Impact of Immigration and Foreign Trade on the American Economy
Introduction
What makes America unique in respect to many other countries is its immigrant history. The U.S. is often characterized as a country of immigrants. For years the U.S. has opened its doors absorbing millions of immigrants, something 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. In order to preserve our heterogeneous American identity and to make immigration succeed, steps need to be taken to control immigration.
Immigration Statistics
-There are an estimated 34 Million immigrants in the United States, one-third of which 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.
-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)
American Gains from Immigration, Who Gains?
To illustrate this gain lets 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 or 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.
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.
(Donald Davis and David Weinstein, "United States Technological Superiority and the Losses from Migration")
Reason’s for Immigration
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 purchasing foreign goods.
Immigration Control
What policies should be implemented?
Option 1: Points program Borjas
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.
