Immigration is an extremely divisive issue in the developed countries. It creates resentment among part of the population, even in countries that historically are made up mainly of migrants, as the US. It is by some considered ‘progressive’ or even ‘socialist’ to campaign for de rights of immigrants to enter the country, and people resenting it are labelled ‘xenophobes’ or ‘racists’. For some, embracing immigration is embracing ‘multiculturalism’, which is considered to be good, while others insist on assimilation as a condition for immigration.
The globalisation drive has been accompanied by a lot of studies claiming to show that immigration is good for everybody. Immigrants create economic growth, it is claimed, and this creates more demand for manpower. So in the end, there is no reason for the native population to fear job loss or lower wages.
The reality is more complicated. Measuring the labour market effects of immigration is difficult, as a lot of other factors are at play, and large scale immigration is often permitted particularly in periods of economic growth and relatively low unemployment. Anyway, many studies show that migration does have an effect on wages for the low-skilled workers, as common sense would make us expect, even if most claim that the effect is small. But these are short-term analyses. The Nobel winning English-American economist Angus Deaton wrote recently (surprisingly enough on the IMF website): ‘I used to subscribe to the near consensus among economists that immigration to the US was a good thing, with great benefits to the migrants and little or no cost to domestic low-skilled workers. I no longer think so (. …). Longer-term analysis over the past century and a half tells a different story. Inequality was high when America was open, was much lower when the borders were closed….’
Irregular immigrants detained at the US border with Mexico. U.S. Customs and Border Protection, Public domain, via Wikimedia Commons.
George J. Borjas, professor in economics at Harvard Kennedy School specialising in migration, is more blunt. He wrote in 2016, when the question of immigration was a central issue in the electoral contest between Donald Trump and Hilary Clinton: ‘(The) message might be hard for many Americans to process, but anyone who tells you that immigration doesn’t have any negative effects doesn’t understand how it really works. When the supply of workers goes up, the price that firms have to pay to hire workers goes down. Wage trends over the past half-century suggest that a 10 percent increase in the number of workers with a particular set of skills probably lowers the wage of that group by at least 3 percent. Even after the economy has fully adjusted, those skill groups that received the most immigrants will still offer lower pay relative to those that received fewer immigrants.’ ‘Somebody’s lower wage is always somebody else’s higher profit. In this case, immigration redistributes wealth from those who compete with immigrants to those who use immigrants—from the employee to the employer’. Well, what can I say. This is not rocket science, it is undergraduate textbook economics. Those familiar with Marx will know that he called it the ‘industrial reserve army’.
As many interests are at play, attitudes towards immigration are heavily politicised. For many employers, free access to foreign labour is seen as essential for their business, and they are influential with establishment politicians. However, pro-immigration policy is often presented not as what it is, namely an employer-friendly policy, but rather as a humanitarian gesture towards poor people in the developing countries. That is perhaps why so many who see themselves as ‘progressives’ are keen on free immigration.
US President Joe Biden stated recently that the U.S. economy was growing “because we welcome immigrants.” “Think about it. Why is China stalling so bad economically?”“Why is Japan having trouble? Why is India? Because they’re xenophobic. They don’t want immigrants.” Now Joe Biden has never been the sharpest tool in the box, but part from his nonsense about China and India (there is no shortage of workers in any of them) and about the present economic growth in the US (it is not driven by immigration but by unsustainable public deficits and debt), I do think that the present unprecedented high immigration is a feature of US economic policy, as he says, not an aberration. Economists who promote more immigration argue that this is the best way to combat inflation (as immigration keeps wages down). So the ‘immigration crisis’ at the US Southern Border is not really a crisis, it is a deliberate policy. However, as many in the US are weary of the high level of immigration, and as 2024 is an election year, the US Government pretends to be worried and is keen to show that measures are taken to diminish the inflow. Pure hypocrisy, but that is alas how politics often works.
There has been a ‘border crisis’ at the US-Mexico border for years. But it is not an accident, it is by design. US President Joe Biden said in May that the open border is key to US growth, and that China and his allies in India and Japan are xenophobes and that is the reason for their economic woes. Photo: Honduras migration caravan October 2018. via Wikimedia Commons,
But what about the countries the immigrants come from?
The emigration means less pressure on the local labour market, so wages for some groups of workers may increase. The remittances that the emigrants send home imply increased incomes for part of the population, which stimulates commerce (and imports of consumer goods), services and some local productive activities, particularly in construction. The remittances ‘trickle up’ to the local leading classes who often have a monopoly within the production of some consumer goods (cement, sugar, soap, processed foods, soft drinks, beer, spirits and so on) and dominate commerce and finance.
The human cost of emigration is often overlooked, but it is high. The people emigrating often leave children in the care of the grand parents, and these children suffer, even when the grand parents are receiving remittances. Money is not a substitute for parental love. Many immigrants never feel really at home in their new country, and hope to go back ‘home’ when they have saved money enough. But it turns out not to be easy.
The emigrants are rarely among the poorest as it requires financial resources to be able to emigrate – in Central America the price of getting illegally to the US is around 5,000 to 10,000 dollars, but it works fast and flawlessly most of the time. Many of the people emigrating are skilled workers (carpenters, masons and so on) that are not easily replaced, some are doctors, dentists, nurses, engineers and so on, who will often get work as unskilled workers in the US (fast food outlets, couriers, gardening, home care and the like). So the emigrants leave a void in their home country.
For the national economy, the remittances work much like the rent from exports of oil, mining, illegal drugs and the like. It is income flowing into the country that is not backed by local production and it is boosting consumption, not productive investments. In some cases this inflow of foreign exchange leads to an overvalued local currency (called ‘Dutch Disease’) that renders local production unprofitable.
To sum up, the neoliberal, globalist recipe where poor countries import manufactured goods from the developed countries and export raw materials and their people, is not a road to development. It is a dead end.
But what can be done? There is obviously a mismatch, when capital and knowledge are available in the developed countries, and there is an underutilised workforce in the developing countries. But this mismatch should be solved by moving production to the developing countries, not by moving the people. This can work if the developing countries drop the neoliberal recipes and get their policy right. And it would be helpful if the developed countries were willing to contribute to the financing of the necessary productive infrastructure.
