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An Economic Approach to Immigration Policies: How Benefits of Immigration Outweigh the Costs

Updated: Dec 4, 2022

Written by Pelinsu Ekinci


One of the most critical concerns for all is immigration, as it may bring severe costs or benefits to host countries. Economic implications are a significant factor when comparing the costs and benefits of immigration. Immigration is a complex and emotional area of concern, yet it is necessary to examine the issue comprehensively. According to a UN report published in 2020, there are over 281 million immigrants around the world and more than 750 million who, if provided the chance, would permanently leave their home countries. Despite the numerous benefits of immigration for both the origin and the host countries, establishing consistent and reasonable immigration policy constitutes a complex legislative procedure that must involve historical, political, and social factors.


Recent policies on immigration vary widely over the world, for instance, family-based policies in the USA, to point-based systems in Australia, to guest workers’ schemes in the UAE. Family-based approaches require at least two family members, a petitioner, and a beneficiary. In the US, the petitioner must be a permanent resident or citizen, and the beneficiary is the family member who wants to hold a green card. If the beneficiary has a spouse and children, they may also qualify for this opportunity in the category of derivative beneficiaries. Family immigrants tend to receive lower income at first. Yet, they begin to have higher pay growth due to better social networks and increased local human capital acquisition opportunities after a certain point. On the other hand, point-based systems follow a way more different path than family-based policies. The applicants are given points according to many factors, such as age, work experience, and English language skills in Australia. An applicant must score at least 65 to obtain a visa. This system encourages immigration of those defined qualities like higher education, employment, or language abilities. These methods result in an influx of highly competent immigrants, yet, such qualifications may not transfer well to the host nation, so the criteria may not be sufficiently flexible to adapt to a changing business environment's dynamic needs. Each policy has its own strength, but there are proven strategies that have been used by several countries to support their policies on guaranteeing the success of immigrants they host, starting with language training. Language skills are fundamental, and language programs lead immigrants to more economic achievement and social inclusion. The employment rate for immigrants is increasing through active labor market programs, such as employment seeking and advice, workplace introduction, and continued mentorship. Secondly, immigrants tend to fare better in countries with open job markets and strong anti-discrimination legislation. The sustainable profit advantages from migration are considerable. Migration permits employees to look for higher earnings by shifting towards a more productive place. This makes the allocation of work more efficient. In spite of this, almost every industrialized country, despite the potential advantages, places restrictions on immigration. Numerous aspects drive these restrictions, for instance, the widespread belief that immigrants lower natives' salaries. However, due to differences in language, vocational, and technical abilities, most immigrant workers are not close substitutes for native workers, and as a result, it is not common for them to compete for the same positions as natives.


Economists Giovanni Peri and Chad Sparber outline a dynamic mechanism in which natives adapt to an influx of immigrants by shifting into jobs that capitalize on their comparative advantage in a highly referenced work. This tends to happen across the educational spectrum; less-educated natives react to an increase in less-educated immigrants by shifting from manual-intensive to communication-intensive jobs, whereas college-educated natives move into management positions when highly skilled engineers and scientists enter the country.


Once in the host country, new immigrants may lack the local network, credentials, and skills to find suitable jobs quickly. The language barrier, unknown cultural customs, and social isolation may lead to psychological effects too. Yet, average salaries will rise with performance in the long run, and experts believe there is a solid correlation between immigration and productivity gains.


On the other hand, immigrants with high levels of education attract cash flow and stimulate innovation, both of which increase labor productivity. Investors and entrepreneurs who are immigrants encourage native employment and broaden the range of goods and services accessible in society. Immigrants can improve welfare by reducing transactional costs, as immigrants know the products, business norms, and standards available at home and are able to offer a broader range of items. They are also able to help them improve international trade.


The concept that immigrants undermine local labor markets or strain government finances is challenged by a solid amount of objective research over the past several decades. Instead, evidence indicates that migration increases the standard of living for both natives and immigrants in the long term. A further reduction in obstacles to international labor mobility might add tens of billions of dollars to the global GDP. Even if migration is often emotionally and politically tricky, potential migrants and future generations need deliberate politics, not political pandering, based on sound principles and scientific evidence.

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