Migration’s effect on host countries is the topic of greatest debate for those living in developed Western countries. Entire industries exist to measure and analyze the effect immigrants have on the countries that receive them, both legally and illegally. The discussion generally touches on both economic and social/cultural flashpoints.
George Borjas is a researcher at the forefront of the debate over whether immigration is economically beneficial for the receiving nation. His studies, conducted over decades, indicate that overall, immigration has a net positive economic effect, but that such effect is marginal. The big story, however, is not the net effect, but rather how the benefits and downsides of immigration are distributed throughout the economy. Or in Borjas’ words, the crux of the argument is not “whether the entire country is made better off by immigration, but about how the economic pie is sliced up.”
- Generally, business owners benefit from having a “flexible workforce.” Immigrants swell the labor pool, especially for unskilled jobs which tend to be more seasonal and/or sensitive to business cycle fluctuations. A larger labor pool means that businesses can increase and decrease employment as needed, gaining and shedding workers as labor needs change. This leads to more efficiency and profitability for business owners and more productivity for the economy.
- A larger labor pool drives down wages business owners have to pay to attract workers. In addition, when a large potential labor pool exists, companies have less incentive to make jobs attractive in terms of employment benefits and perks, as well as working conditions. Business owners generally save money on their labor costs – immigrants will often work for less money, and their willingness to accept a lower salary impacts the wages of native laborers.
- Consumers benefit. Lower labor costs to business owners help drive down the prices of the goods they produce. Lower-priced consumer goods benefit migrant and native consumers alike, enabling them to buy goods that might not otherwise be affordable.
- Overall economy benefits from immigrant talent. As a group, skilled immigrants (and even many unskilled immigrants) tend to be entrepreneurial. Economist Stephen Moore has written that there is a “self-selection process” involved in the act of immigration – it is risk-takers and self-motivators who most often brave the journey – and that “by coming, they impart productive energies on the rest of us.” Immigrants often create jobs and have been shown to be on the forefront of technological innovation. Between 1995-1998, 30% of Silicon Valley businesses, including Google, were started by Chinese and Indian immigrants. Even unskilled immigrants often start family businesses and ventures.
- Everyone benefits when immigrants fill jobs that are difficult to fill. Known as the 3Ds – dirty, dangerous, and difficult – many jobs filled by recent immigrants do not generally attract native workers. Yet, the economies of developed countries are dependent on these manual labor and service sector jobs –construction workers, custodians, home health care workers, etc. Having immigrant labor fill these lower-end jobs frees native workers up to take jobs on the next rung of the ladder.
- The return on immigration for society grows over the course of subsequent generations. The children and grandchildren of immigrants, on average, do better in school and are more productive than their native counterparts. Employment is high and use of welfare benefits low among second and third generation immigrants. As a group, they tend to pay taxes, create jobs, and give back to their communities.
- While business owners experience short-term gains in profitability from a plentiful and flexible labor supply, they may actually lose in the long run. Companies become used to not needing to make reforms or modernize or invest in the productivity of their workers, and thus compromise their long-term competitiveness in a globalized marketplace. The Economist magazine presents the California raisin industry as a case in point, noting that cheap immigrant labor has discouraged farms from adopting automated harvesting like the more profitable grape industries worldwide.
- Native workers pay a price for cheap immigrant labor. Most experts believe that this is generally not significant in terms of unemployment rates – rarely do immigrants “steal jobs” from native workers; they are more likely to “steal jobs” from each other with newly arrived immigrants taking jobs from those already in the labor market. Yet, there is a small negative effect on native wages, mostly among unskilled workers (particularly those without a high school diploma), as immigrant wages drive down the value of labor in lower pay grades where workers are plentiful. However, percentage declines in native worker wages attributed to immigration must be weighed against the benefits native workers gain in lower priced consumer goods and from general economic growth attributed to immigrant labor.
- Native and immigrant laborers both suffer when there is little incentive to improve working conditions. When companies don’t need to compete for labor, there is little need to enhance the attractiveness of jobs. Trade unions and workers’ advocates lose leverage when there is a line of people outside the factory ready to take the job of a dissatisfied or striking worker.
- Do immigrants consume public services and/or welfare benefits in line with their tax contributions? Accurate measurements are difficult to obtain because national, state and local laws differ on eligibility for education, health and welfare services, and on the instruments used to collect taxes from illegal immigrants. Most believe that immigrants end up paying for their use of public services through tax contributions and general economic contributions to society, but this may take more than one generation.
Larger Societal Effects
The balance sheet on immigration’s effects on a country of destination is not merely economic. Even though immigration’s net economic effect on a host nation’s economy is positive, the debate about its larger effects is far from resolved. As a RAND corporation study quoted in The Economist summarizes, “the economic pluses and minuses are much smaller than the political and emotional salience” of the issue. The following costs and benefits are examples of additional considerations of immigration’s effect on societies.
- Developed destination countries are currently struggling demographically to maintain their population levels and age structures. With low fertility and longer life spans, many MDCs are in danger of developing skewed dependency ratios in the future (number of people in the workforce to the number of people too young or too old to work). Immigrants are an answer to this dilemma, as they are usually of working and childbearing age. They keep the population growing, boosting the dependency ratio in a favorable direction. (See Demographics in Special Issue Section).
- Immigrants add a cultural richness to a society, bringing with them unique customs and traditions that become part of the multilayered fabric of a nation. Beneath the obvious food, flag, festival and folk hero contributions, a multicultural diverse society is more culturally and intellectually stimulating and innovative than a mono-cultural one.
- Many advances made by the human race have been the result of contact between different peoples, in artistic and scientific realms. Efficiency is generated by a pooling of diverse talent in geographical hubs.
- Urbanization tends to accompany internal and international immigration. The movement of people is partly a story of people moving from rural to urban areas, or small cities to larger ones, whether they cross international borders or not. The growth of cities brings together talent that is highly conducive to innovation, increasing the economic and social vibrancy of a nation.
All of these benefits have corresponding costs.
- Some natives fear immigrant populations will alter the religious and socio-cultural foundations of their nation. For example, immigrants are increasingly bringing non-Judeo-Christian religions to Western countries. Conversely, within Christianity, Hispanic populations are boosting the membership of the Catholic Church. Some fear that family practices such as preference for male children in Asian societies may be aided by modern reproductive technologies and alter the gender balance in countries of destination for this population.
- There are those who raise the issue of immigrants changing national identity and coherence. Some fear the dilution of national symbols, narratives and experiences that have traditionally formed a country’s heritage and image abroad.
- Security concerns are associated with immigration when porous borders are conceivably able to facilitate the transport of enemies of the state and radical ideologies. Major terrorist events occurring in destination countries, such as the US and UK, carried out by foreign nationals and/or 1st and 2nd generation immigrants feed this fear.
- The presence of large ethnic immigrant interest groups impacts the foreign policy of the host country toward their countries of origin. US lawmakers develop policies toward Mexico with the American Hispanic communities in mind; few politicians make statements regarding US policy on Israel or the Middle East in general without regard for the sentiment of American Jewish groups.
- Host nations are adversely affected when internal conflicts within the home countries follow immigrants to their new homes. The violence that accompanies rivalries between different Italian “mafia” families in the US or between Russian exiles in the UK creates criminal and public safety concerns for host nations.
- Finally, urbanization associated with migration has a significant downside as illustrated by the slums of many global cities. Service delivery and general capacity often do not keep pace with the growth of urban populations in places like China, India and South Africa, dragging down the quality of life for many immigrant and native residents. Large global cities like New York and London provide a microcosm of the rich-poor divide that motivates much migration in the first place. Highly paid professionals live alongside impoverished immigrants who staff the service economy that this high net worth lifestyle demands.
Many classic transit countries are now becoming countries of destination themselves, and experiencing many of the associated costs and benefits. For example, EU policy mandates that migrants seeking refuge/asylum must complete their application in the first EU country in which they land. This is creating a backlog of immigrants of all types in Southern EU member countries such as Greece, Italy, Spain and Malta. Immigration restrictions for the EU as a whole and the process of interdicting (detaining) migrants in the Mediterranean attempting the journey to Europe from North Africa has similarly swelled the migrant populations of the Maghreb region (Morocco, Tunisia, Algeria, Libya, Egypt) which used to be primarily transit countries.
The Balance Sheet
Host countries gain from immigration, but also must bear the negative consequences. Countries attempt to limit the downside through policies that try to restrict immigration to those immigrants that who are most economically productive. Immigrant countries attempt to attract certain types of talent from certain countries through the calibration of visa categories. The HB-1 visa system in the United States for highly skilled workers is an example that is enthusiastically supported by the corporate sector. (Bill Gates recently gave Congressional testimony in support of boosting the number of these visas that are available to potential immigrants.) See Regulations section for a more thorough discussion.
Regardless, a host country cannot fully seal its borders, but it can instigate policies aimed at maximizing the contributions of immigrants who make it into the country while minimizing their adverse effects. This is key also for host countries that are structurally dependent on immigrant labor, such as Gulf oil-producing states in the Middle East or Malaysia.
This policymaking does not occur in a vacuum. It is inherently political and often reflects electoral cycles of the modern industrial democracies in host nations. In times of economic hardship, anti-immigrant sentiment generally rises as the distribution of a “diminishing pie” becomes more contentious. A recent article in the New York Times details the plight of immigrants to Spain who were recruited to combat labor shortages in past decades, but who now find themselves unemployed and often unwelcome in a previously relatively open country.
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