According To A Survey Conducted
According to a survey conducted in 2015 by the United Nations (UN), 244 million people were considered International Immigrants. Due to Globalisation and the growth of companies now trading internationally, it is likely that this figure will continue to rise. As such, Immigration is becoming an increasingly prevalent topic of debate on whether Governments should reduce the restrictions on immigration. Immigration restrictions not only effect Immigrants themselves, but also businesses, locals of the host nation that are accepting the Immigrants, the nation that the Immigrants are emigrating from and the economy of both. This essay contributes to gaining an understanding on whether or not reducing restrictions on immigration would have a negative or positive impact on the economy.
In order to gain an understanding of this, it will focus on common arguments that are debated, and will assess them to see how truthful they are. Borjas (cited in Makowsky & Stratmann 2014, pp 132) believes that most economists consider Immigration to be a large contribution to economic growth and are valuable to the workforce that they join. However, some argue that large scale immigration leads to an increase in unemployment of local workers, and result in less job opportunities available to them. This is important to study, as Governments need to ensure that if restrictions are reduced, that the unemployment rate does not rise as this could lead to welfare dependency.
This leads to the most popular argument that economists debate: do Immigrants have a small or large effect on public finances to the nation they immigrate to? This proposition will be tested, as the cost of Immigration influences the fiscal sustainability of a country. The last argument that will be verified will be that Immigration denies developing countries access to educated and skilled workers, causing lack of development in these countries.
As a result of examining the above propositions, this essay finds that reduced restrictions on immigration may only be beneficial to some countries. It is hard to determine a general conclusion for all countries as determining factors differ for each country, with the main influential aspect being welfare programs.
Economists often debate that large scale immigration can lead to less job opportunities and unemployment amongst local workers. This is not just a common belief among economists. According to a survey conducted by Transatlantic Trends in 2011, 58% of UK citizens and 57% of US citizens either strongly agreed or somewhat agreed to the statement “Immigrants take jobs away from native borns”. The key theme that is prevalent however, is that employment levels of existing workers will depend on the skill level of the migrants (The Migration Observatory, 2015). It is frequently thought that unskilled natives would be most affected by Immigration. Rowthorn (2004) argues, that if low skilled immigrants gain jobs, it is damaging to the local unskilled workers.
Using an uncomplicated economic theory, and following trends in the labour market for migrants and locals, it is found that there are various factors that influence the impact of migration on existing workers, with one of the main factors being the existing economic conditions of the host nation (Devlin et al, 2014). Short term and long term impacts will vary due to this. It can be assumed that those migrating will choose their destination based on the probability of finding employment (Geis et al.). As such, most Immigrants will migrate to a country that has a strong economy. However, it is hard to determine the economies of these countries in the future, as they may experience an economic crisis at some stage.
Assuming that the economy will remain stable, immigration will not negatively affect existing workers or their job opportunities in the long term. Devlin et al. (2014) rivals Rowthorn’s argument with evidence found from 1990 to 2008 (prior to the Great Financial Crisis), revealing the UK experienced positive labour market outcomes for UK citizens due to migration. We can base this on a straightforward supply and demand theory, Immigrants increase demand for goods and services in the market. Over time, businesses will need to expand to supply these good and services in order to meet the demand equilibrium. This will result in an increase in jobs in the labour market, available to both natives and migrants. In the short term however, there may be a minimal negative impact due to the economy having to adjust to the influx of arriving migrants (Devlin et al., 2014). Using this same supply and demand theory, it can be determined that Immigrants are not considered substitutes to natives (Longhi et al. 2006), mainly due to the lack of cultural knowledge, language fluency and a differing skill set. Due to this, this supports the argument that Immigrants are not a risk to job opportunities for natives.
Another predominant argument that rivals Rowthorn’s theory, is that Immigrants fill the gap in the labour market for lower skilled jobs that natives are unwilling to do or where there is no one to do them due to an ageing gap (Legrain, 2009). Bean et al. (2012) studies data from the US Bureau of Labor Statistics from 2011 and concludes post-secondary education has increased by approximately 25% since 1960. Consequently, these US natives believe they are entitled to jobs in which they are skilled to do, and that are higher paying than the unskilled jobs. It was also found that fertility rates in the US have dropped 40% since the 1960, which confirms there is a gap in the labour market due to an ageing population. A study conducted by the United Nations (2000) examines the 1998 World Population Prospects, and that “international migration is the only option in the short to medium term to reduce the declines”.
Based on the above research, it is evident that Immigrants have little to no effect on native’s job opportunities and unemployment rates. It is apparent that immigration can actually lead to an increase in job opportunities for both native and migrants due to the demand of goods and services. As such, it is unlikely that welfare dependency will rise amongst natives. However, it must be noted that these conclusions are drawn assuming that there is economic stability present and there may be a different result if there is an economic crisis.
One of the most popular arguments in the Immigration debate is what impact Immigrants have on public finances, and what their fiscal contribution to society is. Many people are likely to oppose reduced immigration restrictions if there is a negative relationship. According to Hayter (2004), it’s suggested that there is little effect on public finances from Immigrants. Dustmann and Frattini (2014) examined the fiscal impact of immigration in the UK by using information collected from the UK Labour Force Survey. The survey focuses on immigrants residing in the UK from 1995 to 2011, and Dustmann and Frattini used this information to calculate what the net fiscal contribution has been to society. The results found, support Hayter’s argument and suggests that migrants have made positive fiscal contributions, and that they are less likely than natives to access benefits, tax credits and social housing.
In contrast to Hayter’s proposition, Hansen et al. (2015) argues that it is dependent on where the Immigrants migrate from, “Immigrants from richer countries have a positive fiscal impact, while immigrants from poorer countries have a large negative one”. The study was based on the Danish Rational Economic Agents Model, where it examines data forecasted for population growth, education, demographics and country of origin factors. It was found that in 2014, Immigrants from non-Western countries contributed to a 2.2 billion EUR deficit in Denmark, whereas Immigrants from Western countries provided to a net surplus of 0.5 billion EUR.
A large component calculating the fiscal contribution is the use of welfare benefits. In the 2008 European Social Survey (cited by Dustmann & Frattini, 2014), 37% of European citizens believed that immigrants should only have access to welfare once they have become a citizen of the country that they migrated to. This high percentage indicates that the need to understand the relationship between Immigrants and their access to Welfare benefits. Preston (2014), suggests that the relationship between Immigrants and welfare benefits depends on the structure of each country welfare policies. It can be assumed that if there is more benefits available, there would naturally be a higher percentage of Immigrants accessing these welfare benefits. Whereas, if there were stricter access to benefits, there would be a lower percentage. This can be applied to why Hansen et al. find a different result to Dustmann & Frattini, as Denmark has a generous welfare system in comparison to the UK.
Many Economists believe it is difficult to calculate the Fiscal contribution of Immigrants, which may be another reason behind the varied findings. Coleman & Rowthorn (2004), analysed Gott and Johnston’s (2002) study and found that there are various factors that add to the complexity in obtaining an accurate fiscal contribution figure from Immigrants. According to the Migration Observatory at the University of Oxford (2015), fiscal contribution from Immigrants is calculated based off finding the difference of taxes paid, contributions to public finances, and the cost of public services/benefits they receive. It is evident that there is a divided opinion, to what extent the indirect effects should be included in public services/benefits. As such, the calculations may be skewed to support each side of the debate.
It is evident from the above research, that past statistics suggest that generally immigrants have little to no effect on public finances. However, the fiscal contribution may vary from country to country. This can largely be accounted to the welfare system that is in place and how strict the policies are to access it. It can also be concluded, that it is more complex to forecast how future generations of immigrants will affect public finances, as it is dependent on their existing health conditions, and whether they bring their family who may require access to the education system. Results can also be skewed in favour of a particular side of the debate, depending on what indirect effects are accounted for in the calculation.
Brain drain is believed to occur among developing countries when highly skilled and qualified people emigrate to developed countries. It is often argued that there may be benefits from the migration of highly skilled people, this is known as brain gain. Seglow (2006) suggests that developing countries do suffer from migration of highly skilled people.