The United States is home to the highest number of immigrants across the globe. Precisely, at least 40 million individuals living in the U.S. are born in other countries (Wiener, 2020). Consecutively, almost an equivalent number of individuals have at least one foreign born parent. Almost one in four individuals living in the U.S. belong to either foreign born (first generation) or children of foreign born parents (second generation) (Wharton, 2016). Despite the fact that immigrants has accumulated fasted in the U.S. than in any other developing or developed country, the debate of immigration policy has become a bone of consumption in the recent past, especially during the Trump administration. Apparently, immigration does not only impact the immediate environment where the immigrants occupies, learns and works, but also impacts the economy. This paper pays high attention to the analysis of the impacts of immigration to the economy.
One of the major perceptions of the impact of immigration to the economy is that immigrants increases the competition for employment opportunities which are meant to be for the American citizens. Influx of immigrants contributes to short term losses especially due to lower wages and increased unemployment (Wiener, 2020). Apparently, according to the standard economic theory, though the high supply of labor from the immigrants may depress wages, organizations can enhance investments (through the savings from the reduced cost of labor), which in the long run restores the amount of capital per employee. A gradual growth in per capital-labor ration prevents the average productivity of the employees, and this, in the long run prevents average wages from decreasing.
Immigrants tend to enhance the level of ingenuity and talent in the society, which greatly fosters economic growth. According to a study that was done in 2011 concerning the top fifty venture capital funded companies, it was established that approximately 76 percent of the top 10 U.S. patent producing universities had more than one foreign born author (Wharton, 2016). Precisely, the patents registered by immigrants was twice that of the natives (Caliendo et al., 2018). In overall, if the productivity of individuals is measured in terms of the GDP per person, the impact of the immigrants can be assessed by evaluating the change of the GDP within a given period. For example, if the immigrants are productive, per capital GDP of the country should increase.
The impact of the immigrants to the economy can be realized through assessing the competitive advantage that a country gains especially in the international trade. Competitive advantage can be explained in terms of the ability of the economy to produce goods and services at a lower cost that what the other trade partners are doing (Toussaint-Comeau, 2016). Producing goods and services for less enables a nation to sell its products and services at a lower price compared to the other players in the market, and this results to increased sales margins. This is achieved in such a way that some of the immigrants are educated, have high tech skills and experience compared to the natives. This means that these immigrants will manage to use their skills, knowledge and experience in producing goods and services for the host country for a lower wage.
It is, therefore, evident that immigration tends to have both positive and negative impacts to the economy. The positive aspects of immigration to the economy is realized if the productivity of the immigrants is above average. The competition for labor, productivity and comparative advantage are some of the major impacts of immigrants to the economy of the host.
Caliendo, L., Parro, F., Rossi-Hansberg, E., & Sarte, P. D. (2018). The impact of regional and sectoral productivity changes on the US economy. The Review of economic studies, 85(4), 2042-2096.
Toussaint-Comeau, M. (2016). Mexican immigration, occupational clustering, and the local labor market adjustment of African-American workers. IZA Journal of Migration, 5(1), 14.
Wharton P., (2016). The Effect of Immigration on the United States Economy. Retrieved from, https://budgetmodel.wharton.upenn.edu/issues/2016/1/27/the-effects-of-immigration-on-the-united-states-economy
Wiener, N. M. (2020). Labor Market Segmentation and Immigrant Competition: A Quantal Response Statistical Equilibrium Analysis. Entropy, 22(7), 742.