America / Immigration

Immigration and the Economy: The Reason For Reform

Today, the consensus is that our immigration system is in dire need of reform. However, there are still those who do not wish to acknowledge the precedence that this matter should take.

Apart from being merely a matter of doing the right thing, it is crucial to understand that some sort of earned legal status for immigrants will greatly improve the US economy as a whole. The reason for this is three fold.

First, the economic pie will largely increase with the addition of close to 11 million people. Also, the loss of would-be immigrant entrepreneurs will no longer stifle potential economic growth.  Lastly, contrary to popular belief, immigrant workers will not displace American workers, but will in fact complement their efforts and allow for a more efficient economic system.

It is undeniable that the addition of around 11 million people to the economy will have great benefits. With the incorporation of more contributors to the market, the economy will grow. If immigrants earn some sort of legal status, odds are that upon coming out of the shadows and gaining employment rights, their wages will increase. With higher wages, this group of people will have a higher spending power and will thus foster a higher flow of money in the economy.

To those that worry that Social Security will be further burdened, the addition of this group will undoubtedly ease the pressure on the system because workers that are generally young and healthy will be paying into the trust fund. According to data from the US Census Bureau Annual and Social Economic Supplement, 37 percent of Hispanics in the US are within the 21-44 age bracket. This translates to a population that will help ease the burden that the aging US population is putting on Social Security.

Also, an immigration reform will benefit the US economy because it will attract foreign-born entrepreneurs to invest here, as opposed to merely being educated in the US and taking their invaluable ideas elsewhere, benefiting foreign economies.  The problem has become so troublesome that Vivek Wadha, a tech entrepreneur who also teaches at Stanford, has advised his students against building their companies in the US for fear that it would be a waste of time, since American companies are often unable to get the high-skilled workers they need.

The necessity to reform the immigration system becomes especially pressing when one considers the fact that foreign-born men and women have founded over half of all tech start-ups in Silicon Valley. A notable example of this would be Sergei Brin- the Russian born co-founder of Google.

Those that worry about immigrant workers lowering the wages of already low-skilled jobs and displacing their US counterparts need not do so. If a large quantity of foreign born workers – workers that have the same exact skills their US counterparts have – is added to the US labor force, then odds are that wages will decrease because native-born workers will now become dispensable with the growth of labor supply.

However, according to research conducted by Giovanni Peri, an Economist at the University of Southern California, Davis, this is unlikely to occur because immigrant workers and native born workers do not possess the same skills, and thus do not compete for the same jobs.

Where native-born workers might be more qualified for jobs that require communication skills, foreign-born workers are likely to be equally qualified in jobs that require physical labor. However, if foreign-born workers take the jobs that require physical labor, then native-born workers are better able to acquire jobs that demand communication skills and usually have higher wages.  Therefore, specialization in labor, an effect that occurs when labor assets are used to the best of their specific abilities, actually creates a more efficient economic system.

While the US economy has recovered, it is certainly not what it used to be.  A reform of the immigration system will expand the potential of the invaluable human capital that we already find within this country. Immigration reform will not only allow close to 11 million people to come out of the shadows, but it will also greatly help foster tremendous growth in the US economy.

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