SURVEY: MIGRATION
A modest contribution
Oct 31st 2002
From The Economist print edition
On balance, host countries benefit only slightly from immigration, whereas immigrants benefit hugely
“LET me tell you the problem,” says Victor Trevino, Mexico's deputy consul in the border town of El Paso. “The minimum wage in the United States is $5.15 an hour. In Mexico, many people earn $5 a day. In a supermarket here, a gallon of milk costs $3. Across the border, in Juarez, it often costs 10 or 15 cents more.” No wonder they come. But what do the people in the host country gain?
For most people, this question revolves around tax and welfare benefits. Do immigrants come to scrounge? Or will they be the salvation of rich countries that have promised their citizens pensions that the public purse cannot afford? There are wider questions too. Do immigrants depress the pay of native workers? Do they retard the growth of productivity? Or do they bolster global economic growth? To such questions, the answer is mostly an unsatisfying “it all depends”.
Take tax and welfare first. Asked whether he thought that the United States should open its borders to all comers, Milton Friedman, the grand old man of liberal economics, replied: “Unfortunately not. You cannot simultaneously have free immigration and a welfare state.”
At a given moment, migrants are generally net contributors to the public purse: they are disproportionately of working age, and the receiving country has not had to pay for their education. A study by Britain's Home Office estimated that the foreign-born population paid about 10% more to the government than it received in expenditure. However, a magisterial study in 1997 of the economic impacts of immigration, by America's National Research Council, found that the picture changes if one looks across time instead of taking a snapshot. In that case, the NRC found, first-generation migrants imposed an average net fiscal cost of $3,000 at present discounted value; but the second generation yielded a $80,000 fiscal gain.
Some immigrants contribute more than others. Those who come as students or relatives or asylum-seekers (as most do) may not work at all—or may not be allowed to work. In addition, immigrants tend to have larger families, to be poorer and to be more often unemployed than the native-born. The report for the Fondazione Rodolfo Debenedetti found that, in some European countries, such as Denmark and the Netherlands, welfare benefits were so generous that they probably distorted the inflow of immigrants and encouraged them to draw welfare.
As with so many other aspects of immigration, skill levels affect costs. Migrants from poor countries are much more likely to claim benefits than migrants from rich ones; unskilled migrants are much more likely than natives or skilled migrants to lose their jobs in a recession. And countries treat different classes of immigrants in different ways for welfare-benefit purposes. Asylum-seekers in the United States cannot claim welfare during the six months in which their claim is normally determined. In Germany, by contrast, asylum-seekers can claim welfare benefits while their asylum claim is processed. That can easily take years, during which time they may not be allowed to work if they have been sent to live in an area of high unemployment.
Even if immigrants pay more tax than they get back in public spending, they may create some imbalances on the way. The tax they pay may go to the national government but the spending may burden a city or state, which houses and educates them and their children. The NRC study noted that the fiscal gain from immigrants was spread fairly evenly across the United States, but that the burden on states varied, depending on the type of immigrants they attracted. In 1989-90, in New Jersey, where almost half of new immigrants are from Europe or Canada, native households paid a net $232 a year more because of immigration; in California, where more than half of all immigrants come from Latin America, they paid $1,178 a year more.
Immigrants are on average younger than the native-born, and they have more children—partly because of their ages, but also because they usually come from countries with higher fertility rates. Fertility in most rich countries, and especially in Europe, is below replacement level, so their populations will age and shrink over the next half-century. For instance, the median age in Italy may rise from 41 today to 53 in 2050. By mid-century, the population of Spain may be 22% smaller than it is now, and that of the Netherlands 10% smaller. All told, by 2050 no fewer than 34 countries will face a decline in population.
(cont)
