The Economic Effects of Immigration - Essay Example

The Economic Effects of Immigration Legal permanent residents (LPRs) are foreign nationals who have been granted the right to reside permanently in the United States. LPRs are often referred to as simply "immigrants," but they are also known as "permanent resident aliens" and "green card holders (Immigration: Legal Permanent Residents (LPRs), 2008) ". In countries like UK and America, the increase in the number of foreign-born people has increased to a considerable extent in the last three decades or so. The reasons behind this increase are multifold. You will understand the reasons by learning the fact that permanent resident status confers certain rights and responsibilities. For example, LPRs may live and work permanently anywhere in the United States, own property, and attend public schools, colleges, and universities. They may also join certain branches of the Armed Forces, and apply to become U.S. citizens if they meet certain eligibility requirements (Monger & Rytina, 2009). It is due to the number of benefits associated with the idea of becoming legal permanent residents that in 2008, a total of 1,107,126 persons became LPRs of the United States (see Table 1 and Figure 1). The majority of new LPRs (58 percent) already lived in the United States when they were granted lawful permanent residence. Nearly 65 percent were granted permanent residence based on a family relationship with a U.S. citizen or legal permanent resident of the United States. The leading countries of birth of new LPRs were Mexico (17 percent), China (7 percent), and India (6 percent) (Monger & Rytina, 2009). This graph makes it pretty clear that LPR flow to America has always been moving up and down but a considerable number of people have already attained the status of LPR in this country, making it one of the most favorite countries for immigration. Following figures will also give you an idea about this particular fact. This table shows a 5% increase in the total number of immigrants from 2007 to 2008. But, it also shows a greater increase (8%) in the number of newly entered legal immigrant as compared to those with change of status (3%). This is a considerable amount of people coming to US and a further increase in these numbers is expected. Actually, people migrate to other countries because of a plethora of reasons. Generally though, people do so to raise their financial status and that's the reason why most people come to America from certain Asian and African countries. Since America and UK are the countries where people can find better job opportunities with enhanced security, they prefer leaving their homeland. But, there can also be some other motives for immigration. For instance, during 1890-1924, the reason for Jews immigrants to come to America was the religious freedom, Asians and Italians were in search of work and Russian wanted to escape persecution. But, it is a fact that the increase in number of immigrants has a great impact on the economies of these so-called "immigrant friendly" countries. Obviously, it is not easy for a country to accommodate and provide all essential facilities to millions of people who actually don't belong to that country. This essay is all about delving more into the details pertaining to the economic effects of immigration on all those countries. Economic Effects of Immigration: As mentioned, America has always been known as a nation of immigrants but it is true that the nation has faced various types of problems and negative impacts due to the increase in the number of immigrants coming from Europe, Asia and Latin America. Immigration can create some sort of an impact on different economical aspects but its impact on labour market is more crucial. The increase in the number of immigrant has power to influence the labour market but the impact can be different in different areas and states. It is so because these immigrants are not evenly distributed in all part of America. Hence a different kind of influence can be seen on local and regional labour markets. In 2003, the President of The American Federation of Labor and an immigrant himself- said we immediately realized that immigration is, in its fundamental aspects, a labor problem. All immigrants have to work or be supported by those who do. In most instances, so do their spouses and children eventually (Briggs, 2003). Actually, the biggest fear of immigration is the loss of employment for native workers. According to a study conducted by the Center of Immigration Studies in February 2005 it was found that in 2002, the net loss to U.S. natives from immigration was $68 billion. This $68 billion annual loss represents a $14 billion increase just since 1998. As the size of the immigrant population has continued to increase, so has the loss (Davis &Weinstein, 2005). However, when it comes to labour market, you can find three types of workers working in different industries. First off, there are workers with low level of skills, then comes those with intermediate level of skills and finally the workers with high skills are found in the market. Now, it is found in several studies that most of the native workers fall in the category of workers with intermediate skill level, whereas, immigrants either possess low skills or high skills. What it means is that those immigrants who come with low skills don't affect natives with intermediate skills and immigrants with high skills make technological and scientific contributions to help lifting the overall economy. So, there surely are negative impacts on the labour market but immigrants also contribute towards the expansion of economy. Following chart will give you an idea about the level of education of immigrants and natives. You can see that a wide majority of immigrants comes with a less than high school degree. That's the only part of the market where natives have to compete with immigrants to secure jobs. Other than this, natives possessing better qualifications are preferred by employers. But, economy also gets benefited by the number of professional degree holder immigrants. Here, it is also quite significant to mention that immigration will have a different effect on economy in short run and long run. In case of short run, it is obvious that technology as well as capital will remain fixed. Or, you can say that both these factors will not be fully adjustable. What it means is that the increase in immigration will directly affect the supply of labour or workers and the wages of local workers will have to suffer as now the competition will be on an upsurge. But, a decline in wages will only be for those workers who may be the substitutes for the immigrant workers due to the same level of skills. In short run, increase in supply of labour will also help employers to earn more profit but that's not the case in long run. In the long run, it is assumed that capital and technology may partially or fully adjust to immigration. For example, because immigration increases the returns to capital in the short run, investment is likely to increase in the long run, thereby driving down profit margins. More investment in, for example, machines and equipment, increases the demand for labour to operate the equipment, thus raising wages back towards their pre-immigration rates (The Economic Impact of Immigration. 2008). In addition to labour market, the net increase in immigration has a fiscal impact as well. The immediate fiscal impact of immigration is negative; American taxpayers bear a cost of immigration at the state and local levels and more or less break even at the federal level. When looked at from a long term perspective, however, the fiscal impact of immigrants on American natives is positive, with the positive federal effect outweighing the negative state and local effect (Isbister, 1997). The main issue to discuss is the amount of pressure being exerted by these immigrants on social welfare, health and education systems. But, according to Coppel, J, J. Dumont and I. Visco (2001), efforts to compute the net fiscal contribution of immigrants are complicated. The results depend very much on the methodology adopted, the time period concerned, the assumptions about what should be considered and excluded, which public services are regarded as pure public goods, the appropriate discount rate and the demographic unit of analysis (individuals or households). Besides having an impact on labour market and fiscal policies, which is not too serious, immigration can create problems pertaining to one important factor, i.e. the supply of land. Since the supply of land is limited, it is obvious to face certain problems due to an increase in the population density. It is only because of this particular fact that housing crisis can create problem for immigrant-receiving country. When it comes to economic effects of immigration, it is obvious to focus on labour market and fiscal effects but it is crucial to see the effects being created by immigration on housing market. Though it is thought that immigrants demand for housing is not extensive and they prefer to stay in smaller households but these preferences change with time and immigrants start to demand for housing like locals, resulting in a pressure on housing market of that country. But, it is found by US Department of Commerce (1997) that the longer an immigrant remains in this country, the more likely he or she will be to purchase a home, up to a point. Last year, the homeownership rate was highest - 80 per- cent - for foreign-born citizens who entered the United States between 1950 and 1959 compared to only 36.1 percent for those who entered the country in 1990 or later. So, a decrease in the per capita living space is surely a problem to deal with through more refined immigration rules and policies. Discussion and Conclusion: By delving more into the details mentioned in previous paragraphs, it becomes quite easy to conclude that though there are certain negative effects of immigration but positive effects also tag along. There are several such industries in America which are working fine just because of the immigrant labourers. For instance, textile and agricultural industries has now become able to raise productivity just because of the availability of immigrant labour. Since these labourers are willing to work at slightly lower wage, it becomes easier for industries to provide goods and services more cheaply. Moreover, it should also be kept into perspective that these immigrants has to use certain services along with buying different products that may have been made by the native workers. What it means is that more shoes will now be sold as immigrants also need them and that will surely help natives and the economy as a whole. While considering this same phenomenon from another perspective, it shows that immigrants willing to work at lower wage have created some negative impact on natives who ask for a higher wage rate. Also, if you see things from another angle, you will find that immigration is not beneficial for the natives but only for the immigrants. The thing is that high U.S productivity inspires workers and capital to come to this country. Due to this entry, an increase in U.S exports will be witnessed along with a decrease in the exports of other countries which will now be having lower level of capital and workers. However, this entire process will reduce the price of exported goods for U.S and will increase the price for imported goods. It means that U.S natives will suffer because of the entry of new foreign born workers. But, the fact remains that economy as a whole gets benefited because more goods and services will now be available at lower rates because of decline in cost of production for companies and it will also increase the overall size of the economy. Similarly, when fiscal effects are considered, it is found that immigrants pay taxes to use certain public services. But, it is also a fact that long term fiscal contributions of immigrants differs a lot. It basically depends on their age and education. Immigrants having higher education are more likely to pay higher taxes. It is so because there income will be higher. But, with immigrants having lower income the effects on economy will not be so good because they will pay less in form of taxes to enjoy same level of public services. However, it is also true that the negative effect of low-paid workers will fade out with an increase in their income and with their children serving the nation as this will compel them to pay more taxes. Furthermore, immigration can actually help in lowering the inflation rate as locals will not be interested in spending or consuming more because of the fear of unemployment. All in all, it can easily be concluded that though immigrants can create an impact on the economy which are slightly negative only in the short run. When you talk about long term impact of immigration, you can see that no real negative effects are created by these foreign born individuals on the economy. But, the fact remains that the biggest beneficiaries of migrations are only the migrants themselves as they get more money and security in countries like US and UK as compared to their native countries. References: Coppel, J., J. Dumont and I. Visco (2001), "Trends in Immigration and Economic Consequences", OECD Economics Department Working Papers, No. 284, OECD Publishing. doi:10.1787/553515678780 Donald R. Davis. David E Weinstein. (2005). United States Technological Superiority and the Losses From Migration. Retrieved on April 25, 2009 from Center of Immigration Studies. Website: http://www.cis.org/articles/2005/back205.html "EFFECTS OF IMMIGRATION ON U.S. WORKERS:VERNON M. BRIGGS, JR." Congressional Testimony. 2003. Retrieved April 25, 2009 from HighBeam Research: http://www.highbeam.com/doc/1P1-86538056.html Immigration Bolsters U.S. Housing Market. 1997. US Department of Commerce. Immigration: Legal Permanent Residents (LPRs). (2008). Retrieved April 25, 2009, from Homeland Security. Website: http://www.dhs.gov/ximgtn/statistics/data/lprmaps.shtm Isbister, John. "The New Americans: Economic, Demographic, and Fiscal Effects of Immigration." The International Migration Review. Center for Migration Studies PR Account. 1997. Retrieved April 25, 2009 from HighBeam Research: http://www.highbeam.com/doc/1P3-24024935.html Randall Monger. Nancy Rytina. (2009). U.S. Legal Permanent Residents: 2008. Annual Flow Report 2009. Office of Immigration Statistics. The Economic Impact of Immigration. (2008). Select Committee on Economic Affairs, 1st Report of Session 2007-08. Read More