Immigration: The Problem Isn’t Too Much, But Not Enough

The rich nation narrative

Movement of labour is arguably one of the most important global issues. The common knowledge in rich countries is that there are hoards of people in developing nations that are clamouring and queuing to get into rich countries to get a piece of the economic pie. The story goes that they do this at the expense of the working class natives of the rich nation. Therefore, this requires authorities to act to control the influx in order to protect the interests of the countries native citizens. This is a powerful narrative – one strong enough to influence political action like the election of Donald Trump in the US and the rise of right wing nationalism across Europe. However, under closer scrutiny the story soon becomes clear as one of fiction.

What does the research say?

There is a significant volume of research into the economic effects of immigration. This report by the National Academies of Sciences, Engineering and Medicine has performed a review of this literature. It concluded that there is little to no effect of immigration on wages and employment in the host nation. This is significant, because it refutes the hypothesis that immigrants benefit at the expense of low paid workers in the country accepting them.

These results suggest that the rich nation narrative is ultimately a one dimensional one. The view is summarised well by President Trump’s comments: “Our country is full”. The fact is that a country does not “fill up”. Economies are based on the activities of their agents. For example, businesses respond to the additional supply of labour in their own decision making process to maximise profits. Equally, immigrants will consume goods and services, each with its own effects on businesses and the economy as a whole. The point is that characterising a country as a container to be filled misses the point. Economies are not inanimate objects – they are complex and ever evolving networks of human interaction.

The cultural argument

In terms of the economic effects, the consensus of the empirical research is clear. There are, of course, arguments outside of economics. These tend to be centred around an idea of maintaining a cultural integrity and purity.

A simple inspection of any nation with second generation immigrants offers evidence that cultural immigration is not a zero sum game as this view might suggest. That is, the cultures from other nations do not directly detract from that of the host nation.

In fact, when integrated well and observed over time the cultures of immigrants and host nations have flourished side by side. Visits to a British Curry house, a Boston Irish pub or a “China Town” in one of many major cities around the world provide good examples of this kind of cultural integration in action.

If not too much, maybe not enough?

2019 Nobel Prize winning economists Abhijit Banerjee and Esther Duflo in Good Economics for Hard Times explain that there are numerous reasons against people leaving their native countries – which so often outweigh the reasons for migrating (which are often poverty or war).

They cite a study to illustrate people’s aversion to migration. The research uses a randomised control trial in Bangladesh where a scheme of subsidies were provided to rural workers during their planting season. Typically during this season they would not have an income and families were at risk of going hungry. The small subsidies were designed to provide the “nudge” to migrate to the city and gain an income that they would not have otherwise. The results of the trial suggested that the subsidy was not enough to get people to go and seize the opportunities available to them to increase their earnings. The implication here is that even when provided with additional incentives to migrate, people may choose not to. This leads us to question why.

The reasons not to leave your home nation are strikingly similar between developed and undeveloped nations. They also make a lot of sense intuitively. The reasons include financial constraints, overestimation of the risks involved and non-financial costs (these include loss of family ties, regulatory barriers and time investments like learning a new language). As a result of these kinds of factors, people overwhelmingly stay in their home nation. Only 3.5% of the global population are defined as international immigrants. In light of this, it seems that the problem of immigration might not be one of too much, but of too little.

Generally speaking, people tend to stay put unless they have to. This leaves the benefits of immigration on the table. Policy makers should be investigating ways to attract and effectively integrate immigrants. Instead, world leaders in rich countries are increasingly pursuing the opposing strategy – restricting their numbers and demonising them for political gain.