I am going to do something very dangerous today. I am going to touch on one of the most controversial topics in current politics. I am going to write about immigration. To be clear, this post is not intended to upset anyone. I know there are many dimensions to this debate, most of which have nothing to do with economics, such as the impact of immigration on social cohesion and cultural identity. I am not going to say anything about that except that I agree these are valid concerns. All I am going to focus on today is the economic impact of immigration, knowing full well that this is only one part of the story.
.....and sometimes these waves of industrious immigrants include people who publish economic data, articles etc. and thus increase the human capital of the population as a whole.
From the study 'We distinguish the impact of immigration shocks in OECD countries from that of refugee immigration in emerging and developing economies.'
The problem with this is that in Europe, where immigration has been moralized and for decades has been a crucial identifier of one's position on the political spectrum (and not seldomly discussed in terms of 'are you a decent person or not?') the difference between immigrants and asylum seekers is rather confused: a large share of asylum seekers are economic immigrants.
Second, in western European countries millions are not counted as unemployed since they are in some gov / local gov scheme which often is no more than a job scheme that keeps them busy and that flatters the official employment number.
The Ducth economy for instance, officially roaring, still has a mln plus 'inactives' who for some reason cannot be employed in the real economy but who are not part of the official unemployement statistic - which is extremely low. A (very) significant part of these inactives have a legal immigration background and most of them will simply be relatives of the 1960s and 70s immigrants. Most of whom were laid off in the late 70s / early 80s.
Another segment in the inactives number are the often also un(der)skilled 'refugees' who, since entry is supposed to be stringent, come in fleeing chaos. A large part of asylum seekers (typically young men) are middle class in their own country and basically function as the spearhead for a family. (For some reason the stream of refugees follows the path of US democracy promotion abroad...).
There is a clear difference in employment- and job levels when comparing north Africans (family-follow-up immigration / asylum) vs for instance Indians (official economic immigrants). But not just there: Ghanaians, like north Africans, often hold low wage jobs, but their unemployment numbers are lower than those of north Africans (just like their incarceration rates).
In the job market refugees/immigrants typically don't make a dent beyond low wage flexible jobs since in the ever growing service economy language- and social skills rule. Dependency on welfare is high. (And since Dutch welfare schemes keep up with wage growth in the real economy, the Dutch definition of 'poverty' is raised continuously as the country grows wealthier. These days, a single person making less than 1500 euros a months is officially 'poor'.
What is further 'remarkable' about the NL immigrant economy is that eastern European immigrants have crushed it compared to their north African and middle eastern compadres: almost all are employed...
Lance Roberts last week wrote an excellent deep dive into the effects of immigration, legal and illegal, on US economic growth, job creation, wage suppression, corporate profits and inflation.
A summary:
Millions of new jobs have been created the past few years, almost all of them part time and pre dominently filled by immigrants - legal and illegal - who work harder than locals, take less pay and benefits, are sick much less and hence are more productive and disinflationary.
Wage growth does not correspond with a growing economy & a 'tight' labor market (it's not that tight as typically thought in msm * ).
US full time employment has decreased the past decades with part time service jobs growing fast.
Since 2019, the cumulative employment change has favored foreign-born workers, who have gained almost 2.5 million jobs, while native-born workers have lost 1.3 million.
Most job growth is realized at healthcare (babyboomers retiring), leasure and hospitality, retail and the gov (i guess that's where young educated Americans hope to be employed so that they can pay off their student debt,,,).
Despite weakness in manufacturing and services, with many companies recently announcing layoffs, we have near-record-low jobless claims and employment.
But:
A 2023 survey from staffing agency Insight Global found that recently unemployed full-time workers had applied to an average of 30 jobs only to receive an average of four callbacks or responses.”
When the broader societal effects of immigration on the host nation are concerned, perhaps the most telling story never really told was Robert Putnam's study from 2007:
Bowling With Our Own
Robert Putnam’s sobering new diversity research scares its author.
'Robert Putnam, author of Bowling Alone, is very nervous about releasing his new research, and understandably so. His five-year study shows that immigration and ethnic diversity have a devastating short- and medium-term influence on the social capital, fabric of associations, trust, and neighborliness that create and sustain communities.'
Putnam, a liberal and an immigration optimist and obviously sensing he was going to publish something that would go firmly against progressives' believes (and his) and that would reinforce conservatives' opinions, decided to not immediately publish his study but to do more research into how to combat the negative impacts. He didn't get beyond mostly the liberal abstractions that we know so well.
* Cullen roche 'You could even argue that metrics like full time employment, temporary help and the quit rate are consistent with a labor market that is loose.' https://tinyurl.com/3a97nz9e
Sensible to restrict scope to effects on economy and within that only the effect on GDP.
This article addresses absolute increase in GDP - increase from £100 to £102. What about GDP per capita of population - at the same time this could fall from £1 to £0-98. Is GDP per capita a better measure of benefit to citizens?
Outside scope, but still an ‘economic’ effect, is competition demand for resources adversely affecting citizens e.g. average house price rises from £1000 to £1250.
Of course, you're not wading into a political minefield when you restrict yourself to the pros and cons as concern the economy only.
That said, Japan has fared pretty well with very little immigration. And I think it wouldn't be crazy to say that low immigration could be a boost to the development of robotics.
As positive as the economic argument for immigration is, the political argument might be a lot more contentuous. The average Joe who in some general terms benefits from more economic growth will still be anti-immigration if it means housing becomes unaffordable, or (and this is *really* a minefield) more foreigners mean more crime.
A good read on this topic is the book How migration really works by the Dutsch scholar Hein de Haas. Excellent book where he debunks 22 myths on migration.
Joachim - this is a very helpful contribution to the debate. Most welcome.
I have to echo the comment that the per-capita view is at least as important as the raw gdp (etc) data.
If we gain 1% of population numbers via immigration, and the immigrants are as productive as the existing pop (eg suppose they are drawn from the same cultural and ethnic pool, with lots of family ties in), then... the existing population don't gain or lose in gdp per head.
They may however gain or lose in other economic areas. Some bad news: More costly housing. More pressure on green spaces. Busier transport networks. More pollution per square mile. Some good news: the country is a bit bigger and stronger, a few fixed costs like defence get shared over more households.
There may also be indirect economic effects from the changed to the age distribution, skills mix, etc etc.
Overall i would not be suprised at the conclusions offered, that for a surge in economic migrants, gdp goes up pro rata (with a 5yr lag) to population, ie gdp per head recovers. Hopefully not just from upward pressure on property prices (i am of the view that way too much of the uk gdp is based on property and financial services).
And... that for refugee migrants the picture is less rosy ... although the picture of c. nil gdp growth in 5yrs, ie a big negative impact on gdp per head, is at the low end of what i would expect. YES speeding up assimilation would help. Although there is the (non-economic) argument that doing so will attract more folk.
I'll follow your lead in leaving the humanitarian, cultural, environmental and other non economic aspects for another time.
Interesting but not very practical. While the 5-year timeframe captures "immediate" impact or lack thereof, it misses the longer-term economic effects and potential of associated demographic trends. To understand labor flows, we have to think over much longer periods of time than 5 years. I think it's a very complicated question to answer, ergo the politicization of the debate. It would be helpful to see an economic study that looks at a broader time period. Anecdotally, it seems that higher immigration countries - Australia, Canada, US - benefit from higher levels of growth than higher emigration countries?
.....and sometimes these waves of industrious immigrants include people who publish economic data, articles etc. and thus increase the human capital of the population as a whole.
From the study 'We distinguish the impact of immigration shocks in OECD countries from that of refugee immigration in emerging and developing economies.'
The problem with this is that in Europe, where immigration has been moralized and for decades has been a crucial identifier of one's position on the political spectrum (and not seldomly discussed in terms of 'are you a decent person or not?') the difference between immigrants and asylum seekers is rather confused: a large share of asylum seekers are economic immigrants.
Second, in western European countries millions are not counted as unemployed since they are in some gov / local gov scheme which often is no more than a job scheme that keeps them busy and that flatters the official employment number.
The Ducth economy for instance, officially roaring, still has a mln plus 'inactives' who for some reason cannot be employed in the real economy but who are not part of the official unemployement statistic - which is extremely low. A (very) significant part of these inactives have a legal immigration background and most of them will simply be relatives of the 1960s and 70s immigrants. Most of whom were laid off in the late 70s / early 80s.
Another segment in the inactives number are the often also un(der)skilled 'refugees' who, since entry is supposed to be stringent, come in fleeing chaos. A large part of asylum seekers (typically young men) are middle class in their own country and basically function as the spearhead for a family. (For some reason the stream of refugees follows the path of US democracy promotion abroad...).
There is a clear difference in employment- and job levels when comparing north Africans (family-follow-up immigration / asylum) vs for instance Indians (official economic immigrants). But not just there: Ghanaians, like north Africans, often hold low wage jobs, but their unemployment numbers are lower than those of north Africans (just like their incarceration rates).
In the job market refugees/immigrants typically don't make a dent beyond low wage flexible jobs since in the ever growing service economy language- and social skills rule. Dependency on welfare is high. (And since Dutch welfare schemes keep up with wage growth in the real economy, the Dutch definition of 'poverty' is raised continuously as the country grows wealthier. These days, a single person making less than 1500 euros a months is officially 'poor'.
What is further 'remarkable' about the NL immigrant economy is that eastern European immigrants have crushed it compared to their north African and middle eastern compadres: almost all are employed...
Lance Roberts last week wrote an excellent deep dive into the effects of immigration, legal and illegal, on US economic growth, job creation, wage suppression, corporate profits and inflation.
A summary:
Millions of new jobs have been created the past few years, almost all of them part time and pre dominently filled by immigrants - legal and illegal - who work harder than locals, take less pay and benefits, are sick much less and hence are more productive and disinflationary.
Wage growth does not correspond with a growing economy & a 'tight' labor market (it's not that tight as typically thought in msm * ).
US full time employment has decreased the past decades with part time service jobs growing fast.
Since 2019, the cumulative employment change has favored foreign-born workers, who have gained almost 2.5 million jobs, while native-born workers have lost 1.3 million.
Most job growth is realized at healthcare (babyboomers retiring), leasure and hospitality, retail and the gov (i guess that's where young educated Americans hope to be employed so that they can pay off their student debt,,,).
Despite weakness in manufacturing and services, with many companies recently announcing layoffs, we have near-record-low jobless claims and employment.
But:
A 2023 survey from staffing agency Insight Global found that recently unemployed full-time workers had applied to an average of 30 jobs only to receive an average of four callbacks or responses.”
https://tinyurl.com/ms4pbphe
When the broader societal effects of immigration on the host nation are concerned, perhaps the most telling story never really told was Robert Putnam's study from 2007:
Bowling With Our Own
Robert Putnam’s sobering new diversity research scares its author.
'Robert Putnam, author of Bowling Alone, is very nervous about releasing his new research, and understandably so. His five-year study shows that immigration and ethnic diversity have a devastating short- and medium-term influence on the social capital, fabric of associations, trust, and neighborliness that create and sustain communities.'
https://tinyurl.com/4y4jxzrk
Putnam, a liberal and an immigration optimist and obviously sensing he was going to publish something that would go firmly against progressives' believes (and his) and that would reinforce conservatives' opinions, decided to not immediately publish his study but to do more research into how to combat the negative impacts. He didn't get beyond mostly the liberal abstractions that we know so well.
* Cullen roche 'You could even argue that metrics like full time employment, temporary help and the quit rate are consistent with a labor market that is loose.' https://tinyurl.com/3a97nz9e
Sensible to restrict scope to effects on economy and within that only the effect on GDP.
This article addresses absolute increase in GDP - increase from £100 to £102. What about GDP per capita of population - at the same time this could fall from £1 to £0-98. Is GDP per capita a better measure of benefit to citizens?
Outside scope, but still an ‘economic’ effect, is competition demand for resources adversely affecting citizens e.g. average house price rises from £1000 to £1250.
very well-argued!
Of course, you're not wading into a political minefield when you restrict yourself to the pros and cons as concern the economy only.
That said, Japan has fared pretty well with very little immigration. And I think it wouldn't be crazy to say that low immigration could be a boost to the development of robotics.
As positive as the economic argument for immigration is, the political argument might be a lot more contentuous. The average Joe who in some general terms benefits from more economic growth will still be anti-immigration if it means housing becomes unaffordable, or (and this is *really* a minefield) more foreigners mean more crime.
A good read on this topic is the book How migration really works by the Dutsch scholar Hein de Haas. Excellent book where he debunks 22 myths on migration.
Joachim - this is a very helpful contribution to the debate. Most welcome.
I have to echo the comment that the per-capita view is at least as important as the raw gdp (etc) data.
If we gain 1% of population numbers via immigration, and the immigrants are as productive as the existing pop (eg suppose they are drawn from the same cultural and ethnic pool, with lots of family ties in), then... the existing population don't gain or lose in gdp per head.
They may however gain or lose in other economic areas. Some bad news: More costly housing. More pressure on green spaces. Busier transport networks. More pollution per square mile. Some good news: the country is a bit bigger and stronger, a few fixed costs like defence get shared over more households.
There may also be indirect economic effects from the changed to the age distribution, skills mix, etc etc.
Overall i would not be suprised at the conclusions offered, that for a surge in economic migrants, gdp goes up pro rata (with a 5yr lag) to population, ie gdp per head recovers. Hopefully not just from upward pressure on property prices (i am of the view that way too much of the uk gdp is based on property and financial services).
And... that for refugee migrants the picture is less rosy ... although the picture of c. nil gdp growth in 5yrs, ie a big negative impact on gdp per head, is at the low end of what i would expect. YES speeding up assimilation would help. Although there is the (non-economic) argument that doing so will attract more folk.
I'll follow your lead in leaving the humanitarian, cultural, environmental and other non economic aspects for another time.
Interesting but not very practical. While the 5-year timeframe captures "immediate" impact or lack thereof, it misses the longer-term economic effects and potential of associated demographic trends. To understand labor flows, we have to think over much longer periods of time than 5 years. I think it's a very complicated question to answer, ergo the politicization of the debate. It would be helpful to see an economic study that looks at a broader time period. Anecdotally, it seems that higher immigration countries - Australia, Canada, US - benefit from higher levels of growth than higher emigration countries?