The Way Immigration Has Affected the United States Economy - Research Paper Example

The Way Immigration has affected the United s Economy Introduction The impact of immigration on the economy of the United States can be accurately measured through an analysis of the labor market. As the economy of the United States was thriving during the 1990s and the labor force was inadequate, the disagreement over the impact of immigration on the U.S. economy had been largely ignored. Yet, the issue became more pressing throughout the recent years as immigration kept on increasing dramatically and the labor market was unable to quickly pull through from the economic depression in 2001 (Monthly Labor Review 2010, 41). Scholars have been trying to identify whether immigration has a negative impact on the employment of native workers or whether it takes up an important economic role. This essay argues that immigration has indeed negatively affected the wage rate and unemployment opportunities of U.S.-born or native workers. In order to fulfill the essay’s objective, several important themes are taken into account. The first theme is about the historical development of the U.S. immigration policy. This historical analysis will demonstrate how the dramatic increase in immigration, spurred by changes in the immigration policy of the country, eventually affected the employment opportunities and earnings of native workers. The second theme is about the immigration debate. In order to understand the precise nature of the impact of immigration on the labor market, it is important to identify the strengths and weaknesses of the arguments of pro- and anti-immigration groups. The third theme tackles concrete proofs that the economic benefits of immigrations have been negligible. The last theme focuses on the rise in the unemployment rates of least skilled and unskilled native workers due to immigration. Historical Background The dramatic growth in immigration recently may be due partly to modifications in the immigration policy of the United States. The Immigration Act of 1965 was a decisive moment in the historical development of the immigration policy of the country. The clearest impact of the changes brought about by that policy has been a dramatic growth in the population of foreign-born individuals. These immigrants are younger than the U.S.-born individuals and are comprised of more males than females (Briggs 1996, 372). Moreover, according to the U.S. Department of Labor (1995), immigrants made up 10.8% of the total number of workers in 1994 (Briggs 1996, 372). Another issue is that immigrants are significantly concentrated in few urban areas. However, these labor markets are one of the biggest in the United States, which considerably adds to the impact of their concentration. In 1994, these five urban areas were Washington, D.C., Chicago, Miami, New York, and Los Angeles. Together, they comprised 51% of all immigrants in 1994 (Briggs 1996, 372-373). Thus, the effect of immigration on the labor market is considerably larger than is shown by population data. Immigration has intensified the competition in the low-skilled labor market. Recently, the number of unskilled occupations has failed to keep up with the growth of the unskilled labor force. With regard to skilled occupations, immigration can be temporarily advantageous as a way of supplying capable workers where short supplies of eligible local workers are present. However, the permanent goal should be that these jobs should be occupied by nationals or native residents (Cornelius 2004, 39). In 1989, the Commission on Workforce Quality and Labor Market Efficiency already informed the U.S. Secretary of Labor: “by using immigration to relieve shortages, we may miss the opportunity to draw additional U.S. workers into the economic mainstream” (U.S. Department of Labor et al. 1989, 32). The group further stated that policymakers should “always try to train citizens to fill labor shortages” (U.S. Department of Labor et al. 1989, 32). Shortages must be a warning sign to the educational sector and training policy of the United States to make these workers available and for employers to implement measures to alleviate these shortages. The issue of labor market shortages should not be a justification to encourage skilled immigration as such. The Immigration Debate A current research on the impact of immigration on the U.S. economy was carried out by the National Research Council (NRC) in 1997. The study found out that immigrants contributed to the growth of the nation’s gross domestic product (GDP) during the second half of the 1990s (Gibney & Hansen 2005, 642). Supporters of immigration emphasized this finding, highlighting the positive economic impacts of immigration. However, when the NRC statement was made public, most analysts argued that immigration has a negligible and encouraging economic impact. They claimed that immigration does not make the nation prosperous. The NRC conclusion was derived from the hypothesis that the economy of the United States had stable ‘constant returns to scale’ (CRTS)—implies that increasing the volume of capital and the labor force consequently increases output, and, as a result, immigration does not have the capacity to increase the native workers’ wage rate (Gibney & Hansen 2005, 642). The U.S. economy gains from immigrants because the value of their production is greater than their wages, namely, workers and capitalists who became more productive and profitable due to immigrants. Native workers may have higher unemployment and smaller wages compared to immigrants, but thus far it has been quite difficult to locate credible proof that immigrants worsen the rates of unemployment and lower the wages of native workers. Economic principle states that increasing the number of available workers should lower wages (Borjas 2011, 90). The NRC findings revealed that “immigration produces the net economic gains for domestic residents,” (Gibney & Hansen 2005, 642) primarily because it discovered that immigration reduced prices and wages in the United States and enhanced the productivity of the nation’s economy. The President’s Council on Economic Advisors (CEA) likewise stated in 1986 (Cornelius et al. 2004, 70): Although immigrant workers increase output, their addition to the supply of labor… [causes] wage rates in the immediately affected market [to be] bid down… Thus, native-born workers who compete with immigrants for jobs may experience reduced earnings or reduced employment. As larger volumes of data and empirical findings became accessible during the 1990s, experts were able to gradually identify several effects on labor markets that may be caused by immigration. Researchers discovered that immigrant groups controlled access to certain occupations, for instance, in order to prevent native workers from being informed about job vacancies. The main explanation why econometric studies were unable to identify the impact of immigration on unemployment rates and wages foretold by economic theory is that the labor force and the labor markets of the United States can easily adapt or are flexible: some native workers abandoned urban areas with big populations of immigrants, thus any unemployment or wage effects were immediately diffused all over the country (Gibney & Hansen 2005, 642). Therefore, immigration can have the unemployment or wage impacts anticipated by economic theory although these impacts may not be identified in econometric research. The Overall Economic Benefits of Immigration are Negligible Even though several contributors to the debate over the economic impact of immigration argue that economic benefits from immigration are substantial, the empirical findings reveal the opposite thing: every known estimate show that the net gain annually is remarkably negligible, approximately .1% of GDP (Borjas 2011, 12). In addition, immigration encourages major wealth redistribution. This redistribution negligibly benefits those workers who contend with immigrants. Most of the wealth is transferred to users of immigrant labor like employers (Borjas 2011, 12). Native workers are disadvantaged because immigrants lower wages. Employers are more profitable because immigrants reduce wages. These data create a new way of understanding the debate over the economic impact of immigration. Immigration may be understood as a comprehensive wealth redistribution process. For that reason, the immigration policy discourse is not a disagreement over whether the presence of immigrants improves the economic efficiency of the United States. Instead, the immigration policy discourse is basically a disagreement over how the wealth or income is redistributed or transferred (Briggs 1996, 371). Furthermore, as explained by The Washington Times (2004, A03), immigration could be disadvantageous or advantageous to the U.S. economy through external factors. In any case, immigration enlarges the market’s size. It can bring in numerous new relationships or dealings between employers and workers, and introduce Americans to an assortment of new products/services. Yet, these possible benefits are counteracted by worsened overcrowding or by a greater likelihood of conflicts between ethnic groups. Immigration Increased the Unemployment Rate of the Least Skilled and Unskilled U.S.-Born Workers Immigrants are concentrated geographically in very few states and urban areas. On the contrary, only a small number of U.S.-born individuals reside in these locations. This geographical concentration indicates that it is possible to determine the effect of immigration on the native workers’ employment rates by comparing native workers who live in urban areas with a high concentration of immigrants to native workers who live in urban areas where a small population of immigrants reside (Monthly Labor Review 2010, 41-42). The existing data show that such ‘spatial correlations’ are very unreliable; for instance, if a particular urban area has 5% more immigrants compared to other cities, the wage rate of native workers in the urban area with a larger population of immigrants is possibly .1% lesser (Borjas 2011, 12-13). Due to this result several scholars assumed that immigration has negligible effect on the employment opportunities of native workers. Yet, it eventually became apparent that an insignificant spatial correlation does not automatically suggest that immigration has a statistically negligible effect on the employment opportunities of U.S.-born workers. For instance, immigration into New York reduces the income of native workers in New York significantly. These native workers will certainly do something to regain their employment opportunities or recover from the negative impact of immigration on their earnings. A large number of native workers will relocate from New York into other locations, and individuals who are planning to relocate in New York will now relocate into another place instead. This dispersion of native workers distributes the negative effect of immigration on the labor market of New York throughout the whole economy (Borjas 2011, 12). Ultimately, every U.S.-born worker is badly affected by immigration, not only those who reside in the regions with a high concentration of immigrants. There is proof that the distribution of native workers all over the country, as well as the distribution of native employers seeking inexpensive labor, has in fact reacted. Due to these reactions, the effect of immigration on the labor market should be assessed at the national level (Monthly Labor Review 2010, 42). Basically, immigration appears to have further widened social inequality and income disparity in the United States, lowering the employment prospects of least skilled and unskilled workers. Conclusions This essay has discussed the negative effect of immigration on the employment opportunities and wages of U.S-born or native workers in the United States. Specifically, the goal of this essay is to prove that these native workers have been negatively affected by the growing population of immigrants. Several researchers and econometric studies generated conflicting findings about the wage and unemployment impact of immigration. But a higher number of evidence points to the fact that the positive economic impact of immigration is negligible. But the growing population of immigrants in the United States has marginalized and negatively affected the earnings of native workers. This issue is still relevant today, especially with the continuously growing population of immigrants in the United States. This issue should be accurately and properly understood in order to help public policy mitigate the depressing impact of immigration on the well-being of native workers. Works Cited Primary Sources “Immigrant Competition Shown to Depress Wages: High School Dropouts, Minorities Hardest Hit in Native Work Force.” The Washington Times May 2004: A03. U.S. Department of Labor. Labor Force, Income, and Poverty Statistics for the Foreign-Born Using the March 1994 Current Population Survey. Washington, DC: Bureau of International Labor Affairs, 1995. Print. U.S. Department of Labor et al. Investing in people: a strategy to address America’s workforce crisis: a report to the Secretary of Labor and the American People. Washington, DC: U.S. Department of Labor, 1989. Print. Secondary Sources “Immigration and the U.S. Economy.” Monthly Labor Review November 2010: 41+ Borjas, George. Heaven’s Door: Immigration Policy and the American Economy. New Jersey: Princeton University Press, 2011. Print. Briggs, Vernon M. Jr. “Immigration Policy and the U.S. Economy: An Institutional Perspective,” Journal of Economic Issues 30.2 (1996): 371+ Cornelius, Wayne et al. Controlling Immigration: A Global Perspective. Stanford, CA: Stanford University Press, 2004. Print. Gibney, Matthew & Randall Hansen. Immigration and Asylum: From 1900 to the Present, Volume 1. New York: ABC-CLIO, 2005. Print. Read More