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Economic Consequences Of Restriction Of Immigration Essay, Research Paper

Immigration, a word that implies so much, a word that constitutes movement of human species around earth in the very beginning of life, a word that meant so much during war periods and the word that has a great deal of attention paid to in the days of peace and relative prosperity.

Is there any persuasive reasons for a country to bar any healthy, law abiding individual from immigrating? Many believe that it is in the natural order of things that movement across borders should be limited. But prior to World War 1, it was thought uncivilized for a nation not to permit free movement, “an improper infringement of personal freedom,” passports did not even exist. All other arguments about immigration based on “natural right” all seem to be inconclusive, in part because the concept of right doesn t apply to countries as well as it does to individuals. Therefore we turn to judge the matter by considering its consequences.

When talking about restricting immigration we can t not to speak of welfare. With the restriction of immigration a certain burden will be taken off each American citizens and to be more precise approximately 150$ annually. From the first sight it seems like a nice, but really not very significant plus on restricting immigration. However that by the same statistical data 39% of white people are residing on welfare compare to 19% of Hispanic population, which boldly implies that Hispanics, so much perpetuated as lazy, useless, burden creating individuals are actually in the lowest amount when it gets to welfare. Talking about Hispanics and immigrants in general we must say that they are the first ones to fill low wages jobs, such as deliveries, farming and so on, jobs that require minimal skill and almost no language.

So immigrants occupy low wage jobs due to absence of one of the couple necessary factors to challenge native worker in his highly paid job. However there are a lot of immigrants who learn language extremely fast and thrive to such positions as sales and Store Clerks, doesn t the job displacement occurs at that level? The answer is yes , but before stating job displacement as another negative impact of immigration and therefore a positive factor of restricting immigration let s look at the following situation: When we import toys made by cheap Chinese labor, workers in the American toy industry undoubtedly suffer wage cuts and perhaps even lose their jobs. These losses, however, are more than offset by the benefits accruing to consumers, who enjoy the lower prices induced by additional competition. An important lesson from this exercise, worth remembering when we look at the gains from immigration, is that for there to be gains from foreign trade for the economy as a whole, some sectors of the economy must lose. Consider the analogous argument for immigration. Immigrants increase the number of workers in the economy. Because they create additional competition in the labor market, the wages of native workers fall. At the same time, however, native-owned firms gain, because they can hire workers at lower wages; and many native consumers gain because lower labor costs lead to cheaper goods and services. The gains accruing to those who consume immigrants’ services exceed the losses suffered by native workers, and hence society as a whole is better off. So as we can see job displacement hurts individuals, but benefits the economy overall.

Immigration therefore has two distinct consequences. The size of the economic pie increases. And a redistribution of income is induced, from native workers who compete with immigrant labor to those who use immigrants’ services. The standard economic model of the labor market suggests that the net gain from immigration is small. The United States now has more than 20 million foreign-born residents, making up slightly less than 10 percent of the population. Native workers lose about $133 billion a year as a result of this immigration (or 1.9 percent of the gross domestic product in a $7 trillion economy), mainly because immigrants drive down wages. However, employers — from the owners of large agricultural enterprises to people who hire household help — gain on the order of $140 billion (or 2.0 percent of GDP). The net gain is only about $7 billion. Thus the increase in the per capita income of natives is small — less than $30 a year. But the small size of this increase masks a substantial redistribution of wealth.

In sharp contrast to the comparatively developed literature on the impacts of immigrants on labor market opportunities of natives, the literature on the economic contribution of immigrants is sketchy. Little has been published in professional journals, and much of the work that has been done has not been replicated for verification. The following findings suggest that contributions of immigrants to the U.S. economy are substantial.

Immigrants, as noted, create more jobs than they themselves fill and recent immigrants from abroad create as much employment growth as internal migrants from other areas of the United States. One source of the positive employment effects of immigration is the retention of industries that would otherwise have moved overseas. Another source of job creation is the entrepreneurial activities of immigrants themselves. In 1990 almost 1.3 million immigrants (7.2 percent) were self-employed, a rate marginally higher than natives (7.0 percent). In addition, the longer immigrants are in this country the more likely they are to be self-employed. During the 1980s, immigrant entrepreneurship increased dramatically. In 1980, 5.6 percent of immigrants living in the United States were self-employed, but by 1990 the same group of pre-1980 immigrants (who had now been in this country for an additional decade) had a self-employment rate of 8.4 percent. Self-employment, as defined by the census, covers a wide range of possibilities from a businessman or professional practitioner to a domestic worker, casual laborer, or someone who drives a gypsy cab. The evidence points to the self-employed as among the most economically successful of all immigrants. Average incomes for self-employed immigrants (slightly over $30,000 a year, according to the 1990 census) exceed those of all other classes of immigrant workers by a substantial amount and are about the same as the average incomes of native entrepreneurs. Furthermore, business ownership for ethnic minorities has been found to correlate well with rates of self-employment.

Another way in which immigrants contribute to employment and overall economic growth is through their effect on aggregate demand for goods and services. Immigrants own and rent properties, as do natives; immigrants buy groceries, clothes, shoes, and the like. Their spending ripples though the economy, creating jobs and generating revenues for businesses and governments. A precise measure of the job-creating impact of immigrant spending has not been quantified, but the effect is clearly large. Total immigrant income in 1989 $285 billion according to the 1990 census represented about 8 percent of all reported income, equal to immigrants’ share of the population (7.9 percent). Even recent immigrants with their relatively low earnings had an aggregate income in 1989 of $80 billion. Much of this income is spent on U.S. goods and services.

The positive economic contributions of immigrants are attested to by the substantial business literature on opportunities in the large and growing ethnic markets. Newspapers, magazines, and radio and TV stations serving immigrant communities are thriving in many parts of the country. Immigrants also contribute in other ways to the U.S. economy, for instance, by attracting foreign capital to regions in which immigrants are concentrated (Miami, New York, Los Angeles) and by spurring technological innovation. Such contributions remain to be quantified.

History has taught us that immigration policy changes rarely, but when it does, it changes drastically. Can economic research play a role in finding a better policy? I believe it can, but there are dangers ahead. Although the pendulum seems to be swinging to the restrictionist side (with ever louder calls for a complete closing of our borders), a greater danger to the national interest may be the few economic groups that gain much from immigration. They seem indifferent to the costs that immigration imposes on other segments of society, and they have considerable financial incentives to keep the current policy in place. The harmful effects of immigration will not go away simply because some people do not wish to see them. In the short run these groups may simply delay the day of reckoning. Their potential long-run impact, however, is much more perilous: the longer the delay, the greater the chances that when immigration policy finally changes, it will undergo a seismic shift — one that, as in the twenties, may come close to shutting down the border and preventing Americans from enjoying the benefits that a well-designed immigration policy can bestow on the United States.

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