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A Simple Immigration
Sodel Showing the "Impact on Wage Rates, Efficiency, and
Output"
Assumptions:
- Dx is the demand for
labor in country X; Dy is the demand for labor in country
Y. The demand for labor presumably is greater in the
country Y because it has more capital, more advanced
technology, and better infrastructure that enhance the
productivity of labor. Therefore wages are higher in
country Y
- before migration, the labor
force of country X is 5 million and the wage is
$5
- before migration the labor force
of country Y is 2 million and the wage is $10
- there is full employment in both
countries
- labor quality is the same in
both countries
- migration (1) has no cost, (2)
occurs solely in response to wage differentials, and (3)
is unimpeded by law in both countries
Conclusions:
- Workers will migrate
from low wage country X to high wage country Y until wage
rates in the two countries are equal at $8.
- At that level, 1 million workers
will have migrated from country X to country Y.
- In country Y, the wage rate will
decrease from $10 to $8.
- In country Y the domestic output
(the sum of the marginal revenue products of the entire
workforce) will increase as shown by the blue area c + e.
- In country X, the wage rate will
rise from $5 to $8.
- In country X the domestic output
(the sum of the marginal revenue products of the entire
workforce) will decrease as shown by the red area C + E.
- Observe that the gain in
domestic output in country Y exceeds the loss of domestic
output in country X. The migration from Y to X has
increased the world's output and income.
- 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.
A Model Showing the
Impact of Illegal Workers in a Low Wage Labor
Market
Assumptions:
- Employers in this
market are willing and able to ignore minimum wage
laws.
- Sd represents the supply of
domestically-born (and legal immigrant) workers.
- St represents the total supply
of workers in this labor market (Sd plus illegal
immigrants.
- 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.
- Unless otherwise stated, illegal
immigration is not effectively blocked by the
government.
Conclusions:
- With illegal workers
present, as implied by curve St, the equilibrium wage and
level of employment in this labor market are $5.50 and
450,000.
- At the low wage of $5.50:
* Only 250,000
domestic-born workers are willing to work
* the other workers (200,000)
are illegal immigrants
- Can we therefore conclude that
illegal workers have filled jobs that most U.S.-born
workers do not want?
* The answer is "yes,"
but only with the proviso: "at wage rate
$5.50"
* 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 $8.00. Then 100,000 more domestic-born
workers would work and 200,000 illegal immigrants
would lose jobs.
- Can we therefore conclude that
illegal workers reduce the employment of Americans by an
amount equal to the employment of illegal workers?
No.
* 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.
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