Check out this article by Jason Welker about the Economics of Illegal Immigration. It is a refreshing take on an issue that has gotten a great deal of publicity recently. What are your thoughts after reading the article? Is this different from what you have been hearing from both the Republicans and the Democrats lately? Leave your comments before Sunday at midnight.
Illegal Immigration is not an Economic Issue:
Because if it were, there would be no debate at all. Immigration, from an economic standpoint, is simply the flow of labor from one geographic region to another. I’m not talking about the kinds of immigrants who arrive in America or Switzerland or the UK as refugees fleeing political, religious, gender or racial persecution. Such asylum seekers have motives that are entirely non-economic for fleeing their homelands. I’m talking about the millions of people every year pack up their homes and seek a new life in a new country for economic reasons.
America has been called the “land of opportunity”, and for nearly five centuries now the opportunities the New World has had to offer have attracted immigrants from all corners of the globe. First it was the Spanish and the Portuguese who came in conquest in search of gold and silver. Later came the pilgrims seeking religious freedom, and after that the Irish, Italian, Germans, Russians and countless other Europeans seeking the economic opportunities offered by the construction of railroads, homesteads on the Great Plains and gold in the mountains of the West. Chinese arrived by the millions from the 1850′s through the turn of the 20th century, and over the past hundred years America’s racial, ethnic, religious, linguistic and cultural fabric has been enriched by the arrival of millions upon millions of people seeking the economic opportunities America has had to offer. The opportunities of the 21st century no longer involve the hope of striking gold or working on the railroad, rather they exist in industries such as software engineering, medicine, scientific research, finance and, yes, agriculture and construction.
It is interesting to me that in the United States today, American citizens and politicians seem to be as angry as ever about the seemingly endless flow of “illegals” flooding across the American border, bringing with them crime and contributing to unemployment among American workers already struggling to find jobs during the country’s deepest
recession in decades. If you believe politicians like the governor of Arizona,
Jan Brewer, this “invasion” of illegals from south of the US border is simply tearing apart the fabric of American society. Her state has even gone so far as to pass a law requiring police officers to require anyone who they suspect of being “illegal” to present proof of their legal status upon the officer’s request. Other attempts by states to crack down on illegal immigration include laws forbidding landlords from renting apartments to illegal immigrants and on a national level there is a major push to change the US constitution, in which the 14th Amendment states that any child born in the United States is automatically a US citizen. Imigration opponents claim that millions of Latinos enter the US illegally to have babies, which they call
“anchor babies”, who become US citizens and then, supposedly, later in life, help their parents become legal US residents.
The protest against illegal immigration has dominated the right wing agenda in America lately, and has brought angry Americans to the street for rallies across the country aimed at sending illegals “back to where they came from”.
The irony of the whole situation is that today, in the midst of the Great Recession, immigration rates are falling rapidly. The number of immigrants entering the United States illegally has actually
fallenby 67% in the last few years, from 850,000 per year between 2000 and 2005 to under 300,000 in 2009. Even more ironically, the number of illegals
leaving the United States now actually exceeds the number
entering the US, meaning that the total number of illegal immigrants (around 11 million in 2009) is decreasing and is lower now than it has been for much of the last decade.
The Washington Post presents the facts:
From an economic perspective, the backlash against illegal immigration to the United Sates right now is perplexing and frustrating. Americans currently find themselves in a dire economic situation in which over 8 million people have lost their jobs, the unemployment rate is stuck at a historic high of nearly 10%, and discouraged workers have dropped out of the labor force at alarming rates, meaning that almost one in five Americans is either unable to find work or has given up the search. Clearly there is much to be upset about.
But all the facts above send a clear message to potential illegal immigrants to America, as well as to those who are already here! The message is, “DON’T COME!” (or for those who are already here, “maybe this is a good time to leave!”). Some of the decrease in the flow of illegal immigrants can probably be attributed to tougher border security and increased enforcement of the existing immigration law. But it’s more likely that the decrease in the illegal population is an economic phenomenon. Here’s why:
America purportedly practices a system of economics known as a
free market. The fundamental characteristic of the free
market system is that resources are allocated efficiently when they are allowed to flow from markets in which they are in low
demand to markets in which they are in high demand.
Price is the signal that tells resource owners where their resources are demanded the most. When we are talking about immigration, the resource that is flowing from market to market is
labor. In a
free market economy, there should be no government controls over the free flow of labor from one market to another. When the price of labor in one market (say the apple industry in Washington State or the construction sector in Arizona) is higher than in another market (say the corn industry in Mexico or the retail sector in Guatemala), the signal sent by this imbalance of wages is that more labor is demanded in Washington and Arizona and less is needed in Mexico and Guatemala.
The imbalance of wages between the US and its closest neighbors leads to a natural inflow of labor from low-
wage countries to the higher wage industries in the United States. It’s a form of osmosis, which according to Wikipedia is “the movement of water across a partially permeable membrane from an area of high water concentration to an area of low water concentration… which tends to reduce the difference in concentrations”. Instead of water, immigration is osmosis of labor. Labor is more abundant in Mexico and Latin America than it is in the United States. The flow of labor across America’s “semi-permeable” border with Mexico simply “reduces the differences in concentration” of labor between the US and its southerly neighbors.
Making it harder for immigrants to come into the United States does little to protect American jobs. One thing I teach my students is that in a world where labor is not able to be imported (i.e. one where immigration is stemmed or slowed down), we should expect to see
capital exported. A higher border fence with Mexico or more immigration police or a repeal of the 14th Amendment may reduce the number of people coming to the United States to find work, but these barriers to immigration will do nothing to stop the flow of capital to Mexico and the rest of the low-wage world. If Americans want more jobs to be done in America, then they should embrace those who are willing to do them, otherwise those jobs can be exported to where the wages are lower and people are willing to do them. If labor is immobile, capital will grow legs!
The immigration debate is not an economic debate. It is a political one. From a purely economic perspective, with the efficiency of free markets as a guiding principle, the free flow of labor across national borders improves overall efficiency of both the countries from which the immigrants come and the country in which they arrive. American workers are only marginally affected by the presence of illegal immigrants in the United States. Several studies have shown that
while employment among certain Americans is affected slightly, there is no evidence that illegal immigration puts downward pressure on American wage rates. Jobs that might not even exist in America without immigrant workers willing to work for low wages
do get done thanks to immigration, and the American economy is stronger and healthier because of this. Without immigration, those jobs will still get done, just
not in America! Or, if the jobs can’t be exported, they’ll get done but at a much higher cost, raising prices for American households and reducing the real
income of the American people.
In economic terms, increased immigration allows the United States to have a
comparative advantagein the production of a broader range of
goods and
services than it would have without immigration. Since in a global economy, what a nation’s economy produces is determined by what it can produce at the lowest opportunity cost, the more low-wage labor America has to employ, the larger it can expect its economy to be and the greater number of exports it can expect to sell to the rest of the world. Immigration is overwhelmingly positive for the American economy, even illegal immigration. If it weren’t illegal, it would happen anyway, just more of it, which again would only make the US economy stronger and its output greater.
Again, these are all mute points in the current American debate over immigration, because the fact is that the net flow of illegal immigrants is actually negative right now.
NPR reports,
Signs are pointing to stabilization on the border… as a still-sputtering U.S. economy and high
unemployment continue to contribute to the over-the-border slowdown. Estimates suggest that the U.S. economy has lost 8 million jobs in the downturn, including 4 million manufacturing and construction jobs over the past three years.
The free market offers the perfect solution to the illegal immigration debate in the United States. Let it be! If America doesn’t need more labor, then labor will not come to America, and some of that which is already here will leave. But once the US economy begins to recover and the demand for labor begins to grow once more, let it be! Instead of building higher fences and hiring more border police, find ways to make it easier for workers to enter the country and fill the jobs for which they are demanded. America will be stronger for it! After all, if we don’t embrace the inflow of labor, we better be prepared for an outflow of capital. And as even my first year IB Econ students can tell you, a decrease in the labor force and the amount of capital in a nation is a recipe for economic contraction, recession and declining standard of living among that nation’s people.
Is that the America we want to see in the future? Would America be the land of freedom and opportunity today if it had kept out immigrants throughout its history instead of embracing them and incorporating them into American society and the US economy? I doubt it. So, America, end the debate… because from an economist’s perspective, it was over before it even began!
