Immigrant and Economic Growth

Does immigration interrupts economic growth in the United States?
Recently, the number of immigrant workers in the United States has significantly increased. The impact of the immigration has been a controversial issue. Majority of the population believe that the large number of immigrants negatively affects the U.S-born workers by lowering wages and increase competition in the nation’s labor market. On the other hand, some believe that immigrants increase GDP, create more jobs, stimulate investment, and eventually bring economic growth in the United States; economic growth means an increase in the total output of an economy. Decades of cons and pros of the impact of immigration on the United States have not drawn any absolute conclusion.
The first argument of the cons would be while the increasing number of immigrants increases U.S. national GDP, the net gain from the immigrants is significantly small. In the book, “Immigration and the American Worker: A Review of the Academic Literature,” George Borjas, the famous immigration economist in the United States, says immigrant workers increases GDP about sixteen hundred billion dollars each year. However, as he analyzed such increase in U.S. GDP, he found out that ninety eight percent of the GDP raised by immigrants goes to themselves in the form of benefits and wages. He also stated that the net gain the U.S. born people receive from the GDP made by immigrant workers is only 0.2 percent. Therefore, it would be safe to say that the increase in GDP made by immigrants does not bring the net benefit to whole nation.
Those who believe that immigration is irrelevant to economic growth in the United States would also argue that immigration reduces wages of U.S.-born workers. Based on a standard supply and demand model, the more workers means the lower wages. As more immigrants come in to the United States, the large proportion of them contributes to the surplus of low-skill workers. No one can ignore the presence of illegal foreign workers in the U.S. job market. The huge population of low-skill immigrant workers and illegal foreign workers were recognized by reports of the U.S. Commission on Immigration Reform in 1990s. The Reform, which is also known as “Jordan Commission,” states that “immigrants with relatively low education and skills may compete for jobs and public services with the most vulnerable of Americans, particularly those who are unemployed or underemployed.” Also the Commission stated, “It is not in the national interest to admit unskilled workers” because “the U.S. economy is showing difficulty in absorbing disadvantaged workers.” According to a research done by the Center for American Progress, reducing the number of illegal foreign workers in the United States by one-third can raise the annual income of U.S.-born unskilled workers by four hundred dollars. It is very interesting that the majority of the immigrant population is not involved in the labor market based on their education or skill level. According to the DHS Yearbook of Immigration Statistics in 2009. In 2009, the United Stated admitted about one million legal immigrants. Among these immigrants, only 5.8 percent possessed the employment skills demanded in the United States. On the other hand, about sixty six percent of the immigrant population came to America for the family-based reasons, which is irrelevant to the U.S. job market and which only makes competition in the U.S. labor market.
Another graph created by U.S. Census Bureau explains the irrelevance between immigration and the growth in labor market. According to the graph, about thirty percent of foreign-born workers do not have high school diploma, which is three times more than the native-born workers. Also, about half of the illegal immigrant population has not fully received high school education. Compared to the natives, foreign-born population and illegal immigrant population have relatively less education level. Such low level of education of immigrant population shows that the large number of immigrants in the United States is not a big gain in the U.S. labor market, but it only stimulates competition among the national low-skill population. One the other hand, people who believe immigration brings economic growth in the United States argue that the large number of immigrant workers did not decrease the wage of U.S. born workers. But instead, it raised the overall standard of living of American workers by lowering prices and increasing wages. According to the “Ten Economic Facts about Immigration,” written by Michael Greenstone and Adam Looney explains that the foreign-born workers do not compete with the U.S.-born workers for the same jobs. Instead of having competition with the natives, immigrant workers take complementary jobs for U.S. employees. For example, the Immigrant workers expand the capacity of American business and farms, by contributing to agriculture industry and construction industry. Such contribution can increase the wages and earnings of American supervisors and foremen. Then, the more contribution of immigrant workers would provide more opportunities for high-skilled Americans. The U.S. business market welcome immigrants because they can open and run new restaurants, stores, factories to take advantage of the huge supply of workers.
It is very well known that immigrant labors had been decreasing the wages of U.S.-born workers. According to a study of Geroge Borjas and Lawrence Katz, the average wage of American college graduates, from 1980 to 2000, was decreased by 0.5 percent due to a large number of immigrant workers. The average wage of American worker, who did not finish high school education, was decreased by 4.8 percent due to immigration; such decrease in wage is shown as the purple bars in the chart below. However, in 2012, a study by Gianmarco Ottaviano and Giovanni Peri broke the old myth. According to their study, the wages of U.S.-born workers, shown as the light blue bars in the chart below, have been increasing. Even though the increase is significantly small, from 0.1 percent to 0.6 percent, the new study shows that the immigration raises the wages of all native labors and this increase in wage is not affected by their level of education.

Furthermore, immigrants contribute to the U.S. economic growth by operating a large number of businesses and file a large number of patents. According to the chart below, immigrants form about thirty percent more businesses than U.S. born citizens do. Also, immigrants with high level of education are likely to file three times more than U.S. born citizens do. Such investment in business and patents may bring net benefit to the whole U.S. population by creating more jobs and increasing innovations for U.S. citizens.

The economic impact of immigration on the United States is still a controversial issue among contemporary economists. What is very interesting is that the both cons and pros for the issue sound convincing. While immigration generate negative economic impact on the United States, it also generates positive economic impact on the United States. The number of immigrants coming to the United States will never decrease and there will be people who gain and people who lose due to the huge number of immigrant population. If you are an advocate of immigration, then you must see a decrease in the wages of some workers. But still, the net benefit from the immigration is not significantly big. One possible solution would be increasing the level of education of the children of immigrants. If the children grow up and enter in a labor market, they will possibly increase the net benefit to the U.S. economy and eventually bring economic growth to the future of the United States of America.
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Reference
Mack, Roger. Macroeconomics A Basic Perspective. New Jersey: Prentice Hall, 2010. Print.
Ruark, Eric and Matthew Graham. “Immigration, Poverty and Low-Wage Earners.” Importing Poverty. Washington (2011): 2-7. Print
Borjas, George and Lawrence Katz. “The Evolution of the Mexican-Born Workforce in the Unite States.” Trends in the Relative Wage Massachusetts (2005): 11-15. Pint
Ottaviano, Gianmarco and Giovanni Peri. “Rethinking the Effect of Immigration on Wages.” Partial and Total Wage effects of Immigration. (2006): 12-15. Print
Matthews, Christopher. The Economics of Immigration: Who Wins, Who Loses and Why. Time Business & Money, 30 Jan. 2013. Web. 10 Mar. 2014. .