has shown to be in favor of the society. I think some of it has to do with the social media. With the help of targeted personal large scale advertising, it is much easier to create a divisive populist narrative than to argue critically in favour of immigration and other such issues. It seems to me that it is much easier for politicians to gain popularity (read votes) by creating an us vs them ideology rather than arguing on well articulated academic research. Furthermore, it appears to me that social media helps to aggravate this divisiveness, as people are seen to be more aggressive, ardent and vocal about their views than in real life.

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