By Carolina González-Velosa *

During 2015 almost 250 million people were living abroad. If all these migrants would gather, they would be the fifth largest nation in the world. In countries that have been traditionally open to immigration, such as the United States, around 13% of the population are immigrants, while in Switzerland or New Zealand this share reaches 30%. Considering these figures, it is not surprising that a large research group has analyzed how immigration impacts on the destination country’s economy. Their verdict is clear and it clashes against several prejudices: immigration has a positive impact of the economy.

This conclusion is based on plenty of rigorous evidence that, for years, has shown that immigration contributes to a greater economic growth and to rises in productivity (for instance, check the summaries of this research developed by the University of Pennsylvania or of this one, developed by the University of California, Berkeley). Immigration also has proven effects of innovation levels: in the United States, for instance, the production of patents and the funding of venture capital firms are leaded by migrants (check examples at the American Economic Association or at the National Foundation for American Policy).

Therefore, there is a contrast between the academic world and the public opinion, where several sectors state that immigration can be harmful. And these arguments mostly emphasize the possible effects of the labor market: there is a fear that immigration will damage local people by reducing their employment options or wages level. However, there is strong evidence that consistently shows that immigration does not significantly reduce the wages or employment level of local people. George Borjas, from Harvard University, might be the academic who places himself further away from that consensus. Unlike most authors, in his studies, he has found out that immigration strongly affects natives in the labor market. But even he acknowledges that the net economic effect of immigration on the economy is positive.

One of the reasons for the disagreement between what academics say and what the public opinion states is probably due to a logic problem that labor economists call “lump of labor fallacy”. It is an erroneous argument that claims that the number of jobs in an economy is fixed and never changes. If this was true, natives would necessarily be affected by the immigration of workers, either because their wages are reduced or because their jobs are taken away from them and given to immigrants.

The problem with this fallacy is that it does not acknowledge the difference between the labor market and the market of any consumption good, such as oranges. It is true that if there are more oranges in the market, their price will go down. But, unlike oranges, immigrants consume, produce and invest. They buy cars, food and houses. They also create companies, purchase shares, pay taxes, and save for their pensions. It has been proven that their entry to the labor market incentives businessmen to adopt technological changes or to invest in new products that are more workforce intensive. And that, in most cases, does not compete with natives in the labor market as they specialize in other types of jobs, which also improves productivity. Therefore, immigration can increase the number of jobs there are in an economy. And this is precisely the consensus that numerous economists have reached after decades of thorough research.

We rarely find this level of unanimity in economics. The economic benefits of immigration are undeniable and it is important that the public opinion understands this. The debate can be taken to another area, where economic arguments fall in second place. Maybe what we need to agree on is the way in which immigration benefits societies, by making them more open, diverse and culturally rich. Maybe we need to acknowledge that we have a lot to win if we prioritize the humanity that binds us to foreign people, over the nationality that divides us.

*Carolina González Velosa is Specialists of the Labor Markets and Social Security Division of de IDB.

Source: Factor Trabajo IDB