Economics of Immigration

As the presidential election continues to heat up our Facebook and Twitter feeds, so does the topic of immigration. The anti-immigrant fables are supplemented with a deluge of faulty economics and it only makes sense to bring some better stats to help round our knowledge on the issue.immigration-us

More workers, cheaper wages? Econ 101?

Yes, it’s true that when you increase supply, prices come down. We are fans of that when it comes to TVs, computers, oh hell, just about anything – except immigrants. But what about demand?

An influx of immigrants will increase the supply of labor, perhaps decreasing wages. However, once those workers are paid, the demand for goods and services increases because there are more people to buy stuff. Therefore, when supply and demand move together, prices, or wages in this case, don’t move much.

While we’re on supply and demand, we also take into account that the supply of labor is not uniform across all occupations. Currently, there are way too many people wanting to be pharmacists than there are available jobs, but not enough people matching the demand for nurses . However, according to the Bureau of Labor Statistics, foreign-born workers go for jobs that natives don’t normally want.

Immigrants take our jobs – not so fast

The education levels of most of the United States native population reside in the middle of the road—from high school diplomas to bachelor degrees. There are few high school dropouts and fewer Ph.D’s. Conversely, non-natives fill those tail-end levels of education.

Sixty-two percent of foreign-born workers have a high school diploma or higher compared to 91 percent for natives.Further, approximately half of the doctoral degrees in engineering, computer science, and physics were awarded to non-citizens. In turn, this means that although immigrants only take up around 16 percent of the workforce, they take up a larger share of some college-educated occupations in the STEM fields.

This illustrates that migrants mainly impact the job market at the two extremes – high-skilled jobs and low-skilled jobs. By understanding the distribution of educational levels of both natives and non-natives, we see that immigrants fill the void and complement the job market.

“Studies also show that foreign-born workers are more likely to be self-employed and create, as opposed to eliminate, jobs for native workers.”

Studies also show that foreign-born workers are more likely to be self-employed and create, as opposed to eliminate, jobs for native workers. Migrant workers are self-employed at a rate of 11 percent while native self-employed workers are at 10 percent. According to Pew Research Center, Asian immigrants are more likely to hire workers than native-born workers.

No zero sum in trade, nor in labor

A huge factor in the attitudes surrounding immigration is the idea that the labor market is a zero-sum game. This implies that if a foreign worker takes a job, the native worker is left with nothing, or vice versa.

However, the labor market is, in fact, not zero-sum. If immigrants take our jobs, the same could be said about any group of people that come into the labor force, like women and baby boomers. In the last 65 years, the labor force has experienced a massive influx of workers, yet unemployment went from six percent in January 1950 to 4.9 percent in January 2015.

Economists generally agree with the notion that trading goods and services, freely, creates more wealth. If it works for goods, and services, why wouldn’t it work for people? Allowing people to move to where they can be the most productive is a net benefit to the economy of the nation and the world.

Permitting the free flow of human capital from poor countries to rich countries creates incentives for developing countries to invest in education and better institutions. In addition to increases in individual wealth, we also see those riches shared back to their country of origin in the form of remittances, expanding the pie of global prosperity.

John Kennan, an economist from the University of Wisconsin-Madison, estimates that opening the borders would increase wages of workers from developing countries by $10,100 per year, or over 100 percent. Other studies approximate a global output increase of 122 percent as a result of people being more productive.  Even the most-established scholars against immigration like George Borjas, agree that immigrants increase the wealth of the economy by at least $22 billion.

My take

It is easy to be against immigration when you hear a story about someone who was laid off because a migrant worker would do the same job at a lower wage. However, looking at the seen and the unseen data, gives you a much more accurate snapshot on the issue. In the short run, a native may experience a job loss, but in the long run, more jobs are created due to the increased demand for goods and services.

Immigrants, according to stacks of economic research, help the economy of the United States. They make stuff more affordable. They satisfy the demands of occupations that are not filled by native workers, like the lower and upper ends of the skill spectrum. They are job creators.

The United States is in dire need of immigration reform, but kicking immigrants out and not letting immigrants in goes against all economic research. Millennials, being the most educated generation in history, should continue to not be swayed by the anti-foreign rhetoric that plagues the nation’s political arena.

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