In 2006, over 1,250,000 people became legal permanent residents of the United States. Nearly sixty-five percent of these "green card" recipients were already living in the United States. In addition, sixty-three percent of these people were granted their permanent residence based on a family relationship with either another legal permanent resident or a U.S. citizen (DHS 2007). In response, citizens, policy makers, and government officials have been concerned about the economic consequences of each year's influx of immigrants. Economics plays a large role in immigration policy debates, although economics has had a somewhat limited role in the study of immigration law (Chang 2000).
This paper examines the costs and benefits of immigration on the welfare
of natives while exploring the idea that we should allow more immigration
because the benefits outweigh the costs. This paper is organized into sections.
The first section discusses immigration reform proposals that the U.S. has
debated in the past. The second section discusses how immigrant labor increases
the economic welfare of natives. The third section discusses immigration
effects on native workers and their wages. The fourth section discusses
some of the costs of protectionist policies. The fifth section looks at
immigration effects on natives with a look at the public treasury and consequences
of immigrant descendents. The sixth section offers concluding remarks on
immigration.
Recent Immigration Reform Proposals
In response to heavy inflows of immigrants into the United States in the
early 1990's, in 1995, the United States Commission on Immigration Reform
advised Congress to adopt a more restrictive immigration policy. They presented
a report to congress that examined the costs and benefits of more restrictive
immigration laws. The changes that the Commission recommended included "reducing
the overall level of legal immigration into the United States by one-third"
through "permanent cuts in both employment-based and family-based immigration"
(Chang 2000). Policy makers introduced bills to attempt to implement the
Commission's recommendation. However, after debate and review, the Senate
eventually voted to exclude these cuts based on their controversial arguments
and because there was no "objective basis for reduction".
In fact, according to some economists, economic analysis of U.S. immigration
law "strongly suggests that specific liberalizing reforms, which are
likely to increase the levels of employment-based and family-based immigration
by eliminating certain immigration barriers, would raise national economic
welfare as well as global economic welfare" (Chang 2000). Therefore,
the United States should allow "higher levels of employment-based and
family-based immigration than current immigration laws permit" (Chang
2000). The remainder of this paper explores why these economic welfare gains
can be reached through higher immigration.
Labor Market Benefits From Immigration
Recent immigration trends suggest that labor migrates from low-wage countries
to high-wage countries as immigrants pursue higher wages. If this utilitarian
principle holds, world output is likely to rise because the marginal product
of labor is higher in the high-wage country than in the source country (Chang
2000). The most efficient global labor market is one that contains no barriers
to the completely free flow of labor. The countries with the highest returns
should attract the most labor.
Economists have found that "immigration barriers interfere with the
free flow of labor internationally and thereby cause the wage rates for
the same class of labor to diverge widely among different countries"
(Chang 2000). In addition, restrictions and barriers on immigration warp
the global labor market by "producing a misallocation of labor among
countries…wasting human resources and creating unnecessary poverty
in labor-abundant countries" (Chang 2000). This global labor market
distortion caused by migration restrictions creates a large inequality gap
in wages between countries. Liberalizing labor migration can help close
the inequality gap as economic gains are reached. Some economic estimates
"suggest that the gains from free migration of labor would more than
double worldwide real income" (Chang 2000).
Within the United States, economists find that natives will gain from the
immigration of labor as consumers obtain goods and services at lower costs.
In addition, natives can also benefit from employing immigrant workers as
they "gain surplus in excess of what they par immigrants for their
labor" (Chang 2000). As compared to the international trade of goods,
labor migration lets foreign suppliers sell their services to domestic buyers,
which allows both groups to reap gains as a result of this exchange (Chang
2000). With these global and domestic benefits in mind, the United States
should allow more immigration.
Immigration Effect on the Wages of Native Workers
The economic distributive effects of immigration are an important area of
study. Since natives compete with immigrants in the labor market, some natives
might feel that immigration reduces their real income. However, empirical
evidence suggests that immigration into United States labor market has a
weak effect on the employment and wages of natives. For example, one economist
in 1990 found that "the arrival of 125,000 Cubans in 1980, which unexpectedly
increased the supply of labor in Miami by seven percent almost overnight,
had virtually no effect on the wages and employment opportunities for workers
in Miami, including unskilled whites and blacks, even in the year in which
the Cubans arrived (Chang 2000).
There are a few reasons for this little impact that immigrants have on the
wages and employment of natives. First, labor demand does not remain fixed
when immigrants enter the economy. Immigrant workers supply labor as well
as demand goods and services which translate into an even greater demand
for locally supplied labor (Chang 2000). Economists feel that this increased
demand can offset the increase in supply. Second, evidence also suggests
that immigrants do not compete for the same type of job as natives because
the labor market is heavily segmented. The segmented labor market "implies
that immigration can produce gains for natives in the labor market without
necessarily producing adverse effects for native workers" (Chang 2000).
Also, many findings reveal that immigrants compete with each other more
than they compete with natives.
The Costs of Protectionism
In an attempt to protect United States workers from foreign competition,
protectionist acts have been implemented by policy makers. For example,
the United States government obligates U.S. employers to "discriminate
against foreign workers" through a labor-certificate statute that "requires
an employer to prefer any qualified U.S. worker over any foreign worker,
no matter hoe much better qualified the foreign worker may be" (Chang
2000). These protectionist barriers forgo gains from trade and reduce the
total wealth of natives as a group. Protectionism is a costly was to redistribute
wealth for natives as the same wealth could be redistributed "through
tax policies and transfer programs…and make all classes of natives
better off" (Chang 2000). Furthermore, since data shows that immigration
has only marginal effects on the wages of unskilled natives, mild changes
in the tax system could offset these distributive effects. For example,
a more progressive Social Security tax could accomplish some of the same
redistributive wealth goals as immigration protectionism (Chang 2000).
The Fiscal Effects of Immigrants and Their Descendents
Immigrants are just as involved in the public sector as natives. Immigrants
pay the same taxes, including income taxes, social security taxes, sales
taxes, and property taxes. These taxes give the United States an addition
reason to value an increased influx of immigrants because they "increase
tax revenues by expanding the tax base" (Chang 2000). Economists do
note, however, that immigrants do use up public goods such as national defense
use the same public roads, which may cause some congestion. Therefore, the
overall effect of immigrants on natives "will depend on whether immigrants
pay more in taxes than the costs they impose through the public goods sector"
(Chang 2000).
In a study conducted by the National Research Council (NRC) in 1997, the
economic effect on the public sector by the descendents of immigrants was
explored. The NRC found that "the descendents of current immigrants
into the United States are likely to have a net positive fiscal impact,
whether their immigrant forebears are highly educated or not: although the
descendents of more educated immigrants tend to have larger positive fiscal
effects, even the descendents of immigrants with less than a high school
education will on average have a significant positive effect" (Chang
2000). One explanation for this conclusion can be drawn from data that suggests
that the descendents of "relatively uneducated immigrants show substantial
upward educational mobility. As these descendents receive higher educations,
they move from unskilled to skilled workers and offer positive benefits
to the economy and natives as a whole.
In an economic study by Lee and Miller, the net fiscal consequences of a
"single composite immigrant arriving in 1998" were explored. These
economists found that there was an initial negative impact by the immigrant
as the immigrant sends "children to school and has low earnings in
the years soon after arrival" (Lee and Miller 2000). However, after
sixteen years, this impact turns positive. Figures are presented that show
each generation cycling though negative, positive, and finally negative
impacts. However, "because the generations overlap, the total impact
remains positive after sixteen years" (Lee and Miller 2000).
The age composition of an immigration pool is another important aspect that
carries with it fiscal implications. Economists find that "the younger
the immigrant at the time of entry, the more working years the immigrant
can spend in the United States, the more tax revenues the immigrant will
contribute to the public coffers prior to employment, and the more positive
the immigrant's overall fiscal impact" (Chang 2000). Economists have
also suggested a policy "of admitting only high-education immigrants
of young working ages" in order to receive the most fiscal benefits
from immigration (Lee and Miller 2000).
Concluding Remarks
In conclusion, this paper has examined the costs and benefits surrounding
immigration in the United States. In contrast to a widely held view, "economic
considerations point towards liberalizing reforms rather than restrictionist
policies" (Chang 2000). These liberalizing reforms include "eliminating
our quotas on skilled immigrates and eliminating the 'labor certification'
requirements that impose protectionist restrictions on their immigration"
(Chang 2000). Requirements for sponsorship of family-based immigrants should
also be liberalized in order to not exclude young and educated immigrants.
In order for the United States to reach a more optimum level of economic
wealth, intolerant practices towards immigration by certain individuals
for purely social and personal reasons much be discouraged and policy makers
need to become more aware of the economic benefits that lie ahead if immigration
barriers are lifted and more immigration is allowed.
Chang, Howard F. (2000) "The Economic Analysis of Immigration Law", Migration theory: Talking across disciplines (2000): Brettell, Caroline B.; Hollifield, James F. (editors), New York, Routlege, 205-230.
Lee, Ronald, Miller, Timothy, (2000), "Immigration, Social Security,
and Broader Fiscal Impacts", American Economic Review, vol.
90, no. 2, (May 2000), pp. 350-354
Department of Homeland Security (2007), "U.S. Legal Permanent Residents
2006" http://www.dhs.gov/xlibrary/assets/statistics/publications/IS-4496_LPRFlowReport_04vaccessible.pdf