The Economics of Immigration

Once upon a time in AmericaBetter Living Standards. Despite discussion to the contrary, best available economic evidence suggests that immigration expands economic opportunities and incomes of Americans and helps reduce budget deficit. Recent research suggests immigration raises wages and lowers prices for consumers throughout economy. For the American business owners, immigrants are both new sources of customers+employees, helping to expand production using American resources + know-how in sectors ranging from farming to technology. For American workers data suggest rather than competing for identical jobs, immigrants tend to work alongside and in support of American workers, creating more and better job opportunities. Graph (below) summarizes two sets of results from recent cutting-edge economics research on the impact of immigration on wages. Both show small but positive effects of immigration on the American wages as a whole. The evidence becomes more mixed, though, when looking at specific groups of workers. While some studies show large negative impacts of immigration on low-skill workers (purple bars), other estimates find that immigration raises the wages of all U.S. workers, regardless of education (blue bars). As further evidence supporting second set of findings, one study that examines a period of rapid immigration finds immigrants do not cause declines in wages, even among less-skilled residents. Most studies also find over time immigrants improve the finances of programs like Social Security and can actually help reduce the budget deficit. And these are only direct measured effects of immigration on individual wages, employment, budget. Immigrants, particularly higher-skilled immigrants, start more businesses and participate in scientific + other research at higher rates than native-born Americans. These other findings hint at additional potential benefits of more immigration, including increases in innovation could help boost overall economic growth. The high fraction of innovative Silicon Valley start-ups founded by immigrants are an important example of this point. These potential additional boosts to the economic growth are not necessary to make a case for more immigration. Evidence on the direct effects of immigration, higher wages, lower prices and net taxes, shows that immigration raises standards of living for Americans.

Room For Debate:


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Consultor Internacional

13 Responses to The Economics of Immigration

  1. Professor Uziel Nogueira says: The experience of field research in LA while living in the US gave me two insights in support of the thesis defended by the Brookings researchers. First, even poor campesinos from El Salvador can prosper in the US. They send their kids to school, learn English as a second language, start a small business or do work shunned by Americans. The question is why a poor El Salvadorean can become a valuable citizen in the US and not in his native country? the US economic and social systems are set up to provide opportunity for immigrants to prosper. Immigration is the engine of growth and prosperity of the American economy. The second argument is counter factual.

    Countries closed to immigration lag behind those opened to foreign skill and knowledge. Take the case of Brazil.

    In the 19th century many predicted Brazil becoming a world power along with the US. The US became a major world superpower and Brazil continues to be an emerging market with a sub par educational system and illiterate population. There are many reasons and factors that could explain Brazil backwardness. One, however, stands out. The country is closed to immigration, even badly needed high skilled foreign professionals in dynamic sectors of the economy. The Brazilian economy in 2013 is stagnated with the lowest rate of labor productivity among the BRICS. Lack of qualified foreign workers + poor quality of schools are the MAIN factor preventing Brazil to become a developed country in this century.

  2. Ordinary Jen: You are more than welcome to lobby your government to import more low skilled Hispanic nationals if you like. But it is outrageous of you to attempt to dictate what Americans must do. American workers have seen their wages remain stagnant for decades. The solution to that problem is not to hand our citizenship to unskilled Hispanics who will only attempt to bid down wages and force up our taxes even further.

  3. Steve Mumford: I believe that Brazil’s past and current economic prospects are much more related to problems in its cultural heritage such as corruption and nepotism, endemic to Latin America as a whole.

  4. Liberals are furious, but the gun issue will not significantly damage the Republican Party. Sure, it looks bad to oppose background checks, which have overwhelming popular support. Sure, the Republican position will further taint the party’s image in places like the suburbs of Philadelphia and Northern Virginia. Sure, the party looks extreme when it can’t accept a bill sponsored by the conservative Senator Joe Manchin and the very conservative Senator Pat Toomey. But, let’s face it, the gun issue has its own unique dynamic, which is that the people who oppose gun limits vote on this issue while the people who support them do not. Moreover, Democrats never made a compelling case that the bill would have been effective, that it would have directly prevented future Sandy Hooks or lowered the murder rate nationwide. Even many of the bill’s supporters were lukewarm about its contents.

    The main reason the gun issue won’t significantly harm Republicans is that it doesn’t play into the core debate that will shape the future of the party. The issue that does that is immigration. The near-term future of American politics will be determined by who wins the immigration debate (…..)

  5. Professor Uziel Nogueira says: Obama defeat on gun control reveals a naked truth about the American Way of Life. Americans love guns and politicians only oblige to their constituency. It is not complicated.

  6. THE German immigrants of the 19th century were so devoted to their native language that Americans wondered if the new arrivals would ever assimilate. The Irish who followed were said to be too devoted to a foreign pope to embrace American democracy. Many Italians not only were Roman Catholic but also returned home for the winter, when construction work here slowed. The Chinese and Jews, skeptics argued, were of an entirely different race than many successful immigrants who came before them. With the arrival of millions of Latinos in recent decades, there have been multiple reasons to wonder if they would assimilate and thrive — including legitimate economic issues that go well beyond ethnic stereotypes. Unlike previous generations of immigrants, today’s can remain in daily telephone and video contact with their homeland. And unlike those in the past, today’s immigrants face legal obstacles, and their pathway to a middle-class life involves college tuition. A decade ago, the political scientist Samuel P. Huntington described the newfound issues with assimilation as simply the “Hispanic challenge.” Yet as the Senate begins to debate a major immigration bill, we already know a great deal about how Latinos are faring with that challenge: they’re meeting it, by and large. Whatever Washington does in coming months, a wealth of data suggests that Latinos, who make up fully half of the immigration wave of the past century, are already following the classic pattern for American immigrants. They have arrived in this country in great numbers, most of them poor, ill educated and, in important respects, different from native-born Americans. The children of immigrants, however, become richer and better educated than their parents and overwhelmingly speak English. The grandchildren look ever more American. “These fears about immigrants have been voiced many times in American history, and they’ve never proven true,” Alan M. Kraut, a history professor at American University, in Washington, told me. “It doesn’t happen immediately, but everything with Latinos points to a very typical pattern of integration in American life in a generation or two” (…..)

  7. Nations that manage to satisfy a large population politically, economically, socially can become beacons of hope for the rest of the world. The US is the world’s third most populated country, trailing China and India, but could aim to become most populated by the end of the century: An eightfold increase in annual immigration would lead to a fivefold increase in the US population, explains demographer Joseph Chamie. Of course, population rankings depend on what other nations do: Others may woo immigrants; fertility rates could rise or fall. Current projections suggest that China’s and India’s populations will plateau, then drop, respectively, by 2030 and 2060; populations of Nigeria and the US, with its current rate of immigration, show a steady rise. “Global opinion polls show that many people at virtually all skill levels would like to emigrate, and the number-one destination is overwhelmingly the United States,” Chamie concludes. Immigration is a dominant force behind population totals for the US, as well as its balance between young and old and transmission of social values (…..)

  8. Increased immigration is consistent with America’s admired tradition of being a nation of immigrants and the eloquent call on the plaque inside the pedestal of the Statue of Liberty: “Give me your tired, your poor, Your huddled masses, yearning to breathe free, The wretched refuse of your teeming shore.” Since the nation’s founding in 1776, immigration has accounted for more than half of America’s population growth. Without its past immigration waves, America’s current population of 316 million would be about 143 million.

  9. STUDENTS piling on debt to go to college might attract all the attention, but colleges have been on a borrowing spree as well, nearly doubling the amount of debt they’ve taken on in the last decade to fix aging campuses, keep up with competitors and lure students with lavish amenities. In January, Moody’s Investors Service put a negative outlook on the entire higher education sector, even at major research universities, which had been spared in previous forecasts. And that came after a year in which the agency downgraded the credit ratings of 22 colleges, including Alabama A&M, Wellesley College and Morehouse College. At the same time, Standard & Poor’s Ratings Service downgraded 13 institutions, including Amherst College, Tulane University and Yeshiva University. Combined, both agencies upgraded only eight colleges in 2012. Bond ratings aren’t scoured like the U.S. News and World Report rankings. But if you’re a parent preparing to start the college search with your son or daughter, the negative financial outlook raises plenty of questions to ask the college tour guide: Will outdated buildings be renovated? Will more part-time instructors replace retiring professors? Will classes get bigger or will students end up in partly online courses? Will the school even be in business by the time your child graduates in four years? “There is a major problem in that the industry has an inability to grow revenue in a way they have for the last 20 years,” says John C. Nelson, managing director of the higher education and health care practice at Moody’s, which examines the finances of more than 500 colleges and universities that issue bonds through public markets. A handful of colleges have closed, merged or been bought by for-profit colleges in recent years — mostly small, tuition-dependent private colleges, which remain at most risk. While few financial experts foresee mass closings in the years ahead, only 500 or so of the 4,000-plus colleges and universities in the United States seem to have stable enough finances to be truly safe. The remaining colleges, where a vast majority of Americans attend, can no longer hold off the technological, demographic and economic forces quickly bearing down on them. One-third of all colleges and universities in the United States face financial statements significantly weaker than before the recession and, according to an analysis released last July, are on an unsustainable fiscal path. Another quarter find themselves at serious risk of joining them. “Expenses are growing at such a pace that colleges don’t have the cash or the revenue to cover them for much longer,” says Jeff Denneen, head of the higher education practice at Bain & Company, the global consulting firm that, along with the private-equity firm Sterling Partners, performed the analysis. “A growing number of colleges are in real financial trouble” (…..)

  10. Professor Uziel Nogueira says: The American high learning system — the largest in the Western world — has to change for three interrelated reasons. First, the number of college age US born students are in rapid decline. The lack of domestic students has been filled with foreigners. This stop gap measure is unsustainable. There are too many colleges-universities for too few students. A classical case of system overcapacity. Second, the cost of high education is out of reach for many middle class families. The system suffers the same illness f health care. Costs are out of control and unresponsive to any market control mechanism. Many universities – colleges with sub par education evaluation are already priced out the market. Third, the value of a college degree has been greatly devalued by changes occurred in the labor market. Why to get in debt for years to come if the only jobs available pay wages well below market rates of 5-10 years ago? Why to get a degree from Harvard to sell IPhones and make 36K a year? In sum, the US high learning system is going to undergo some type of consolidation in the next few years. Noncompetitive schools will be closed and others will seek merger with more powerful domestic or foreign schools. When the consolidation process is over, there will be few universities and colleges open for business. In many cases — particularly schools specialized in sciences, math and I&T — foreign students and teaching staff will be the majority.

  11. AK: Uziel, I cannot agree to your first and third points, but you nailed the issue in the second. The first point is applicable to countries like Japan (or some European countries) with a declining birthrate. US need not worry – illegal and legal immigration plus the fact any child born in US is a citizen (a great gesture, but to be expected from the country of immigrants) will make sure there will be students wanting to learn. The third point – there will be a value to college education no matter the cost. The problem is the cost of higher education. There is no reason an year of college should cost more than $10000 without subsidies / stipends / scholarships. But why? You have to ‘follow the money’. The system which supports this investment – starting from consultants / administrators / officials / sports team to “government run student loan industry” (the only debt you cannot clear in bankruptcy are your student loans) and ending with local contractors and campus police (American campus police is a joke – who the flying f@#$% needs campus police in colleges) need a permanent state of action and expansion – else they will be jobless. This is like the war on drugs. Add all the above costs and you can see why tuition exceeds $30 to $40 K per year. And who bears the brunt – the students – the ultimate suckers. None of the above ancillary or sundry costs add no value to your education – these are frills which need to be discarded – the sooner the better.

  12. Professor Uziel Nogueira says: AK, I appreciate and take note of your points. Totally relevant. Now, regarding point one. I still think overcapacity is an issue. One way to measure overcapacity is the aggressive market competition between profit and non profit colleges and universities to recruit US and foreign students in the last few years. On point three, I’m referring to the lost of value of university degree vis a vis a tight labor market characterized by high unemployment, labor saving technologies, low wages and overseas competition. Labor competition will become fierce as the new immigration law allows easier access to qualified foreign professionals to work in the US. One final comment. The dominant position of US high learning centers is being challenged by foreign competitors, particularly in Europe and Asia. My country Brazil is left behind due to a retrograde mentality of keeping university teaching and research to less qualified nationals and members of the local elite. In high education, Brazil is going nowhere.

  13. AK: Uziel, Agreed, overcapacity is indeed an issue. But colleges are focusing more on non-American students also since they bring much needed ‘full course fee’ with no scholarship/stipends etc. USA is still the premier destination for pursuing higher education. Only the very best Indian schools – IIT’s (Indian Institute of Technology), REC’s (Regional Engineering Colleges) and IIM’s (Indian Institute of Management) are comparable to decent mid level American schools. The tie-ups/partnerships US schools are starting with local chapters – at least in India – are serving only a micro minority. Students want the ‘real US experience’ – not the recreated environment in India. I guess the situation is same for China and Brazil. No other country – the whole Eurozone included -has the power and pull of American higher education. For every École Normale in France you have 20 counterparts in USA. The game changers in the long run might be (I am not certain as it is still early) are the MOOC ventures – Massive Online Open Courses.


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