Migration and Human Rights (27): The Economic Benefits of Immigration

The prevailing thought in most Western countries is that immigration is a bad thing, and it’s a thought shared by both governments and public opinion. Western countries, it is believed, can only accommodate a limited number of immigrants – a few hand-picked high-skilled ones, some low-skilled ones in very special circumstances for special industries and for a limited amount of time (when local labor can’t or won’t provide), and a few lucky ones who might otherwise face certain death or extreme pain in their country of origin (generously called “asylum seekers”). People merely fleeing the horrors of poverty (“economic migrants”) should think again.

When the numbers of immigrants surpass this threshold, it’s imminent disaster for these proud former rulers of the world with their efficient economies, exemplary political and legal systems and strong moral and religious traditions. Two disasters, to be precise: on the one hand, cultural and religious destruction and, on the other hand, economic destruction. Let’s focus on the latter shall we. (An age-old culture or religion that can’t withstand the onslaught of a few million poverty stricken and low-skilled nannies, builders and factory laborers doesn’t seem to deserve survival).

Immigrants are said to be a burden on social safety nets; and they bring down wages for local workers because they are willing to work for less (especially the illegal immigrants). Never mind that this is completely and utterly wrong.

However, not only are the disadvantages of immigration overstated, the advantages are understated. It turns out that relatively high levels of immigration are beneficial for the receiving economy, at least in the U.S.:

[C]omprehensive immigration reform* would raise wages, increase consumption, create jobs, and generate additional tax revenue. … This is a compelling economic reason to move away from the current “vicious cycle” where enforcement-only policies perpetuate unauthorized migration and exert downward pressure on already low wages, and toward a “virtuous cycle” of worker empowerment in which legal status and labor rights exert upward pressure on wages. …

[L]egalizing the roughly 12 million undocumented immigrants through comprehensive immigration reform as well as making future flows more flexible would grow the economy by $1.5 trillion over 10 years. … [I]n the short term (three years) [it would] generate $4.5 to $5.4 billion in additional tax revenue and consumer spending sufficient to support 750,000 to 900,000 jobs. … Conversely, the deportation prescription that is offered by immigration restrictionists would poison the already anemic U.S. economy by draining $2.5 trillion from the economy over 10 years, even before factoring in the costs to deport 12 million people and permanently seal the border. (source)

And this isn’t just left-wing extremism. Here’s another quote, from a right-wing think-tank:

This study finds that increased enforcement [of immigration law] and reduced low-skilled immigration have a significant negative impact on the income of U.S. households. … A policy that reduces the number of low-skilled immigrant workers by 28.6 percent compared to projected levels would reduce U.S. household welfare by about 0.5 percent, or $80 billion. … In contrast, legalization of low-skilled immigrant workers would yield significant income gains for American workers and households. Legalization would eliminate smugglers’ fees and other costs faced by illegal immigrants. It would also allow immigrants to have higher productivity and create more openings for Americans in higher skilled occupations. The positive impact for U.S. households of legalization under an optimal visa tax would be 1.27 percent of GDP or $180 billion. (source)

* legalization of illegal immigrants combined with visa reform

Much of the economically inspired opposition to immigration is about the wellbeing of local low-skilled workers. These people, the narrative goes, are unable to compete with low-skilled immigrants who ask lower wages, especially if they’re illegal (and don’t have to pay taxes, and their employers don’t have to pay taxes for hiring them). In the best case, this competition pushes down the wages of local people; in the worst case it pushes these people into unemployment.

The studies cited above show that such claims aren’t compatible with the facts: low-skilled local workers actually benefit from low-skilled immigration, especially if this is legal (or legalized) immigration, because it allows them to move to higher skilled positions. It also makes it possible for them to spend less time on low-skilled and non-paid activities that they can outsource, and hence they can spend more time on paid activities, which increases their income. And there’s another way in which the indigenous population – including the less wealthy parts – can benefit from immigration: legalization of immigrants pushes their wages up and increases tax revenues. Higher earning immigrants consume and invest more, which creates higher economic growth that benefits everyone. And the taxes that they pay can be used for social safety nets that also benefit everyone.

There’s actually some data showing that immigration doesn’t push down low-skilled wages.

This chart tracks the average median hourly wage for high school drop outs – the very subgroup that immigrations most pressures – in a variety of states. If, as some claim, high levels of immigration exert relentless downward pressure on unskilled native wages, you’d expect states with large immigrant populations to exhibit very low wages for unskilled workers. That doesn’t appear to be the case. … [E]ven George Borjas, the economist most often used by restrictionists, estimates that under realistic assumptions, the drag immigrants exert on native, unskilled wages is about 4 percent. Given the universe of things screwing over the working man, immigration just ain’t that large a player. (source)

And here are some other data confirming that the effect of immigration on the wages of low-skilled workers is negligible:

California may seem the best place to study the impact of illegal immigration on the prospects of American workers. Hordes of immigrants rushed into the state in the last 25 years, competing for jobs with the least educated among the native population. The wages of high school dropouts in California fell 17 percent from 1980 to 2004. But before concluding that immigrants are undercutting the wages of the least fortunate Americans, perhaps one should consider Ohio. Unlike California, Ohio remains mostly free of illegal immigrants. And what happened to the wages of Ohio’s high school dropouts from 1980 to 2004? They fell 31 percent. (source)


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