Effect of immigration to the economy
One of the United States’ formidable engine of demographic and economic growth has been immigration. In the early 19th century, immigration greatly contributed to the country’s growth. For instance, it provided cheap labor for both electrification and industrialization of the nation. However, the immigration law passed in 1929 brought to an end that wave of immigration. With 1965’s ‘immigration and National Act,’ national quotas were abolished. This Act, however, permitted the flow of immigrants to continue. Today, the mobility of people has increased tremendously. The young, educated individuals are on a constant move, while most of them desire to get to America. With more than 41 million immigrants, the United States is the world largest magnet for migrants.
A straightforward logic that relates to demand and supply is that, when the labor supply increases, it directly causes a reduction of wages. This is because employees start competing in an economy that is increasingly crowded. As the number of workers increases, most firms would consider investing. They increase the capacity of their productivity, and hence they continue building more establishments. Between 1960 and 2009 the productivity capacity of every worker has increased in the American economy at a rate that is constant. The capacity per worker is said to been high in 2007 when immigration in the United States had reached its peak. This, however, was the exact opposite during 1990, before the start of the immigration boom. The inflow of workers was a response to the great investments across the country. Therefore, in the long run, immigrants never crowded the existing firms, but instead, they made the size and numbers of firms to increase.
In terms of the labor market skills, workers are not the same. There is a huge variation between workers who have tertiary education and those with more or less secondary education. Since these two groups do different jobs, it becomes more sensible to distinguish them. A modern modified wage-depressing effect is that, if there is a large relative supply less educated immigrant workers, then their inflow would likely depress wages of the less educated natives. In the United States, however, since immigrants have combined the top as well as the bottom of the educational distribution, they have caused a balanced distribution. Overall, the proportion of immigrants who are university educated has been the same as that of the natives. Therefore, the inflow of these immigrants has not impacted the relative supply of both groups. According to labor economists, the split between non-tertiary and tertiary educated is considered the most relative factor that can help in the understanding effects of relative supply on relative wage.
Unlike the natives, immigrant laborers are always more than willing to move in search of jobs. As a result, immigration has greatly helped to smooth the county’s local busts and booms. When they move away from areas that are declining and into booming regions, immigrants in the process stabilize the country’s economy and decrease ‘mismatch’ existing between the demand and supply for labor. The willingness of immigrants to move helps in slowing down the wage decline in areas that are stagnant. Therefore, immigrants have a direct contribution to economic growth of booming ones. This mobility of immigrants when combined with their complementarity to natives, helps to reinforce the productivity growth labor markets that are strong.
Immigrants who are highly educated are a great asset to a county’s economy. An economy made of educated individuals, both immigrants and natives, attract engineers and scientist from all parts of the world. About one-third of American’s innovation is an account of immigrants. Immigrants founded close to twenty percent of high tech firm back in 2006. Most of these firms have had sales amounting to more than $1 million and are generating employment and income for the entire nation. In technologically advanced nations such as the United States, technology and innovation are the growth engines for economic growth.
Although immigrants bring with them many economic benefits, they also have a negative impact. For instance, when immigrants come in, they take a different position from the natives particularly so those without a college degree. They displace and drive out natives workers by moving them into low wage jobs. Although the firms may end up making some more profits in the process, it would, however, be at the expense of existing workers.
Generally, immigration has more benefits to a country’s economy in that, it causes prices to reduce, reduce costs, encourages innovation and helps to free up resources. However, nobody would want to be displayed in his/her work. Similarly, nobody would want to find him/herself being forced to accept wages that are lower the training he/she went through. The long-run educational and demographic trends in America suggest that in the near future there would be a decreased supply for natives in most occupations. This is because the current population is aging. However, when more natives are hired manual work, new positions are created for the natives as complementary workers are required.
https://clas.berkeley.edu/research/immigration-economic-benefits-immigration
https://www.investopedia.com/financial-edge/0809/3-ways-immigration-helps-and-hurts-the-economy.aspx
https://www.thebalance.com/how-immigration-impacts-the-economy-4125413