Impact of Immigrants on a Country’s Economy

The International Monetary Fund (IMF) recommends advanced and ageing economies of countries like the US, Japan, and Germany to allow more and more immigrants to solve their unemployment problems. Besides, how can having more potential taxpayers and workers in a country hurt, right?

Nowadays, it is pretty evident that immigration is a controversial topic to discuss. You don’t need to look beyond your usual news media to figure that out. There have been countless debates on countless news channels where people (some more bigoted than others) have been screaming at the top of their lungs to put forth their views either for or against immigration.

In this blog, we shall not be delving into the validity of this form of discourse, nor shall we be delving into the morality aspect of allowing migrants into one’s country. Instead, we shall be discussing — as the title says — the impact of immigrants on a country's economy.

A cursory google search would tell you that there are 195 countries in the world. This means that a potential migrant, who wants to emigrate from his country for whatever reason, has 194 choices to choose from.

With such an abundance of choices, why do immigrants still gravitate towards developed countries like the United States or Canada?

The answer lies in historical precedent. Numerous people in the past have tried to move to greener pastures (countries that are economically/socially/culturally better off) in pursuit of a better life. Many of them have succeeded, creating this glamorous image in the minds of people worldwide that just by having the opportunity to live in a developed nation, you are guaranteed things like wealth, safety, a better quality of life, and so much more. The idea of the “American Dream” is an example of this.

As a result of this, millions of people each year flock to developed countries looking for a kind of life they feel their home country is unable to offer. Let’s take the United States of America, also known as the “nation of immigrants” because it has the highest immigrant population in the world, amounting to more than 40 million in the year 2017. About 29 million of those are actively working or looking for employment. These make up 17% of the American workforce. By no means is that an insignificant number.

With such a huge number of immigrants, there has got to be a significant impact on the economy of the United States, right?

Absolutely! An IMF report states that a 1% increase in the immigrant population in the US can lead to as high as a 2% increase in GDP per capita in the long run because a greater number of working immigrants tends to increase productivity in the country. These effects aren’t noticeable at first because starting salaries of immigrants tend to be quite low.

One consequence of this is that the average wage of workers in a particular area with a high immigrant population falls, leading some people to believe that immigrant labour brings down the average wage of a country. But this isn’t true because over time these wages rack up and become virtually equivalent to native citizen’s salaries. This is true for both skilled as well as unskilled workers. Educated immigrants also lead to a lesser burden on government spending because they contribute more in taxes while taking advantage of lesser public facilities.

Enough evidence shows that immigrants bring more innovation, a better-educated workforce, greater occupational specialization, better matching of skills with jobs, as well as higher overall economic productivity. In fact, immigrants tend to be more enterprising and entrepreneurial than native citizens, at least in North American and the European countries. Out of 87 of the most valuable startups in Silicon Valley, California, more than half were founded by immigrants. Just try to imagine a world without Apple, a company whose founder – Steve Jobs – was a second-generation Syrian immigrant. Or a world without SpaceX and Tesla, both of which are companies founded by a South African immigrant – Elon Musk. Amazon’s founder Jeff Bezos is a second-generation Cuban immigrant (he is also the world’s richest person).

Jeff Bezos, CEO of Amazon

Even Yahoo’s founder is a Taiwanese immigrant and the list goes on and on. There is a trade-off though. Research shows that each company established by an immigrant tends to employ lesser people than companies established by natives.

So if there are so many economic benefits of immigration, why are some people still so vehemently against it?

Majority of the people who call for the closing of borders to migrants cite cultural reasons like the gradual change in the traditional identity and values of people which bring about migrants who apparently are “culturally and morally inferior” to the natives.

The economic reasons for not allowing mass immigration are increased job competition, increase in crime, an unnatural rise in population, and more resources being consumed that were originally meant for the natives, an example being less-educated immigrants who mostly work minimum-wage jobs and struggle to pay taxes, while also consuming more public facilities, thereby becoming a burden in the eyes of the government and increasing the overall taxes everyone in the country has to pay.

Also, so far we have only really looked at immigration in developed countries. Immigration in developing and 3rd world countries is a major bone of contention nowadays because there already is a scarcity of resources in these countries, and if a foreigner were to come and take them away from the natives, there would naturally be some form of resistance against the idea of immigration. Because of this reason, allowing unchecked immigration in developing countries isn’t advisable.

So what is the bottom line?

The bottom line is that for developed countries, immigration is great in the long run. Most of the reservations that people have against allowing migrants in are offset by long-time economic gains of the country. Sure, it may seem as if immigrant workers initially aren’t beneficial economically, but over time they prove their mettle and their worth and can lead to a more prosperous nation.

In developed countries especially, more and more native people are wanting to work in urban environments, creating a vacuum in rural work areas like farms and plantations, which can be filled by… you guessed it! Immigrant labour.

Immigrant farmers in the state of Idaho

Nowadays, over half of all farmers in the US alone are immigrants, the majority of them being undocumented. Even the urban areas are benefitted by immigrants, who bring their expertise in the form of education and work experience to create and be part of various enterprises. In fact, the International Monetary Fund (IMF) recommends advanced and ageing economies of countries like the US, Japan, and Germany to allow more and more immigrants to solve their unemployment problems. Besides, how can having more potential taxpayers and workers in a country hurt, right?

Written by: Agastya Bose

#economics #ecoeducate #educateyourself #blog

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