Impact of Immigration Policy Reform on Labor Market - Research Paper Example

IMPACT OF IMMIGRATION POLICY REFORM ON LABOR MARKETS The immigration policy is one of the most significant factors for labor market condition of a country. It has been observed that the reform in such policies leads to either declined or inclined in country’s economy. The immigration policies of one country usually differ with the other country. These policies differ according to the requirements and needs of labors of the countries. A country usually develops relaxed immigration policy when it needs skillful labors from foreign countries that could be beneficial for its economy. On the other hand, a country makes strict immigration policy when it wants to discourage the inflow of foreign workers in the economy. This is usually done by the government of the country when it controls its economy or when it encourages its local workers to participate in the overall economic well being of the country. It is worth notable that several countries design their immigration policies based on the group of skilled or less skilled workers. For instance, United Arab Emirates has developed relaxed workers’ immigration policies for skillful workers such as Medical Doctors, engineers, welders, plumbers etc. It has also been observed that some countries are status conscious and they do not involve themselves in some of particular work such as welding, carpeting, driving, etc. Therefore, they require foreign workers to work on these positions. For example, most of the GCC countries can be categorized in these countries. Various studies have been conducted to find out the impact of immigration policies on labor market. The studies demonstrated that how change in the country’s immigration policies can influence the employment rate, wages of workers and the economy well being of a country. A study conducted by David Card to find out the influence of immigration policies on US wages and employment revealed that less strict immigration policies lead to an increase in the number of foreign workers of different skill groups in a country. On the other hand, it has been argued that immigration impacts negatively on wages at the national level (Dustmann, Hatton and Preston, F297) A study on OECD countries has been conducted and they found that relaxed immigration policies have a positive effect on the country’s labor market. They revealed that these policies positively affect native wage rates that range from no affect to approximately 4 percent. They further concluded that, those native workers who did not get college education gain the highest wage increases (Pritchard) People and economists that support strict immigration policy argues that the supply of labors in the labor market is increased by having relaxed immigration policy as a result of which lower wages prevail in the labor market. The lower wages do not harm the immigrants so badly but it hurts the native workforce. However they do not focus the second side of the coin as immigrants also fulfill the requirement of the skilled and less skill worker in the labor market. In addition to that, immigrants buy goods and services when they receive labor income which in turn increase demand of the goods and services and thus demand of labor to produce output increase. Therefore, increased immigration leads to higher labor demand and labor supply. It has also been noticed that the influence of immigration on wages differ across labor markets; labor markets where labor supply is more than labor demand result in high wages whereas wages rise in the market where labor supply is less than labor demand (South Western College). The less strict immigration reform also brings prosperity in the country. Immigrant workers are productive because they arrive at the stage of life when they are active and they are in another country to earn more money. In addition to this, more number of immigrants leads to increase in the per capita income of the country. Another benefit of having relaxed immigrants policy in the country is that it enhances the productivity of the domestic workers because competitive environment arises due to the influx of large number of immigrants in the country. Immigrants also work at cheaper wages than the native workers due to which domestic workers start working efficiently. On the other hand, it has been argued that the relaxed immigration policy leads to an increment in the wage of complementary workers and it lowers the wage of competing workers. The influx of foreign workers occupies the economic opportunities for domestic workers; the domestic workers face intense competition in the labor market. Moreover, domestic workers are paid less for the work they were being paid more in past (South Western College). In United States, the number of immigrants has surged rapidly since 1960s which has been because of the relaxed immigration policies made for foreign workers. In 2000, US accounted 10 percent of immigrants of its total population. While in 2010, yearly average salary of immigrant workers from less developed countries increased by $22,000 and the average earnings of college graduates reached to an average of $57,000 per year. These immigrants bring various benefits in US in terms of skills, ideas, abilities and human capital (Peri). However, it’s the employment based immigrant selection system of United States is still a debatable topic. Some economists do not favor the policies and argue that the system is not properly aligned according to the current economical situation of U.S. While some economists favor the policies and argue to continue them in the future. The U.S. immigration policy is based on the three elements: a. Humanitarian protection b. Permanent US citizenship and c. Meeting labor markets needs (Papademetriou, Meissner, Rosenblum and Sumption, 5) It is interesting to note that the U.S. immigration policy differs from the policies of other countries. For instance Australia and Canada evaluates immigrants according to their education, skills, attributes and working experience. If the immigrants score more than the native population then they will be hired to work in the country (Lozano, and Sørensen, 2-3) Relaxed immigration policy has allowed both skillful and less skilled workers to contribute in U.S. economy. Various skillful workers including researchers, students and entrepreneurs have been hired to work in U.S. markets and almost one third of the 20th century U.S. Noble prize winners are immigrants. The above success is associated with the changes in U.S. immigration law in 1990 which has encouraged the educated and skillful workers to work in America. The changing policies have also enhanced the contribution of low skilled workers in U.S. economy as these policies have played a significant role in the development of U.S. economy. Furthermore, U.S. has reported low unemployment but the production level has been slowing since 1980. However, immigration have become a fundamental source for the economic growth of United States (Papademetriou, Meissner, Rosenblum and Sumption, 6-7) Papademetriou, Meissner, Rosenblum and Sumption (5) have argued that in spite the above benefits; there are significant disadvantages for relaxed immigration policies in U.S. They conducted a study and concluded that the number of workers’ immigrant and wage rates are indirectly related with each other. The increasing number of immigrants would decrease the wage rates in U.S. which would harm the domestic workers badly. It has been noticed that U.S. policy makers design worker’s immigration policy according to the labor requirement in the country. The President of U.S. has recently signed the new immigration policy of United States. According to the policy, no actions would be taken against young illegal students who came to U.S. before 16 years of age and have now successfully got college degrees. This reform in the immigration policy allows almost 700,000 young immigrants to work in U.S. legally. After this announcement, the U.S. native students have protested against this policy and they have asked the government to expel these illegal immigrants from America. Many economists believe that the new policy is against the domestic workforce of U.S. and the implementation of this policy would discourage U.S. native workers. On the other hand, several economists think that the reform in the policy is better for the future of U.S. economy. The director of the Institute for the Study of International Migration at Georgetown, Susan Martin, also considers the reform as a better action of the government. The illegal immigrants who have got college degrees are involved in low skilled jobs such as housekeeping, nursing and janitorial work due to the improper documentation. The legalization program would give them proper identity in the U.S. labor market and eventually the economy will boost as it has been seen in 1980’s. The decade brought several benefits for the US economy and one of these benefits is high wage rates and more secured jobs (Dwoskin) The new reform in the immigrants’ policy also seems better in a sense that low birthrates along with rising life spans of U.S. citizen would result in declining active workforce in the country. Therefore this reform could solve the current U.S. problems by allowing foreign youngster to work in US legally. Works Cited Dustmann, Christian, Tim Hatton and Ian Preston. “The Labour Market Effects Of Immigration.” The Economic Journal. 115. (Nov. 2005): F297-F299. Dwoskin, Elizabeth. “How Obamas New Immigration Policy Will (May) Help Young Workers”. Bloomberg Business Week. Jun. 2012. 9 Oct. 2012. < http://www.businessweek.com/articles/2012-06-18/how-obamas-new-immigration-policy-will-help-young-workers-dot-maybe> Lozano, Fernando and Todd Sørensen. “The Labor Market Effects of Immigration Reform.” A Quarterly Publication of the University of California, Riverside. 4.3. (2011): 1-11. Papademetriou, Demetrios, Doris Meissner, Marc Rosenblum and Madeleine Sumption. “Harnessing the Advantages of Immigration for a 21st Century Economy: A Standing Commission on Labor Markets, Economic Competitiveness and Immigration.” Migration Policy Institute. May 2009. 9 Oct. 2012. http://www.migrationpolicy.org/pubs/StandingCommission_May09.pdf Peri, Giovanni. “Rationalizing U.S. Immigration Policy: Reforms for Simplicity, Fairness, and Economic Growth.” The Hamilton Project. May. 2012. 9 Oct. 2012 < http://www.hamiltonproject.org/papers/rationalizing_u.s._immigration_policy_reforms_for_simplicity_fairness_/> Pritchard, Claire. “Welcome, Stranger: The Positive Labor Market Effects of Immigration.” Chicago Policy Review. Jun. 2012. 8 Oct. 2012 < http://chicagopolicyreview.org/2012/06/03/welcome-stranger-the-positive-labor-market-effects-of-immigration/> South Western College. Policy Debate: Does U.S. immigration policy harm domestic workers?. 7 Oct. 2012 Read More