immigration

22a Immigration - Lesson Outline

OUTLINE - Immigration - Lesson 22a

I. Economic Immigrants

II. Number of Immigants

A. Legal Immigrants Living in the United States
1. Numbers and Trend: How many immigrants (foreign-born residents) live in the United States?

2. Legal immigrants living in the United States by country of origin

2. Annual Legal US Immigration (2015)

a. about 1 million new legal immigrants per year enter the US (138 million in 2015)
b. numbers by category of admission (2015)

family sponsored - about 891,000

refugees - about 200,000

employnment (skills) based - about 189,000

diversity lottery - about 63,000

c. In 2015, 1.38 million foreign-born individuals moved to the United States, a 2 percent increase from 1.36 million in 2014.

1) India was the leading country of origin for recent immigrants, with 179,800 arriving in 2015,
2) followed by 143,200 from China,

3) 139,400 from Mexico,

4) 47,500 from the Philippines, and

5) 46,800 from Canada.

d. In 2013, India and China overtook Mexico as the top origin countries for recent arrivals.

B. Illegal Immigrants - About 11 million undocumented immigrants are living in the United States

III. The Decision to Migrate

A. Pull Factors and Push Factors
B. Reasons

1. economic opportunities in destination country (pull factor)
2. escape oppression (push factor)

3. family reunification (pull factor)

C. Marginal Benefits and Marginal Costs

1. earnings opportunities (MB): larger wage difference = more likely to migrate
2. moving costs (MC):

a. higher moving costs = less likely to migrate
b. beaten paths: reduce moving costs = more likely to migrate

3. Other

a. distance: greater distance = less likely to migrate
b. age: younger workers = more likely to migrate

IV. The Economic Effects of Immigration

A. The fact that economic immigration to the United States is sizeable and continuous affirms that in general the economic benefits of immigration to the immigrants exceed their costs.
B. . Personal Gain for those who Migrate

C. Impact on Wage Rates, Efficiency, and Output

1. Wage rates rise in source country and fall in destination country
2. Efficiency gains from immigration: same number of workers produces a greater total output

D. Brain drain

E. Complications and Modifications

1. Costs of migration
2. Remittances and backflows

2. Complementary vs. substitute resources

4. Expansion of capital in destination country

5. Full employment vs. unemployment

F. Fiscal Impacts: What effects do immigrants have on tax revenues and government spending in the United States?

G. Research Findings:

1. All economists agree that U.S. immigration increases U.S. domestic output and income and that highly educated immigrants and successful entrepreneurs add to the vitality of American enterprise.
2. But in light of the complications just discussed, no single generalization is possible as to the impact of immigration on the wages of native-born U.S. workers.

3. The best evidence indicates that immigration reduces the wages of native-born workers who have low educations, and also may reduce the salaries of some highly trained native-born workers.

4. The overall effect of immigration on the average American wage is much less clear. Scholarly estimates on that effect range from minus 3 percent to plus 2 percent.

V. Immigration Policy

A. Current US immigration policy
1. favors family reunification (about two-thirds of all legal immigrants)
2. refugees (about 14% of all legal immigrants)

3. employment-based - needed skills (about 13% of all legal immigrants)

4. immigration diversity lottery (about 50,000 or less than 5% of all legal immigrants)

B."Three Ways To Totally Transform U.S. Immigration Policy" NPR, Planet Money http://www.npr.org/blogs/money/2013/02/21/172501563/three-ways-to-totally-transform-u-s-immigration-policy

1. The Best And The Brightest: allow in mostly skilled immigrants
2. The Highest Bidder: Let the markets decided who can immigrate by auctioning the visas off to employers.

3. Let 'Em In: allow free immigration of anyone who wants to enter the United States, except if there are security or safety concerns. Similar to what happened in the U.S. from 1790 to 1882 and similar to migration between the 50 united states and between the 28 countries of the European Union.

C. President Trump

1. improve border security - "build a wall"
2. reduce the total number of immigrants

3. emphasize "the best and the brightest'; Trump supports a skills-based immigration policy (like Canada's current policy)

4. fewer family reunification immigrants; reduce or abolish "chain migration"

5. abolish the immigration diversity lottery

VI. The Illegal Immigration Debate

A. Employment Effects
1. PRO-immigration: Illegal immigrants take jobs that Americans do not want
2. ANTI-immigration: Illegal immigrants take jobs from Americans

3. Evidence: illegal immigration causes some substitution of illegal workers for domestic workers, but the amount of displacement is less than the total employment of the illegal workers. Illegal immigration-as with legal immigration-increases total employment in the United States

B. Wage Effects

1. the overall effect of illegal immigration on the average wage rate in the economy is either a smaller decline or even positive
2. Illegal immigration has very little effect on the average level of wages in the United States. That average wage level depends mainly on the nation's overall level of labor productivity, which illegal immigration does not appreciably affect.

C. Price Effects

1.In industries where illegal immigrants are heavily used-for example, construction, agriculture, landscaping, home cleaning, restaurant meals, and lodging-the presence of illegal workers may have a discernable downward price effect.
2. Lower prices raise the standard of living of all Americans and their families.

D. Fiscal Impacts on State and Local Governments: One major and very legitimate concern about illegal immigration is the negative fiscal impact it has on local and state governments.

E. Other Concerns

1. undermines general respect for the law
2. unfair to the thousands of people enduring the expense and long waits associated with the process for legally gaining the right to live and work in the United States.

3. some observers see national defense as the greatest long-term risk from porous borders

VII. Optimal Immigration

A. From a strictly economic perspective, immigration should be expanded until its marginal benefit equals its marginal cost.
B. The MB = MC conceptual framework explicitly recognizes that there can be too few immigrants, just as there can be too many.

VIII. Model: A Simple Immigration Model

A. Assumptions:

1. DX is the demand for labor in country X; DY is the demand for labor in country Y.
2. before-migration labor forces of country X and country Y are 5 and 2, respectively;

3. that neither country is experiencing substantial long-term unemployment;

4. and that labor quality in the two countries is the same.

5. migration (1) has no cost, (2) occurs solely in response to wage differentials, and (3) is unimpeded by law in both countries,

B. Conclusions:

1. workers will migrate from low-wage country X to the high wage country Y until wage rates in the two countries are equal at $8.
2. At that level, 1 million workers will have migrated from country X to the country Y.

3. Country Y

a. the country Y wage level will fall from $10 to $8,
b. country Y domestic output (the sum of the marginal revenue products of the entire workforce) will increase. The gain in domestic output in country Y is blue area on the graph below.

4. Country Y

a. country X, the wage rate will rise from $8 to $10,
b. country X domestic output will decline. The loss in domestic output is red area on the graph below..

7. Observe that the gain in domestic output in country Y (blue area) exceeds the loss of domestic output in country X (red area). The migration from country X to country Y has clearly increased the world's output and income.

8. Migration enables the world to produce a larger output with its currently available resources. So labor mobility joins international trade in enhancing the world's standard of living.

IX. Model: Impact of Illegal Workers in a Low Wage Labor Market

A. Assumptions:
1. Employers in this market are willing and able to ignore minimum wage laws
2. SD represents the supply of domestically-born (and legal immigrant) workers;

3. With no immigration the wage = $10 and quantity employed = 3 million

4. ST represents the total supply of workers in this labor market (SD plus illegal immigrants). Wages now is $8 and total employment is 4 million (2 million domestic employees and 2 million illegal immigrants)

5. The horizontal distances between ST and SD at the various wage rates measure the number of illegal immigrants offering their labor services at those wage rates (2 million)

6. Unless otherwise stated, illegal immigration is not effectively blocked by the government.

B. Conclusions:

1. With illegal workers present, as implied by curve ST, the equilibrium wage and level of employment in this labor market are $8 and 4 million.
2. At the low wage of $8,

a. only 2 million domestic-born workers are willing to work;
b. the other workers are 2 million illegal immigrants.

3. Can we therefore conclude that illegal workers have filled jobs that most U.S.-born workers do not want?

a. The answer is "yes," but only with the proviso: "at wage rate $8."
b. if the United States cut off the full inflow of illegal workers to this market, the relevant supply curve would be SD and the wage rate would rise to $10. Then 3 million domestic-born workers would work.

4. Can we therefore conclude that illegal workers reduce the employment of Americans by an amount equal to the employment of illegal workers? No.

a. illegal immigration causes some substitution of illegal workers for domestic workers,
b. but the amount of displacement is less than the total employment of the illegal workers.

c. Illegal immigration, as with legal immigration, increases total employment in the United States.

C. The Effects of Illegal Immigration - The Facts

1. Employment Effects:
a. Generally, illegal immigration causes some substitution of illegal workers for domestic workers,
b. but the amount of displacement is less than the total employment of the illegal workers.

c. Illegal immigration, as with legal immigration, increases total employment in the United States.

2. Wage Effects:

a. Large flows of illegal workers into specific low-wage labor markets reduce wage rates in those markets.
b. the overall effect of illegal immigration on the average wage rate in the economy is either a smaller decline or even positive.

1) As with legal immigrants, some illegal workers are complementary inputs to domestic-born workers, not substitutes, and therefore their presence INCREASES employment of domestic workers
2) Only where illegal workers and legal workers are substitute resources will the increase in labor supply reduce the wages of other workers. Ironically, studies show that the largest negative impact of illegal immigrants is on the wages of previous immigrants, not on native-born workers.

c. Illegal immigration has very little effect on the average level of wages in the United States. That average wage level depends mainly on the nation's overall level of labor productivity, which illegal immigration does not appreciably affect.

3. Price Effects: Because illegal immigrants work at lower pay than would be necessary to attract native-born workers, the prices of goods and services that illegal workers produce are lower than they would be otherwise.

4. Fiscal Impacts on State and Local governments:

a. One major and very legitimate concern about illegal immigration is the negative fiscal impact it has on local and state governments. Cities and states with high concentrations of illegal immigrants bear the main burden
b. Immigrants do, however, pay state sales taxes and taxes on gasoline, and indirectly pay property taxes built into rent.

5. Other Concerns:

a. allowing immigrants to enter the United States unlawfully may undermine general respect for the law
b. illegal immigration is highly unfair to the thousands of people enduring the expense and long waits associated with the process for legally gaining the right to live and work in the United States

c. some observers see national defense as the greatest long-term risk from porous borders. The flow of illegal entrants into the United States is clearly at odds with the goal of homeland security. Ineffective border enforcement against illegal immigrants allows career criminals and even terrorists to enter the United States undetected.