Economics of Immigration - Essay Example

? Economics of Immigration Immigration forms part of one of the essential components of today’s world. The definition of immigration varies from country to country. For some countries, immigration also includes those people who do not have the nationality of that particular country (OECD, pp.28). For different reasons, which significantly include economic impacts, immigration has become extremely important for many people. Generally, an increase in immigration results in an increase the average supply of labor in the country, which contributes to a larger labor force. However, the economic impact largely depends upon the skills of those immigrated (House of Lords, pp. 5). A question however arises. Why is there a large need for immigration? In many poor countries, the population grows at a faster pace than the creation of employment opportunities. The political instability, economic and social problems all propel certain people to immigrate, either legally or illegally, to developed countries. Mexico is one such country that has shown a large increase in immigration to countries such as the United Sates. Many of the Mexican workers in the United States have immigrated illegally, without any inspection or a Visa (Yoshida, pp. 2). The major relationship of migration occurs between the United States and Mexico. Around 9 million people, born in Mexico have now migrated to United States. This migration has largely created economic changes in Mexico and United States. Two major factors have resulted in the blooming of this relationship. The first is because of increased economic growth. Secondly, because of high inequality in Mexico and between Mexico and United States, the immigration has increased (Bush, McLarty, Alden, pp. 39). Immigration is largely because of economic factors and it further has economic impacts. The paper shall attempt to discuss the economic reasons of immigration into the United States from Mexico, what economic effects it has had on the U.S and Mexican economy. It also covers America’s policy, regarding immigration. As mentioned above, economic factors play a major role in an increase in immigration in the United States from Mexico. After the Second World War, there was a baby boom in both the United States and Mexico, but eventually in 1960, it reduced in US but continued to grow in Mexico. The Mexican economy did not create as many jobs as it should have for the working population; therefore, it resulted in immigration into the United States. Economists have concluded that around one third of immigration from US to Mexico in the past decades has occurred because of an increase in birth rates. (Bush, McLarty, Alden, pp.39). However, the baby boom does not remain the only economic factor, explaining immigration. The second largest reason for immigration into the United States is due to the weak Mexican economy. For the past decades, the Mexican economy has not created enough jobs; the minimum wage remains too low. Even though the Mexican economy grew in 1960s and 1970s, the 1982 debt crisis rocked the economy largely, resulting in emigration from Mexico in search for higher paid jobs. The trend towards higher immigration into the United States from Mexico has largely been followed by recessions or slumps in the Mexican economy (Bush, McLarty, Alden, pp.39). In fact, the economic factors play such an important role in the process of immigration in United States from Mexico that the major source of revenue in Mexico comes from remittances sent by Mexicans working in the United States (Drachman & Paulino, pp. 124). Although immigration to another country may occur because of political instability and religious reasons, in the case of Mexico, this immigration has largely occurred because of economic problems. Mexicans have gained economically because of this immigration into the United States. It increases the wage per hour of an average Mexican worker; therefore, increasing the standard of living. Moreover, the United States provides a safe harbor when the Mexican economy is growing slowly. It has been observed that immigration, in particular, illegal immigration increased in 1983, 1987 and 1995. Such years witnessed a deep slump in the Mexican economy. In addition, during the recession of 2008 in the United States, immigration decreased because the US economy did not seem as attractive as before. Furthermore, much of the migration is seasonal, as well. Seasonal employment patterns bear witness to this factor (Bush, McLarty, Alden, pp. 40). Therefore, it stands to prove that the biggest reason for immigration depends largely on economic factors. Many studies have been conducted to show the impact of immigration on the economy of both the host and the sending country. First, the paper shall discuss the impacts on the economy on the host country, which is the United States. The impacts are largely both positive and negative. Immigration may result in an increase in economic output, but the increase in immigration results in a burden on the resources of a country. The government may increase the taxes to provide for public services, which may significantly influence the natives. Therefore, it also shows the impacts of immigration can become largely diversified and conflicting. Another paper also testifies the fact that although the US labor market has had a negative impact, the effect has not become highly substantial. This is because Mexican workers are largely unskilled and belong to the lower skilled occupations. However, many some employers favor low-wage immigrant labors, especially in periods of high immigration, because of the low-wage factor (OECD, pp.10). However, recently, people in the United States have also realized that Mexican workers are integral to the economic growth of the United States, that they fill employment gaps in those areas that have been recently tapped, which includes states such as Tennessee and Mississippi (Immigration Policy Focus, pp. 3). Immigration into the United States has wide economic impacts for Mexicans and the Mexican economy itself. The immigrant itself receives an increase in living standards, better education, and a chance to send money to their home country to their family. However, Mexican economy sees a negative impact, as well. By exporting labor, the Mexican economy suffers from a loss of GDP, because of poor utilization of resources of Mexico. However, it has also been noticed that the decrease in the supply of labor in Mexico has resulted in an increase in minimum wage figures. Average wages in Mexico have shown an increase by 8 percent. The loss to the GDP therefore is not very substantial. In fact, it is also off set by the remittances sent by the workers in the United States, which contributes significantly to the Mexican economy. It offsets the balance of payments and contributes to around 1.5 percent of GDP, as found out in 2002 (Bergesten, pp. 359-260). The overall net cost of immigration from Mexico into United States is extremely low and the benefits quite high; therefore, the trend towards higher immigration has been higher. Mexican immigration forms a major part of the phenomenon in the United States. There are important economic consequences for both Mexico and United States. The economic impacts are not limited only to the current times, but they will continue to do so in the future years because Mexican workers form such a large proportion of the U.S workforce. The American immigration policy, in addition to new trade policies and agreements between Mexico and United States has also affected the relationship of the economics of immigration between the two countries (Borjas, pp. 11). The paper shall now discuss the American trade and immigration policy. The US-Mexican immigration had increased during the 1990s, and because of this ‘immigration hump’, the U.S policy started to include border controls and checks to prevent unauthorized immigration. These border controls helped restrict the movement of illegal aliens across the borders. Afterwards, before the September 11 attacks, a move towards a liberal immigration policy was started, for a number of reasons, mostly because President Bush wanted to get votes from the Hispanic population. However, after the 9/11 attacks, this policy was eventually abandoned, but immigration on United States soil continued for a variety of reasons, which ranged from high unemployment figures, a growing economic recession since 2001 and as a border studies report concluded: “Migration between United States and Mexico is a permanent, structural phenomenon. It is built on real factors, ranging from geographical, economic inequality and integration, and the intense relationship between the two countries that make it inevitable” (Cornelius, pp. 82-83). However, with the advent of ‘North-American Free Trade Agreement’ (NAFTA) between United States and Mexico, the economy has enjoyed a boom in immigration, which has further led to significant impacts on the economy. The export sector in Mexico has improved, and reforms in Mexico have pushed towards a stronger economic growth. NAFTA has increased the problem of illegal immigration. Illegal immigration has adverse impacts for the economy. The illegal immigrants do not pay in taxes, yet use the public services. It significantly influences the federal budget. Illegal immigration spurred because of NAFTA because Mexico showed an increase in improvement in technology because of the agreement. The unskilled labor therefore migrated to the United States, in search for better pursuits (Bush, McLarty, Alden, pp. 40-41). Inevitably, the immigration trend has been the same, on a constant move for almost the same reasons. Many studies, however have also found out that illegal immigrants do not have economic costs to the United States economy, since they take jobs that would otherwise be unfilled. However, the wage rate has shown a decrease in such employment opportunities, which is harmful for high school dropouts. There is availability of substantial evidence to prove that the wage rate has dropped, because of excess supply in the labor market, however it does not necessarily create a negative impact on the U.S economy. The overall impact of immigration into the United States has actually been positive, around 0.11 percent of GDP in the year 2005 (Kellogg Insight, n.p). The literature regarding the intense relationship of migration between the United States and Mexico covers a broad range of economic impacts. In fact, this literature continues to grow rapidly. This is because immigration has far-reaching economic consequences, which are significant. In recent decades, the skill composition on the U.S workforce has changed sharply. The wage structure has also undergone rapid change due to this immigration (Borjas, pp.11) Therefore, both economic reasons affect immigration, which creates further economic consequences. Works Cited "A Borderline Question - The economics of immigration." Kellogg Insight | Kellogg School of Management. Retrieved on July 23, 2011: http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/a_borderline_question "Mexican Immigrant Workers and the U.S Economy: An increasingly vital role." Immigration Policy Focus. Volume 1, Issue 2: 2002. Borjas, George J. "Introduction." Mexican immigration to the United States. The University of Chicago Press, 2007. Print. Bush, Jeb, Edward Alden, and Thomas McLarty. "Immigration policy." US immigration policy. Council on Foreign relations, 2009. 39-41. Print. Cornelius, Wayne A. "The United States: the continuing debate." Controlling immigration: a global perspective. Stanford University Press, 2004. 82-83. Print. House of Lords. "Introduction." Economic Impact of Immigration. Select Committee on Economic Affairs, 2007. 5. Print. OECD. "Foreigners and Foreign-born Population." Society at a glance: OECD social indicators. Paris: OECD publication services, 2003. 28. Print. OECD. "Introduction." Migration, free trade, and regional integration in North America OECD, 1998. 10-11. Print. Yoshida, Chisato. "Introduction." Illegal immigration and economic welfare. 2000. 2. Print. Read More