Economics of Immigration in the USA - Research Paper Example

 Economics of Immigration in the USA This paper highlights different theories on economic perspective of immigration, the causes and determinants of immigration and how it is going to affect the productivity and growth of the destination. Introduction Immigration is a prominent issue in many parts of the world nowadays. Around 3% of the world’s population lives outside their country of birth. Immigration is an economic phenomenon which is part of a process referred to as globalization. As immigrants move from their source country to their destination country in search of a better living, worthy lifestyle and deserving income, the lives of the people residing in the destination countries is often affected and taken for granted (Bodvarsson and Berg 2). In the survey of 1990s, 60% of Americans thought of immigration as a bad thing and that immigration level should be reduced. After the terrorist attack on World Trade Center in September, 2001, 58% of Americans stated that they favored reducing immigration. In 2004, 61% of Americans agreed that the government was not hard on the immigration issue. Immigration is considered a big threat in every country. In 2002, when the German government recommended hiring engineers from India to fill the vacant positions of high-tech workers, the political parties opposed it and made immigrants a major issue. They were ready to prefer children over the foreigners (Bodvarsson and Berg 5). Economist’s Perspective Opinions on immigration vary because it is a complex phenomenon having different effects on people at home and abroad. Immigration implies the movement of factors of production from one country to another. The movement of labor changes the relative quantities of factors available in economies and therefore, the returns to all factors of production. Workers in destination country will view immigration in an unfavorable manner whereas people who hire immigrant workers will view it favorably. However, the economists often view immigration favorably and in a positive manner. Two leading economists, Julian Simon and Stephen Moore, conducted a small survey in mid 1980s and found that immigration has either a very favorable or slightly favorable effect on economic growth. However, over the past decades, the issue of immigration has become prominent. Still, even now, not only economics but also people in many countries tend to agree with the fact that there should be freedom to move from one country to other; it is a basic human right (Bodvarsson and Berg 5). Immigrants are also consumers; their arrival in the country boosts demand for all factors of production, including immigrants’ own labor. Immigrants do not give a downward effect on the wages of other nationals. A key fact to consider in this whole process is that the immigrants come with knowledge and new ideas. People are carriers of innovative ideas. This spread of ideas from one country to another is a key to economic growth and productivity in the country resulting in long-term improvements in standard of living (Bodvarsson and Berg 4). Cause of Immigration Immigrants are often attracted by higher income, better career opportunities and comfortable living conditions for their children, lower levels of tax and less discrimination. The determinants causing immigration have been divided into four categories: -There could be negative incentives that might push people to migrate. -There could be positive incentives that might pull immigrants to the destination country. -There could be positive incentives that induce people to stay at home. -There could be incentives that cause people to stay away from a foreign country. When push and pull factors are strong enough as compared to stay and stay away factors, immigration will grow as observed in the recent decades (Bodvarsson and Berg 6). Economic Argument for Free Immigration This is a big issue for any country in the world whether to allow free immigration into its borders. The argument for free immigration is that it increases world output and productivity. Labor flows across borders. Consider Mexico and United States. Low-wage workers in Mexico migrate to United States because U.S. offers higher wages. Wages reflect productivity. Because United States has more to offer in terms of wages and technology, people from Mexico give better results in United States than in Mexico. Their productivity is higher in United States rather than in Mexico. Thus, the labor produces more output after immigration, which in turn results in higher world output (Karl 754). Applying Basic Labor Market Model Basic labor market model is applied in immigration analysis. The model simplifies what actually happens in source and destination countries when people immigrate. When labor moves from one country to another, there is not only an international transfer of a factor of production, but also of a consumer. This implies that expenditures, thus the demand for labor, shifts from source to destination countries when people migrate. Immigrants may also produce economies of scale. There are dynamic growth effects observed when people immigrate because immigrants are innovators, entrepreneurs and inventors (Bodvarsson and Berg 26). Theory of International Migration The economic theory of international migration deals with theories of external and internal migration. The economic theory of external migration constitutes three questions: why migrate, who migrates, and what are the consequences for source and destination countries (Bodvarsson and Berg 32). The recent theory of internal migration can be divided into three categories, each corresponding to a particular motive for migration. A migrant can be a supplier of factor services investing in human capital, or a consumer of goods and amenities, or a producer of household goods and services. The connection between migration and investment in human capital was first proposed by Sjaastad. He proposed that a migrant would calculate the value of opportunity available in the destination market, subtracting the costs of shifting and choosing the destination that maximizes his lifetime earnings (Bodvarsson and Berg 32). Immigration Statistics of USA Foreign born as a percentage of total population, 1990 and 1994 to 2005 Country 1990 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 United States 7.9 9.0 9.3 9.3 9.7 9.8 9.7 10.9 11.4 11.5 11.7 11.9 12.1 Source: (Immigration Statistics USA) This table shows the percentage of foreign-born population in the US from 1990 and 1994 to 2005. It is evident from the numbers that foreign born population has an increasing trend (Immigration Statistics USA). Statistics below shows that there were comparatively less immigrants entering U.S. border from 1921 to 1970. However, there was a great rise in immigration levels with the change in immigration law in 1965 (Population Numbers, Projections, Graphs and Data). Source: Population Numbers, Projections, Graphs and Data Sadly, the financial cost of all the immigrants is burdened on the native people of U.S. who pay greater amount of tax every year because of mass immigration (Population Numbers, Projections, Graphs and Data). Conclusion Recent statistics as shown in this paper clearly shows that the level of immigration has risen to a great extent over the past few decades. Economic theories have proven the fact that people who migrate from third world countries work better and show greater productivity in the destination place they migrate to. Labor market model proves that immigrants not only show better productivity but can also result in economies of scale in the destination country (Bodvarsson and Berg 26). The issue over immigration is the question if it is favourable for any country. Different economists have different opinion on this issue. Immigration has many favourable outcomes as discussed in this paper. But on the other hand, in the case of U.S., the over immigration does not solve the overpopulation problems in the world (Population Numbers, Projections, Graphs and Data). References Bodvarsson, Örn Bodvar and Hendrik Van den Berg. The economics of immigration: theory and policy. New York: Springer, 2009. Immigration Statistics USA. 24 July 2011 . Karl, E. Case. Principle of Economics. Pearson Education, Inc., 2007. Population Numbers, Projections, Graphs and Data. 24 July 2011 . Read More