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Understanding The Economics Of Immigration

As we’d expect in The Observer the claim is that the economics of immigration are entirely positive. This is not actually so, there’s more than a little mixing and matching going on here. Including one really rather serious logical mistake:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Some commentators see immigration as a good because it boosts economic growth. Others insist that what business leaders really want is to use immigration to lower wages. Both claims are true. Most studies show immigration boosts GDP. There is little evidence that it increases unemployment or drives down wages. Immigration can affect the wages of those at the bottom of the ladder. But the impact is tiny and more than compensated for by the benefits, for instance, taxes from migrants helping to protect public services. [/perfectpullquote]

The logical mistake is that immigration boosts GDP. This isn’t something we’re particularly interested in. “We” as in us out here that is. GDP isn’t something that’s important – GDP per capita is. The GDP of China is about the same as that of the US. But there’re some 1.1 billion in China sharing that economic activity, perhaps 320 million in the US. The average USian is therefore about 3 times better off than the average Chinee. GDP per capita matters, GDP doesn’t.

Unless, of course, you’re one of the rulers of the place in which case a higher GDP means you’ve more cash you can skim off the top and spend on stuff. Then it does matter. Even, more to skim for the promises about pensions and social care that your forbears made.

There is a much more subtle effect too. The division and specialisation of labour is what makes us all rich, more people – yes of any skill levels – to divide and specialise with makes us richer. In a world of real free trade it wouldn’t matter whether they were within the same economy or not, it isn’t and it does. But this is a very subtle effect, not something we can measure even, just something we can insist from theory is there.

We do gain from well trained immigrants coming in, because we get the productive years of their working life without having had to pay for the training. That doesn’t apply to someone just off the paddy walking in.

We can thus argue about the effects upon the indigenes of immigration in an economic sense. It’s actually pretty much nothing either way. At which point those political concerns might and perhaps should take precedence as there’s nothing much in the economics. Cultural or social matters might be worthy of considering given the null economic result.

Except there’s one truly vast effect. Immigration from a poor economy into a richer one is hugely beneficial to the immigrant. But then that produces a political question again, doesn’t it? How much weight should we put on the potential benefit to not one of us? True global internationalists would insist just as much as any benefit to one already of us. The problem with this moral point being that humans just don’t act or think that way. And we are trying to deal with a world with humans in it, aren’t we? Not that other species that’s going to turn up when all are woke?

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Rhoda Klapp
Rhoda Klapp
5 years ago

The way I like to express it is: ‘Do we have a shortage of poor people meaning we need to import more?’

5 years ago

There’s a moral question too. By encouraging immigration, what are we doing to the economy of the emigrant country? If it, as seems obvious, is impoverishment then surely we are guilty of a moral crime.

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