Economics of Free Migration of Labor into the Us

Economics of Free Migration of Labor into the US

The burst of globalization has brought on many ups and downs to the world economy. With the rise in innovative communication systems and technology, the movement of capital and goods has never been easier and in the case of labor, never more controversial. The United States of America, the melting pot of the world, is known as the country of immigrants. The economic downturn of 2008 has left the country demanding for better immigration policy. Should the government open the borders for unrestricted migration or not? Before the government decide on any policy it would be best to consider the economic impacts of immigration.

A major argument against immigration is that it takes away jobs from native workers. According to George Borjas from the Economics department at the University of California, the US can “benefit from immigration mainly because of the complementaries between immigrant workers and other factors of production”. He also points out that in order for the benefits to be positive for the US, the immigrants have to be sufficiently “different” from the stock of native productive units. David Bier, an immigration policy analyst at the Competitive Enterprise Institute, states in a recent article that immigrant workers allow Americans to specialize in more productive endeavors. This statement of his supports Borjas idea of increasing benefits by having immigrant workers being different from native workers. Bier gives a wonderful example of where an immigrant workers who works in a doctor’s office and files all paperwork. By doing so, he allows the doctor more time to see more patients. He has created economic value from both his work and for the doctor.

Another major argument against immigration is that immigrant families pay little to no tax and burden the welfare system. Bier notes that immigrants are also consumers in the host country. They increase sales for US companies and also pay sales taxes on the goods that they purchase. More sales contribute to economies of scale, which leads to cost savings as per-unit costs go down. Increasing economies of scale allow consumers to spend, save and invest more of their money which leads to more taxable economic activity that benefits everyone.

The chairman of MigrationWatch UK, Sir Andrew Green argues that open borders is unrealistic and impractical. He states that people, immigrant or native, have continuing need for healthcare, education, housing and transport. He quotes economist Milton Friedman that “you cannot have both open borders and a welfare system”. According to him, given the huge disparities of wealth open border would lead to massive flows of people from the third world to the industrialized