View source for Impact of Immigration and Foreign Trade on the American Economy

<center>'''An overview: America and Immigration'''</center>

'''By Jackson Parmenter'''

What makes America unique in respect to many other countries is its immigrant history. Often characterized as a country of immigrants, the U.S. has for years opened its doors to millions.  This is something many Americans pride themselves upon and for good reason.  If those doors were shut on our ancestors we would never have made it to where we are today. In spite of this, new research reveals startling news about the economics of immigration and the United States.  This site attempts to explore immigration to the United States, its effect on the American economy, the American worker, and upon immigrants themselves.  Currently immigration is a hot political topic with two opposing viewpoints, ultimately one finds that there is a serious moral dilemma with regards to this issue, where so you stand?

== Immigration Statistics ==

-There are an estimated 34 Million immigrants in the United States, one-third of which are illegal.

- During the period between January 2000 and March 2005, the United States gained 7.9 million new immigrants, both legal and illegal, which made it the largest five-year span in U.S. history 

- Since 2000, almost half of new immigrants are illegal

-35% lack health insurance.

-26% receive some sort of federal benefit.

-30% of immigrants are Mexican, making them the largest group of U.S. immigrants.  One in 20 working men is a Mexican immigrant.  In 1920 that number was one in 100.
In 2000 63% of Mexican men lacked a high school diploma and 57% of women.  3% of men had a college diploma and 7% of women.  Thus, Mexicans found themselves in low wage jobs.

[[Image:Edu._level.gif|thumb|Description]]

(Camarota,"Immigrants at Mid-Decade")  [http://www.cis.org/articles/2005/back1405.html Immigrants at Mid-Decade]


- In 2005, 18.4% of immigrants were living in poverty, compared to 11.7% for American natives

-It is estimated that native born workers lose about $133 billion a year due to immigration. That is 1.9% of American GDP. (George Borjas)

- States with the largest increase in immigrants are California, Texas Georgia, New Jersey, Maryland, North Carolina, Pennsylvania, Washington, Virginia, Arizona, Tennessee, Minnesota, Nevada, New Mexico, South Carolina, and Mississippi.

-Immigration to the United States since 1900.

[[Image:Immigrant_influx_since_1900.gif|thumb|Description]]

(Camarota,"Immigrants at Mid-Decade")  [http://www.cis.org/articles/2005/back1405.html Immigrants at Mid-Decade]  

Some examples of immigration legislation implemented in the United States. 

[http://en.wikipedia.org/wiki/List_of_United_States_immigration_legislation Immigration Legislation]

== Reason for Immigration ==

Immigration takes place for a variety of reasons.  A lot of the time the reason is of economic origin; "Expected discounted difference in the stream of income between the new and old location is greater than moving costs."(Gordon H. Hanson, Antonio Spilimbergo; "Illegal Immigration, Boarder Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S. Mexican Border")  However there are many other reasons for immigration: religious or political persecution, famine, war, unemployment, etc.  Some divide the factors that motivate people to immigrate into "push and pull factors".  A "theory that suggests that circumstances at the place of origin (such as poverty and unemployment) repel or push people out of that place to other places that exert a positive attraction or pull (such as a high standard of living or job opportunities)."  [http://www.prb.org/Content/NavigationMenu/PRB/Educators/Human_Population/Migration2/Migration1.htm (Population Reference Bureau; Human Population: Fundamentals of Growth 
Effect of Migration on Population Growth)]

== How do Immigrants do in the U.S. Labor market? ==
Some say quite well. 

It has been noted, through the work of Chiswick in the late 70's and early 80's, that immigrant's earnings, after 10-15 years, exceed those of natives in the labor market. "Persons immigrating to the United States for "economic reasons" have strong incentives to devote a large fraction of their effort to the process of accumulating United States-specific human capital skills" (Borjas; Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants.) This explains the rapid rate in which immigrants assimilate into the American Economy and obtain capital. This table contrasts the income of Asian, Black, Hispanic, Mexican, Cuban, and Other Hispanic immigrants arriving in the U.S. 

[[Immigration table]]

But... Is this really the case? Borjas would argue that this is not. The Graph above took us through the 1970's, a period where on average, when all immigrants are taken into account, they are making more than the average native and have a mean educational attainment that is higher than U.S. natives. The 1970's seem to be where this trend stops. By looking at the next graph from a piece Borjas wrote for the Journal of Economic Perspectives titled "The Economic Benefits of Immigration", one sees how these statistics change after the 70's and through the 90's. 

[["Socioeconomic Characteristics of Immigrants and Natives" Table ]]

== American Gains from Immigration, Who Gains? ==

To illustrate this, let’s draw a correlation between the gains from the influx of immigrants and foreign trade. If the United States imports cheap good from China or any other country with cheap labor costs, the American workers who are employed in the same sector are going to suffer. There wage will go down or they may even be fired. However, these losses are offset by the benefit to consumers who are now paying less for these goods, the result of competition. As more immigrants enter the U.S. there is going to be more competition among workers. Wages of native workers are going to fall as a result of this competition. However, again these losses are offset by the gains the firm receives; they can employ labor at a lower wage. Consumers gain as well because they are able to buy the goods that the firm employing cheaper labor produces at a lower cost. As long as the gains exceed the losses the country will be better off.

[[Winners and Losers]]

== Unskilled worker inflow ==

The inflow of unskilled workers has two detrimental affects on America.

1. Harms the economic opportunities of unskilled American workers.

2. Unskilled immigrants are likely to receive welfare assistance.  21% of immigrant families receive some type of assistance (i.e. food stamps, Medicaid, cash benefits.)  This is bound to create a financial burden for those states with a large population of unskilled immigrants. 
== Impact on American unskilled workers ==
Due to the heavy influx of unskilled immigrants the harder it is for unskilled workers already here to advance.  As the number of immigrants increases, the number of workers in the economy increases.  This creates competition in the labor market, thus wages fall.


[[Image:Back201.gif]]

(Donald Davis and David Weinstein, "United States Technological Superiority and the Losses from Migration")


== America the Welfare State ==

In respect to the previous table titled "Socioeconomic Characteristics of Immigration and Natives" under previous section.  There is an increasing trend in the amount of welfare immigrants receive in respect to natives.  In the 1970's U.S. natives were receiving more welfare assistance than immigrants; however by the 90's immigrant household's participation in welfare had rises to 9.1%.  This number is 1.9 percentage points higher than the amount of welfare natives are receiving.

(Borjas; Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants.)



== Trade Effects ==

High levels of productivity in a country encourage immigration to that state.  Take the U.S. for example.  It has a high level of productivity; this contributes to both immigrants and capital entering the country.  As more foreign immigrants and capital enter the United States productivity rises and exports increase.  Because exports increase in the U.S., foreign exports now decrease because they now have less capital and labor.  The end result is an increase in the price for foreign imports and a decrease in the price of U.S. exports, thus being bad for U.S. natives who purchase foreign goods.

'''Other Effects'''

Linkages between Immigration and Trade

-Immigrants can increase imports due to their preferences for goods from their home country.

-Immigrant's knowledge of their home economies can influence both imports and exports.  "Foreign trade imposes costs above and beyond those associated with domestic transactions.  The exporter must identify potential markets and obtain access to distribution channels in unfamiliar environments.  The importer, meanwhile, must find a reliable source of supply.  These activities often require knowledge of local customs, laws and business practices and may be facilitated by the existence of long-run business relationships.  Many immigrants possess market knowledge and contacts in their previous country of residence, in additions to their home country language skills.  These assets lower the transaction costs of trading in either direction."("Immigration and Trade Creation: Economic Evidence from Canada"; Keith Head and Jon Ries)  This will probably be true for the skilled immigrants that enter the country due to the fact that they will be the ones most likely to possess the knowledge and skills to make and obtain contacts.  For immigrants that fall under the category of refugee, they will most likely not bring any contacts to the table due to their fear of persecution at home

== Immigration Control ==

What policies should be implemented?

Option 1: Points program
[http://bss.sfsu.edu/jmoss/resources/635_pdf/No_21_Borjas.pdf Borjas]

[http://www.immigrate.net/law/en/VisasLaws/PointSystem.asp Canadien Point System]

Who should be admitted?  Those who provide economic contribution to native well being that exceeds the cost of social services provided to them? (Economic standpoint)

Should favor be given to skilled workers?  If the goal of immigration policy is to increase per capita income, then YES.

== U.S.-Mexico Border Enforcement and Illegal Immigration ==
Why would a Mexican citizen risk coming to the United States illegally? Because of higher wages, many Mexicans come to the U.S. and send a percentage of their earnings back to their families in Mexico. To obtain legal entry as a legal citizen can take several years, so even if that person has applied he/she may choose to migrate illegally anyway. They may choose to do this because if they are detained by the U.S. Immigration and Naturalization Service (INS) there are no pending repercussions as long as the individual agrees to leave the U.S. on his own terms. After successfully entering the U.S., an illegal immigrant has less than a two percent chance of being caught. In order to figure out some of the impacts of illegal immigration on our economy there needs to be some focus on what has been done by the U.S. to stop illegal immigration. Since Mexicans are the majority, in terms of immigrants residing in the U.S., there has been a consistent increase in attention paid to the border over the years, because of the amount of illegal Mexican immigrants entering the U.S. This is done through hiring more workers at U.S. customs positions. [http://www.jstor.org/view/00028282/ap000007/00a00170/4?searchUrl=http%3a//www.jstor.org/search/AdvancedResults%3fhp%3d25%26si%3d1%26All%3dillegal%2bImmigration%2bborder%2benforcement%26Exact%3d%26One%3d%26None%3d%26sd%3d%26ed%3d%26jt%3d&frame=frame&currentResult=00028282%2bap000007%2b00a00170%2b0%2cFFFA3F&userID=40093d71@dickinson.edu/01cc993397a86f10ace3e6eed&dpi=3&config=jstor Person Hours]
Another method of decreasing illegal immigration is by monitoring employers and companies that would possibly hire illegal persons(i.e. construction, farming, etc.) [http://www.cnn.com/2006/LAW/04/20/immigration.raids/ IFCO Systems Case] There is such a higher rate of attention paid to illegal Mexican immigrants rather than aliens from other countries because studies show that between 1977-1996, 99.2 percent of apprehensions of illegal immigrants occurred at the U.S.-Mexico border. There are several factors that influence a person in Mexico's decision about migrating. Hanson and Spilimbergo further list these factors, "...real wage in Mexico, the real wage in the United States, the probability of being apprehended while attempting to cross the U.S. Mexico border, and any information which is useful to predict future paths of these variables. The direct costs of illegal immigration include forgone wages during migration, transport to the border, and securing safe passage across the border."
(Hanson, Spilimbergo, "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border)

== Setbacks of Illegal Immigration ==
Because it is hard to gauge the exact number of undocumented aliens entering the U.S., data statistics are based on the number of border apprehensions. Also, the only indicator that can be accurately measured is the number of illegal immigrants who failed to enter the U.S., not the ones who successfully gained entry. Some immigrants, who legally enter the U.S., continue to reside in the U.S. after their visas have expired. There is also a glitch in the number of apprehensions. "Some migrants are apprehended several times in the same reporting period, with the consequence that INS arrest figures literally refer to counts of the number of apprehensions and not the number of persons apprehended." (Espenshade, Unauthorized Immigration to the United States) Studies have shown that illegal immigration potentially adds 300,000 new residents to the U.S. each year. A common myth is that illegal aliens receive lower wages than native workers. They receive wages similar to native workers who possess the same skill level. The stipulation is that most illegal immigrants do not possess the same experience in U.S. markets as do native workers, which in turn may cause them to receive lower wages.

== Immigration Theories ==

'''''Approaches'''''

Neoclassical - "Neoclassical approaches portray potential migrants as (expected) income maximizers who will move to a new destination whenever the anticipated gains are sufficiently high. According to neoclassical macro theory, international migration is driven by regional imbalances in the supply and demand for labor. These imbalances promote low wages in countries where labor is plentiful relative to the amount of capital, and higher wages where labor is the scarcer factor of production. Migrants have an incentive to move from low-wage to high-wage countries until changing labor supplies bring international wage levels closer to parity. Because of rapid population growth in developing countries, this theory predicts that most international migration will be from poorer nations to more advanced industrialized ones."

"The micro counterpart to this macro theory views individuals as the relevant decisionmakers who weigh the present value of expected future income streams at the variety of potential destinations against the income expected at the origin. Expected income at alternative destinations will depend on average wages levels and the anticipated probability of securing employment as well as, in the case of unauthorized immigrants, on the probability of avoiding detection and deportation by immigration authorities. According to this theory, rational actors go where expected income is the highest."

New Economics of Migration - "This perspective differs from neoclassical economic theory in several important ways. First, the relevant actors are not individuals but rather families and households whose survival strategies include but often supersede those of individual household members. Second, although households may at times attempt to maximize income, family behaviors are often better understood in terms of efforts to minimize risk. In developed countries, the existence of well-developed capital markets and other insurance schemes helps to protect families against excessive risk. But these mechanisms are either absent or not sufficiently reliable in poorer countries, so families need to self-insure against sudden declines in economic fortune. One way that families do this is by sending earners to other countries; risks can be diversified provided labor market and other economic conditions in the destination country are uncorrelated (or preferably negatively correlated) with those in the origin country."

Dual Labor Market Theory - "Dual labor market theory focuses less on the motivations of individual workers and more on the chronic demand by industrial capitalists for foreign workers. Many employers face inherently unstable demand for their products or services. Because the cost of underutilizing capital equipment falls on businesses whereas the cost of laying off workers falls on workers themselves, owners of capital have a natural incentive to deploy capital to meet the most stable portions of demand and to use labor to satisfy the more unpredictable portions. This results in a situation where many workers in the secondary sector face job insecurity, low wages, and little prospect of upward mobility. This theory argues that native workers will be motivated to seek jobs in the primary sector of the economy where higher skills are required and where pay is better. Consequently, employers will turn to foreign labor to meet the less stable portions of demand." 

(Thomas J. Espenshade, Annual Review of Sociology: "Unauthorized Immigration to the United States")

== Current Debate ==

[[Current Immigration Bill]]

[http://www.whitehouse.gov/news/releases/2004/01/20040107-3.html Guest Worker Program]

[http://www.nytimes.com/2006/04/24/washington/24immig.html "Senators Reignite Debate on Immigration"]

[http://www.nytimes.com/2006/03/29/politics/29immig.html?ex=1146110400&en=89d8e41ce49417db&ei=5070 "Lawmakers are Preparing for Big Battle on Immigration"]

[http://www.nytimes.com/2006/03/29/national/29policy.html?ex=1146110400&en=cbf590513ae575ac&ei=5070 "Republican Split on Immigration Reflects Nation's Struggle"]

[http://www.nytimes.com/2006/03/27/national/27immig.html?ex=1146110400&en=b0489f763b349ff4&ei=5070 Protest 1]

[http://www.nytimes.com/2006/03/25/politics/25protest.html?ex=1146110400&en=664b005d94100c11&ei=5070 Protest 2]

[http://www.nytimes.com/2006/03/28/national/28protests.html?ex=1146110400&en=1f80354f4287119e&ei=5070 Protest 3]

== Moral Hazard ==

It is easy to note from an economic standpoint that immigration is detrimental to unskilled workers at home. Therefore, immigration should be limited, or those who are illegal should be deported.  This would bring back much of the job security that U.S. natives deserve.  On the other hand, many argue that this is not just treatment nor in line with the character of the United States.  There are two sides to this moral dilemma.  

[http://select.nytimes.com/2006/03/27/opinion/27krugman.html?_r=1&oid=82&oref=regi&incamp=ts:chall_article_trial&headline=North+of+the+Border& Paul Krugman; "North of the Border"]

[http://krugman.page.nytimes.com/b/a/255727.htm Krugman; "Notes on immigration"]

[http://select.nytimes.com/2006/03/31/opinion/31krugman.html Krugman; "The Road to Dubai"]

[http://www.marginalrevolution.com/marginalrevolution/2006/03/against_welfare.html#comments Tyler Cowen; "The Limitations of Welfare Economics"]

[http://delong.typepad.com/sdj/2006/03/north_of_the_bo.html Brad DeLong; A response to Krugman's piece "North of the Border"]