By Saiz, Albert
Business Review (Federal Reserve Bank of Philadelphia)
The United States is a country of immigrants. A majority of Americans trace their roots to people who journeyed from far away to seek a better life. And today's immigrants to the United States are doing the same. Recent immigrants tend to concentrate in a handful of metropolitan areas, and immigration has become a salient feature of these cities. According to the Census Bureau, about 1 million people immigrated to the U.S. in 2001. That figure was not too far from the record 1.3 million immigrants who arrived in 1907 (Figure). However, immigration at the start of the century had a relatively greater impact the U.S. was much less populated. Relative immigration rates were at their highest during the first decade of the [20.sup.th] century: 11 immigrants per year for each 1,000 inhabitants, compared with five per 1,000 in the last decade of the century. The U.S. was absorbing twice the proportion of immigrants than it is today.
Nevertheless, several factors make the current immigration inflows distinctive. First, the U.S. government reduced immigration inflows drastically at the beginning of the Great Depression in 1929. Current immigration levels are the highest in the memories of most Americans. Second, the countries of origin of immigrants are more diverse today than in the [19.sup.th] and early [20.sup.th] centuries. The traditional countries of origin (Germany, Holland, Italy, Ireland, UK, and central Europe) are no longer important sources of immigration. Third, even if immigration inflows are small relative to the population levels, they will still have an important impact on population growth. If current immigration rates are sustained, two-thirds of population growth in the United States could be accounted for by immigration by 2050.
Are such projections realistic? That depends on future immigration policies. Any time immigration has fueled a country's population, it has also sparked heated debates over the desirability of further immigration. For example, on September 1, 1910, the Wall Street Journal ran the following story on the front page:
"The Labor party in the colony of Victoria, Australia, which is practically the dominating influence in the Government, is protesting against the immigration of skilled artisans when they add to the congested population of Melbourne. It is our belief that these immigrants would in time tend to distribute themselves to points where they were more needed, but the attitude of the Labor party is by no means unreasonable" [emphasis added].
More than 90 years later, immigration continues to be a furiously debated topic. Public opinion does not always favor letting more people in. Economists Kenneth Scheve of Yale University and Matthew Slaughter of Dartmouth College have demonstrated that less skilled workers favor limiting immigrant inflows into the U.S. Thomas Bauer, Magnus Lofstrom, and Klaus Zimmermann, from Bonn University, also report that survey respondents in OECD countries show substantial support for immigration limits. (1)
This article provides background for a reasoned discussion of the impact of immigration. Economists and other social scientists have produced substantial research on immigration's impact on local economies. Individual and collective preferences for policies should be strongly founded on the available evidence.
Economists generally agree that a worldwide labor market without any border restrictions is efficient: that is, people achieve a maximum level of production of goods given the existing availability of resources. The issue with immigration is its impact on the distribution of real income. Who are the winners and the losers worldwide? Can inhabitants of a country that allows immigration lose because of it? Regardless of the average impact on a country, what is the distribution within a country of gains and costs arising from immigration?
This article will deal with these questions from the point of view of countries receiving immigrants. …