Friday, September 3, 2010

There Is No Wealth but From Men: Why Immigration Is Good for the Economy

Thousands gather in favor of immigrants rights...Image via Wikipedia
2010 has been rife with anti-immigrant rhetoric and action on both sides of the Atlantic. There were the atrocious anti-migrant riots in Italy and the passing of controversial Arizona law SB 1070. France has taken a demagogic turn, which some commentators dub xenophobic. Even Canada, which is celebrated for its progressive immigration policies, has experienced unprecedented immigrant-bashing rhetoric around the arrival of a boat carrying Sri Lankan self-proclaimed refugees.
There is an emerging conventional wisdom across the Atlantic that increasingly characterizes immigrants as a prime source of the ills of our societies. But do economic studies back this up? In short, no.
Immigration has an undisputed effect on economic growth. Migration reduces imbalance in the labor market without imposing a significant impact on public finances. Indeed, without immigration, the population of several European countries, particularly Germany, Spain and Italy, would have declined long ago. In Canada, over 70% of the growth in the labor force during the 1990's is attributable to immigration, a figure that could someday reach 100%. Given the overrepresentation of young people among immigrants, immigration also brings down the age of the population, relieving pressure on the pensions systems. Moreover, migrants help grow a host country's market access by creating valuable business networks with their countries of origin. The benefits continue. In most member countries of the Organization for Economic Co-Operation and Development (OECD), the proportion of immigrants with university degrees is greater than that recorded for the native population. A recent study demonstrates that immigration fuels innovation, an economic boon. From a historical point of view, the example of the great transatlantic migration, from Europe to the Americas of the late nineteenth and early twentieth century has amply demonstrated the salutary effect of immigration on growth.
Conventional wisdom is also wrong in linking immigration and native unemployment. The notion that immigrants cause natives to lose their jobs is simply not supported by empirical results. There is not a fixed number of jobs in an economy, and immigrants often do not compete directly with native workers in the labor market.
Migrants are first and foremost consumers who help expand the economy even before stimulating the labor supply. Their demand stimulates the supply of goods and services which in turn lead to job creation. Except in very special cases, immigrant inflows are extremely low compared to the workforce already available in a country. As such, the absorption of newly arrived migrant on the labor market generally proves to be relatively easy. In fact, when the economy is in a recession, migrants are the first to lose their jobs.
Most studies in fact demonstrate the existence of a positive relationship between immigrant and native labor forces. In fact, people coming from earlier waves of migrants are most directly in competition with newly arrived immigrants rather than the natives. In time of expansion, workers tend to raise their expectations and to shy away from activities that are most painful and least valued, thus generating the need for the recruitment of low-skilled immigrants. Consequently, the idea that immigrants take the jobs of the natives seems to be simply xenophobic political posturing.
Regarding the impact of immigration on wages, a recent meta-analysis of the available data concluded that the impact of immigration on the earnings of the native born population is statistically insignificant. Migrants are not responsible for alleged decrease of salaries or social dumping. Migrants are convenient scapegoats.
In countries with limited sectoral and geographical mobility, foreign labor can alleviate the shortages. The foreign workforce, being more mobile than the native one -- since migrants have relatively less material and family ties in their host country -- helps diffuse tensions in the labor market and helps reinvigorate certain regions. Some shortages are already apparent on the labor markets of most OECD countries, particularly for specialties related to new technologies and health.

Immigration has no significant impact on public spending. Indeed, the great majority of immigrants do pay taxes and add public revenue, particularly high-skilled immigrants. The consequences are positive for some public services, such as defense and interest on the national debt, for which immigrants do not impose costs. The bolstering effect of immigration on the U.S Social Security's finances is particularly compelling.
Economic data provide us with two certainties. First, immigration has positive effects on the overall prosperity of a nation. Second, with the ailing economy, migrants are used as scapegoats by uninspired politicians to scare up votes. Indeed, isn't the United States, a country completely made up of immigrants, the boldest example of the benefits of immigration for a nation?

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