Immigration is the movement of people of one country into another country for living. These people are not the citizens of the country to which they are immigrating and the people are called as immigrants. However, an economic migrant is different from immigrants because economic migrants move from one country to another not only with the purpose of living but to raise their living standards, seeking job opportunities, better working conditions etc. Immigration is one the important components for the demographic changes in the world but it have been a formidable engine for economic growth. Thus, economics of migration is complex and yet needful.
During the last decades of the 19th century, immigration between countries had increased significantly because of industrialization and globalization. The economic impact of migration is controversial. Immigration helps the economy in many ways like it boosts the size of the, reduces labor and skills shortages, generates fiscal benefits etc. However, it puts pressure on the population of a country. Therefore, government needs to weigh the costs and benefits of immigration properly before implementing any policy.
Empirical evidences suggest that immigration leads to better innovation, an enhanced educated workforce, superior occupational specialization, skill development for jobs, and thus higher overall economic productivity. Immigration is supposed to have a net positive effect on central, state and local budgets. However, in low-income areas, the native citizens have to bear the costs of public services used by the immigrants.
Generally, migration takes place to rich countries. After research based on comprehensive data, it was known that two groups of people had the higher propensity to migrate internationally. Firstly, the people who are highly educated tend to have a faster rate of migration than the people with less or no education. The second group comprises of the young individuals aged between 20 to 40 years who have a higher rate of migration than other age groups. Generally, the workers in their 20s and 30s are most flexible and willing to travel to find work. The age composition of the labor force does have an impact on the tax revenues. And as people near their retirement age, they tend to return to the country of their origin. This age composition has implications for net contribution to tax revenues. There are also other reasons for migration such as family reunification, natural disasters, or the desire to change one's surroundings, slow job market, lack of educational opportunities etc.
Therefore, if we consider the case of United States, then the immigrants are divided between a very large group of young, highly educated workers of science, technology, engineering and math i.e. STEM, and the other large group consisting of young workers with little education who are involved in extensive manual work and they do the jobs that natives do not want to do. Therefore, these are mostly called as undocumented workers.
International labor migration is defined as the cross-country movement of people for employment opportunities. People prefer jobs in their home country, however, due to demographic, social and economic factors, immigration is now a rise and this has been a feature of the globalizing world. Thus, labor migration has been an integral part of a country’s development plan and its employment strategies. There is a two way benefit structure for labor immigration.
There are many factors which affect migration such as disparities in wages for equivalent jobs, access to better public services system like healthcare, education etc. of the host countries, diverse employment opportunities, change in people’s expectations, desire to learn, build new skills, develop networks etc.
Labor immigration affects both the home country and the host country in many ways and also determines the country’s labor composition and economy’s growth. Immigration has consequences, and these consequences generally imply that some people lose while others benefit. Thus, based on the demarcation between the two extreme sides, the policies are formulated.
A host country faces both the benefits and the challenges of immigration. The destination country enjoys the benefit of an improved work force and facilitates mobility and growth. Immigration increases productivity i.e. high skilled immigrant workers create more productive innovations, showcase variety of skills and generate specialization. Also, immigration improves the government’s fiscal situation because more immigrants’ leads to more tax collection and this can be used in providing public services to the people of the host country in future.
However, larger migrations lead to population surges which puts strain on the infrastructure and services of the host country and it becomes difficult for the host country to assimilate immigrants into the society and provide support. Immigration may threaten national security through illegal immigration or terrorism, increase dependence on welfare too. Also, the immigrants too face problems in the host country such as finding employment and housing, adjusting to new laws, cultural norms etc.
The main feature of immigration is that it increases the labor force which has many economic impacts. Supposedly, the immigrants are of the same type i.e. low-skilled workers and they immigrate in large enough numbers, thus, there is a significant expansion in supply of labor which further puts pressure on the wages. Thus, immigrants affect the labor market opportunities of natives because if they both tend to have similar skills and compete for the same jobs, then the wages will go down for the natives. On the other hand, if the services are not interchangeable, then they tend to complement each other which are good for the economy. No doubt that immigrants increase the supply of labor but at the same time they also spend their wages goods and services resulting in greater economic demand. This increased demand, promotes growth and generates more jobs to meet the increasing demand.
The home country also experiences specific challenges of immigration because there must be some loopholes in the system due to which people are moving out and thus, the home country should analyze its immigration statistics to determine and address the reasons behind the immigration of its citizens.
In the long-run, the situation can be quite different for the home country because larger immigration will decrease the population, the level of production, and economic spending and these conditions can only improve until substantial economic changes are undertaken. On the other hand, the host country gets relief from the unemployment pressures and contributes towards development through creation of business and trade networks, knowledge transfer etc.
Thus, the government of both the host and the home countries should try to offer policies and technical advice to different sectors, promote efficient, effective and transparent labor migration flows, endorsing safe migration process, facilitating the recruitment of workers and lastly, promoting the integration of labor migrants into their new workplace and society.
United States offers unequaled social, political, and economic opportunities to people to enter into their country. It follows a lottery process for the huge number of applications it receives for providing visas. Immigrants with high levels of productivity and who adapt rapidly to conditions in the host country’s labor market makes considerable contribution to economic growth and immigrants who lack the skills that employers demand may increase the size of the population and this aggravate ethnic and racial inequality in the country. Thus, the debate over immigration policy has been controversial and there have been significant amendments in due course of time i.e. changes in US immigration policy have greatly distorted the number, national origin mix, and skill composition of immigrants.
In case of migration too, the demand and supply forces work together, to determine the effects of migration i.e. effects of increased supply of foreign workers on the demand for native workers and this can be explained with the help of four mechanisms:
When there is more supply of workers, firms invest more to expand their productive capacity and improve their infrastructure. Thus, immigrants do not crowd out existing firms over the long run but expand the investment opportunities of the firms and help them in growing in size too.
The educational composition of the immigrants determines the structure of the labor market i.e. it is one of the most important factor for understanding the effects of relative supply on relative wages. Thus, difference between workers with tertiary education or with secondary education, also distinguishes they do.
The differentiation of skills and productive capacities between natives and immigrants is a pre-requisite for their type of jobs. Generally, immigrant workers with less education tend to go for manual jobs and jobs which require coordination, communication and interaction are usually staffed by natives whose language skills are superior. This dynamic specialization induces natives for job upgrades in search of better pay, communication-intensive occupations and they protect their wages from competition from immigrants.
Immigrants’ eagerness to move alleviated the slow wage in stagnant regions and contributed to economic growth in booming areas. Immigrants are willing to move for job opportunities and this has helped in stabilizing the economy and reinforced the productivity growth in strong labor markets.
These all features have improved the depressing effect of increased labor supply. Also, highly educated immigrants have contributed to innovation, technological growth and increased per capita income of a country. Immigration enhances the gender composition of the labor force and is a driver of entrepreneurship. Increase in labor force leads to job creation which further contributes to the economy’s growth and reduce labor shortages and help in controlling wage inflation. It also makes a country attractive to FDI in high-knowledge industries.
The income flows i.e. remittances sent by migrants to their home countries also boosts sending and increases export demand of other nations. Therefore, due to all this, the world market gets integrated and global economy grows at a faster rate.
However, migration does matter and it impacts development both directly and indirectly. There are increased welfare costs of the host country, displacement of domestic workers, social tensions; pressure on property process, relative poverty in the society worsens etc. Nowadays, another phenomenon which is on a rise is Brain Drain. This is the human capital plight i.e. movement of highly skilled people from their own country to another country where they can earn more money. Here, the home countries lose out the benefits that they should get from the resources used in educating people who leave the country.
Immigration is one of the most debated topics globally. This debate is here to continue in the future because we cannot stop immigration. Therefore, the economics of immigration is need to be developed and focus on economic issues, use the evidences provided by economic research to frame and formulate the ideas behind immigration and solve the problems accordingly.
The economic approach is valuable because it guides us about the losses, a country might face while practicing immigration policies and it also tells us how to minimize or ignore the economic considerations. The main objective of the immigration policies should be to increase the national income accruing to its natives and enhance the welfare of all.
Therefore, there are difficult tradeoffs and decisions to make before any policy implementation. Pursuing a particular immigration policy might help some groups but may hurt others leading some winners and some losers. However, the goal should be to reflect a political consensus that integrates the contradictory social and economic interests of various demographic, socioeconomic, and ethnic groups and safeguard the political and humanitarian concerns of the country.
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