Does immigration help the economy?

Does immigration help the economy?

Fortified borders, like this one seen from Calexico, Mexico, are part of measures taken to reduce the flow of migrants. Photo: <a href="http://www.flickr.com/photos/51186333@N00/316206516/"> Omar Bárcena (Flickr)</a>
Fortified borders, like this one seen from Calexico, Mexico, are part of measures taken to reduce the flow of migrants. Photo: Omar Bárcena (Flickr)

Today is not exactly a great time to be an immigrant. Though over 215 million people worldwide are first-generation migrants, more than ever before, migration is being restricted as many countries have added immigration to the list of economic burdens. Recent experience, however, suggests global migration helps grow economies and spread ideas.

Legislators in Alabama, U.S., recently passed an anti-immigration law (HB56) that prevents any undocumented immigrant from applying for work, penalizes any citizen who hires an undocumented worker, and prevents undocumented immigrants from receiving most state services. Police are able to arrest anyone they suspect to be an undocumented immigrant, a power which resulted in the recent arrest of a German Mercedes-Benz manager, who couldn't produce proper identification when stopped. European governments, grappling with an unprecedented increase in migrant populations, have passed laws restricting religious freedom, while the popularity of anti-immigration political parties is surging. In China, an acclaimed Chinese-American engineer has been jailed on dubious charges that some see as retribution for immigrating from the United States.

Behind all of these laws is a desire to make migration less attractive by making life more difficult for migrant populations. As Alabama State Representative Micky Hammon, a proponent of the anti-immigration initiative, explains, “the goal of the entire bill [is] to prevent illegal immigrants from coming to Alabama and to discourage those that are here from putting down roots." It's working. Though about 2.5 percent of Alabama’s population is undocumented, according to the Center for American Progress, tens of thousands of workers, documented and undocumented, stopped showing up for work after the law was passed.

Proponents of anti-immigration measures argue that immigrants drain government budgets by using its services without paying taxes, and causing unemployment and wage deflation by willing to work for low pay. Yet the evidence is quite flimsy. As Giovanni Peri, an economist at UC Davis who specializes in migration, writes, “on net, immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity. Consistent with previous research, there is no evidence that these effects take place at the expense of jobs for workers born in the United States.”

So much for being a drain on the economy. Economists at the University of Alabama have recently predicted that for every 10,000 laborers, legal and illegal, who are discouraged from working in Alabama as a result of the recent law, the state’s economy will contract by $40 million.

Aleksynska Mariya and Ahmed Tritah, economists at the University of Maine in France write that most evidence of a negative immigration effect come from studies that only examine wages and employment levels for natives in the short-run. But Mariya and Tritah remind us that immigration affects the global economy through a wide range of mechanisms. After examining these mechanisms, they conclude that immigration has a positive effect on income, labor productivity, and total factor productivity in the long run. "Studies
which focus uniquely [on] one type of effect, such as impact on employment, overlook other channels through which [the] economy adjusts to immigration."

And immigration helps developing countries as well. As The Economist writes, migrants spread ideas, information, and money while making it easier to do business across borders: “A Chinese trader in Indonesia who spots a gap in the market for cheap umbrellas will alert his cousin in Shenzhen who knows someone who runs an umbrella factory. Kinship ties foster trust, so they can seal the deal and get the umbrellas to Jakarta before the rainy season ends.” In some emerging markets institutions that foster free trade, like private property and the rule of law in general, tend to be relatively inefficient. So trust is essential to creating the confidence necessary for trade. If the government can’t ensure that you are accountable for the money I loan you, I will only do so if I know I can trust you.

Michael Clemens, senior fellow at the Center for Global Development whose research examines migration and development, discusses the effect of remittances from Haitian immigrants at home and abroad in Foreign Policy magazine:

"We can do a back-of-the-envelope calculation of what additional migration could do. Suppose the United States lets in 100,000 Haitian immigrants. First, this would dramatically raise their incomes and raise essentially all of them out of extreme poverty. Second, this would increase the size of the worldwide Haitian diaspora by 10 percent. If the new migrants remit like earlier migrants did, this would mean roughly $150 million to 180 million every year in additional remittances for Haiti... The Guardian reports that the United States has committed a one-time total of $167 million in aid. Remittances recur year after year, and unlike aid, almost the whole amount of remittances goes directly into needy families' pockets."

Migration will not solve all of our problems, and it doubtless creates many. But so do free trade and globalization, which are generally hailed as essential to modern economic growth. Why not free migration as well?

Michael Clemens was a 2011 Global Envision guest lecturer at Mercy Corps' Action Center in Portland, Oregon.

Ben Osborn is a 2011 graduate of Lewis & Clark College in Portland, Oregon. Read his other contributions to Global Envision.

Curated news and insights about innovative, market-driven solutions to poverty explored through news, commentary and discussion.

Learn more »

Global Envision newsletter