Immigration, Labor Markets, and Productivity

By Peri, Giovanni | The Cato Journal, Winter 2012 | Go to article overview

Immigration, Labor Markets, and Productivity


Peri, Giovanni, The Cato Journal


According to a survey in 2008, about 50 percent of Americans perceived immigration as a problem rather than as an opportunity (Transatlantic Trends 2008). Similar surveys conducted in the pre-recession years of 2007 and before also showed that Americans were much less supportive of more open immigration policies than they were of other aspects of globalization such as free trade or free capital movements (Pew Research Center 2007). Since the onset of the recession of 2008-2009 and during the jobless recovery of 2010-11, public opinion about immigration further deteriorated. The idea that immigrants take American jobs, depress national wages, and threaten the U.S. economy has become even more rooted, as often happens during economic recessions. The political discourse accompanying the economic and labor market impact of immigrants is very intense and pervasive in the media but often generates "more heat than light" (Goldin, Cameron, and Balaarajan 2011: 163).

Americans are not alone in fearing immigrants. Europeans have grown extremely concerned, too. Immigration flows have surged dramatically during the last 10 years in some EU countries. From 1999 to 2009, the share of foreign-born in the population in Spain rose from 3 to 13.5 percent, and in Italy from 2 to 7 percent. Other countries with a longer history of immigration and smaller flows during the last decade are still dealing with issues of integrating previous immigrants (e.g., the United Kingdom and Germany). The tone and quality of the debate is, if possible, even more acrimonious in Europe and politicians have sometimes catered to these anti-immigration sentiments. In the UK all the main parties in the 2010 elections advocated lower levels of immigration. In Spain the Socialist government has promoted during the last two years a "pay to go" initiative offering cash-payments for immigrants to leave the country.

Within the current climate of perception of immigration as a cost to the host country, what do economists have to offer? Can we help to increase the "ratio of clarity to volume" that is usually minimized in the public discourse on immigration? By offering the simplified (but also somewhat enlightening) perspective of considering migrants mainly as workers and analyzing the gains and costs that they generate for themselves and for the host country, we can make progress in clarifying misconceptions. In this article, I take a strictly economic perspective on migration and consider migrants as workers. While not all international migrants move with the immediate prospect of a job, many of them do. Those who do not, such as refugees and students, still consider the improvement of their future economic opportunities as one of the main reasons for the move and eventually look for a job.

I begin with a global perspective, which is the best way to understand the significant opportunities migrants generate for the world and for themselves. I then describe today's immigrants in terms of their skills and productive characteristics, and focus on the effects immigrants have on their host-country labor markets--notably on wages and employment. I specifically discuss the recent evidence, and some theory, relative to the U.S. labor market. Throughout the analysis I distinguish between two types of migrants: those with high and those with low levels of education. That distinction is important for analyzing the role migrants play in the labor market and in the productive structure of the receiving economy. I briefly summarize the evidence on immigration and the labor markets in some other rich countries (mainly European) and discuss what we can learn from such comparative perspective. I conclude with some guiding principles for thinking about immigration policies.

Migrations: The World Perspective

In contrast with the popular perceptions described in the introduction, if one looks at several recent reports and studies on international migrations by economists and research institutions, their main emphasis is on the large size of global gains obtainable by increasing, even by a small measure, the mobility of people. …

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