Listen to the podcast:
In the United States, the economic impact of immigration is a lightning-rod topic that sparks strong feelings on both sides. Opponents have long held that immigrants take away jobs from American citizens and lower wage standards. Proponents dismiss that idea, saying immigrants expand the economy through their hard work and determination. The truth is somewhere in the middle, according to new research from Wharton’s J. Daniel Kim.
To be sure, immigrant workers ramp up competition for jobs, creating a surplus in labor supply for some sectors. But immigrant entrepreneurs have a more profound impact on overall labor demand by starting companies that hire new workers, creating a positive ripple-effect on the economy.
“The problem with the ongoing discussion is that it’s largely one-sided,” Kim said in a recent interview with the Wharton Business Daily radio show on SiriusXM. (Listen to the podcast at the top of this page.) “To be fair, both forces here simultaneously exist. In order for us to have a systematic understanding of the role of immigration on job creation, you need to take both accounts together. And this is what we do in the study.”
Kim is co-author of “Immigration and Entrepreneurship in the United States,” along with Pierre Azoulay, professor at MIT’s Sloan School of Management and associate with National Bureau of Economic Research (NBER); Benjamin F. Jones, professor at the Kellogg School of Management at Northwestern University and an associate with NBER; and Javier Miranda, economist with the U.S. Census Bureau. In their research, the scholars use comprehensive administrative data from 2005 to 2010 on all new firms in the U.S., the U.S. Census Bureau’s 2012 Survey of Business Owners, and data on firms listed in the 2017 edition of the Fortune 500 ranking to paint a more accurate picture of the economic impact of immigrants in America.
“The problem with the ongoing discussion is that it’s largely one-sided.”
“This paper works to fill in the picture through the lens of entrepreneurship,” the authors wrote. “By looking in a more comprehensive manner at the U.S. economy, the analysis helps balance the ledger in assessing immigrants’ economic roles.”
Dispelling Myths
Immigrants make up roughly 15% of workers in the U.S., yet they are 80% more likely than native workers to become entrepreneurs, according to the study. By those numbers, the assumption that immigrants leach jobs away from Americans isn’t incorrect, but it is incomplete. First- and second-generation immigrants are launching businesses across the spectrum, from small sandwich shops with one or two employees to major tech firms with thousands of workers. For example, when South Africa native Elon Musk built his Telsa plant in California, he spawned more than 50,000 jobs and injected $4.1 billion into that state’s economy in 2017.
“What we find, with overwhelming evidence, is that immigrants act more as job creators than they act as job takers in the United States,” Kim said during his interview with Wharton Business Daily.
“Immigrants in the U.S. create a lot more jobs than they take, primarily because many are prone to starting businesses that go on to create a lot of jobs.”
The study builds on previous research that dispels myths about immigrant workers and quantifies the facts, including that immigrant entrepreneurs account for close to 25% of patents and are more likely to hold STEM degrees. Using tax records, the researchers debunked another popular theory that immigration suppresses wages. They found wages were the same or slightly higher for immigrant-founded firms versus firms with native founders.
The authors encourage more research along the same dimensions, saying more information can help shape economic policy around immigration and help remove politics from a debate that’s often short on truths.
“That’s the main takeaway here, that immigrants in the U.S. create a lot more jobs than they take, primarily because many are prone to starting businesses that go on to create a lot of jobs,” Kim said. “While I will not comment on the policy implications of these results, I believe that the broader discussion on the role of entrepreneurship and immigration on economic growth needs to account for both sides – because leaning on one would provide an incomplete picture.”
Join The Discussion
2 Comments So Far
Anumakonda Jagadeesh
Excellent.
Immigration to the United States is the international movement of non-U.S. nationals in order to reside permanently in the country. Immigration has been a major source of population growth and cultural change throughout much of the U.S. history. Because the United States is a settler colonial society, all Americans, with the exception of the small percentage of Native Americans, can trace their ancestry to immigrants from other nations around the world.
In absolute numbers, the United States has a larger immigrant population than any other country, with 47 million immigrants as of 2015. This represents 19.1% of the 244 million international migrants worldwide, and 14.4% of the U.S. population. Some other countries have larger proportions of immigrants, such as Switzerland with 24.9% and Canada with 21.9%.
According to the 2016 Yearbook of Immigration Statistics, the United States admitted a total of 1.18 million legal immigrants (618k new arrivals, 565k status adjustments) in 2016. Of these, 48% were the immediate relatives of U.S. citizens, 20% were family-sponsored, 13% were refugees and/or asylum seekers, 12% were employment-based preferences, 4.2% were part of the Diversity Immigrant Visa program, 1.4% who were victims of a crime (U1) or their family members (U2 to U5), and 1.0% who were granted the Special Immigrant Visa (SIV) for Iraqis and Afghans employed by U.S. Government. The remaining 0.4% included small numbers from several other categories, including 0.2% who were granted suspension of deportation as an immediate relative of a citizen (Z13); persons admitted under the Nicaraguan and Central American Relief Act; children born subsequent to the issuance of a parent’s visa; and certain parolees from the former Soviet Union, Cambodia, Laos, and Vietnam who were denied refugee status.
The economic, social, and political aspects of immigration have caused controversy regarding such issues as maintaining ethnic homogeneity, workers for employers versus jobs for non-immigrants, settlement patterns, impact on upward social mobility, crime, and voting behavior.
Between 1921 and 1965, policies such as the national origins formula limited immigration and naturalization opportunities for people from areas outside Western Europe. Exclusion laws enacted as early as the 1880s generally prohibited or severely restricted immigration from Asia, and quota laws enacted in the 1920s curtailed Eastern European immigration. The civil rights movement led to the replacement of these ethnic quotas with per-country limits for family-sponsored and employment-based preference visas. Since then, the number of first-generation immigrants living in the United States has quadrupled.
Research suggests that immigration to the United States is beneficial to the U.S. economy. With few exceptions, the evidence suggests that on average, immigration has positive economic effects on the native population, but it is mixed as to whether low-skilled immigration adversely affects low-skilled natives. Studies also show that immigrants have lower crime rates than natives in the United States.
History
American immigration history can be viewed in four epochs: the colonial period, the mid-19th century, the start of the 20th century, and post-1965. Each period brought distinct national groups, races and ethnicities to the United States.
Colonial period
During the 17th century, approximately 400,000 English people migrated to Colonial America. However, only half stayed permanently. They comprised 85-90% of white immigrants. From 1700 to 1775 between 350-500,000 Europeans immigrated: the estimates vary in the sources. Only 52,000 English supposedly immigrated in the period 1701 to 1775., a figure questioned as too low. The rest, 400-450,000 were Scots, Scots-Irish from Ulster, Germans and Swiss, French Huguenots, and involuntarily 300,000 Africans. Over half of all European immigrants to Colonial America during the 17th and 18th centuries arrived as indentured servants. They numbered 350,000. On the eve of the War for Independence 1770 to 1775 7,000 English, 15,00 Scots, 13,200 Scots-Irish, 5,200 Germans, and 3,900 Irish Catholics arrived Fully half the English immigrants were young single men, well-skilled, trained artisans like the Huguenots The European populations of the Middle Colonies of New York, New Jersey, Pennsylvania and Delaware were ethnically very mixed, the English constituting only 30% in Pennsylvania, 40-45% in New Jersey, to 18% in New York numbered 22,000. The mid-19th century saw an influx mainly from northern Europe from the same major ethnic groups as for the Colonial Period but with large numbers of Catholic Irish and Scandinavians added to the mix; the late 19th and early 20th-century immigrants were mainly from Southern and Eastern Europe, but there were also several million immigrants from Canada; post-1965 most came from Latin America and Asia.
Historians estimate that fewer than 1 million immigrants moved to the United States from Europe between 1600 and 1799. By comparison, in the first federal census, in 1790, the population of the United States was enumerated to be 3,929,214.
Early United States era
The Naturalization Act of 1790 limited naturalization to “free white persons”; it was expanded to include blacks in the 1860s and Asians only in the 1950s. This made the United States an outlier, since laws that made racial distinctions were uncommon in the world in the 18th Century.
In the early years of the United States, immigration was fewer than 8,000 people a year, including French refugees from the slave revolt in Haiti. After 1820, immigration gradually increased. From 1836 to 1914, over 30 million Europeans migrated to the United States. The death rate on these transatlantic voyages was high, during which one in seven travelers died. In 1875, the nation passed its first immigration law, the Page Act of 1875.
After an initial wave of immigration from China following the California Gold Rush, Congress passed a series of laws culminating in the Chinese Exclusion Act of 1882, banning virtually all immigration from China until the law’s repeal in 1943. In the late 1800s, immigration from other Asian countries, especially to the West Coast, became more common.
20th Century
The peak year of European immigration was in 1907, when 1,285,349 persons entered the country. By 1910, 13.5 million immigrants were living in the United States.
While the Chinese Exclusion Act of 1882 had already excluded immigrants from China, the immigration of people from Asian countries in addition to China was banned by the sweeping Immigration Act of 1917, also known as the Asiatic Barred Zone Act, which also banned homosexuals, people with intellectual disability, and people with an anarchist worldview. The Emergency Quota Act was enacted in 1921, followed by the Immigration Act of 1924. The 1924 Act was aimed at further restricting immigrants from Southern and Eastern Europe, particularly Jews, Italians, and Slavs, who had begun to enter the country in large numbers beginning in the 1890s, and consolidated the prohibition of Asian immigration.
The welfare system was practically non-existent before the 1930s and the economic pressures on the poor were giving rise to child labor.
Immigration patterns of the 1930s were affected by the Great Depression. In the final prosperous year, 1929, there were 279,678 immigrants recorded, but in 1933, only 23,068 moved to the U.S. In the early 1930s, more people emigrated from the United States than to it. The U.S. government sponsored a Mexican Repatriation program which was intended to encourage people to voluntarily move to Mexico, but thousands were deported against their will. Altogether, approximately 400,000 Mexicans were repatriated; half of them were US citizens. Most of the Jewish refugees fleeing the Nazis and World War II were barred from coming to the United States. In the post-war era, the Justice Department launched Operation Wetback, under which 1,075,168 Mexicans were deported in 1954.
First, our cities will not be flooded with a million immigrants annually. Under the proposed bill, the present level of immigration remains substantially the same. … Secondly, the ethnic mix of this country will not be upset. … Contrary to the charges in some quarters, [the bill] will not inundate America with immigrants from any one country or area, or the most populated and deprived nations of Africa and Asia. … In the final analysis, the ethnic pattern of immigration under the proposed measure is not expected to change as sharply as the critics seem to think.
— Ted Kennedy, chief Senate sponsor of the Immigration and Nationality Act of 1965.
Since 1965
The Immigration and Nationality Act of 1965, also known as the Hart-Cellar Act, abolished the system of national-origin quotas. By equalizing immigration policies, the act resulted in new immigration from non-European nations, which changed the ethnic make-up of the United States. In 1970, 60% of immigrants were from Europe; this decreased to 15% by 2000. In 1990, George H. W. Bush signed the Immigration Act of 1990, which increased legal immigration to the United States by 40%. In 1991, Bush signed the Armed Forces Immigration Adjustment Act 1991, allowing foreign service members who had served 12 or more years in the US Armed Forces to qualify for permanent residency and, in some cases, citizenship.
In November 1994, California voters passed Proposition 187 amending the state constitution, denying state financial aid to illegal immigrants. The federal courts voided this change, ruling that it violated the federal constitution.
Appointed by Bill Clinton, the U.S. Commission on Immigration Reform recommended reducing legal immigration from about 800,000 people per year to approximately 550,000. While an influx of new residents from different cultures presents some challenges, “the United States has always been energized by its immigrant populations,” said President Bill Clinton in 1998. “America has constantly drawn strength and spirit from wave after wave of immigrants … They have proved to be the most restless, the most adventurous, the most innovative, the most industrious of people.”
In 2001, President George W. Bush discussed an accord with Mexican President Vincente Fox. This possible accord was derailed by the September 11 attacks. From 2005 to 2013, the US Congress discussed various ways of controlling immigration. The Senate and House were unable to reach an agreement.
Nearly 14 million immigrants entered the United States from 2000 to 2010, and over one million persons were naturalized as U.S. citizens in 2008. The per-country limit applies the same maximum on the number of visas to all countries regardless of their population and has therefore had the effect of significantly restricting immigration of persons born in populous nations such as Mexico, China, India, and the Philippines—the leading countries of origin for legally admitted immigrants to the United States in 2013; nevertheless, China, India, and Mexico were the leading countries of origin for immigrants overall to the United States in 2013, regardless of legal status, according to a U.S. Census Bureau study.
Nearly 8 million people immigrated to the United States from 2000 to 2005; 3.7 million of them entered without papers. In 1986 president Ronald Reagan signed immigration reform that gave amnesty to 3 million undocumented immigrants in the country. Hispanic immigrants suffered job losses during the late-2000s recession, but since the recession’s end in June 2009, immigrants posted a net gain of 656,000 jobs. Over 1 million immigrants were granted legal residence in 2011.
For those who enter the US illegally across the Mexico–United States border and elsewhere, migration is difficult, expensive and dangerous. Virtually all undocumented immigrants have no avenues for legal entry to the United States due to the restrictive legal limits on green cards, and lack of immigrant visas for low-skilled workers. Participants in debates on immigration in the early twenty-first century called for increasing enforcement of existing laws governing illegal immigration to the United States, building a barrier along some or all of the 2,000-mile (3,200 km) Mexico-U.S. border, or creating a new guest worker program. Through much of 2006 the country and Congress was immersed in a debate about these proposals. As of April 2010 few of these proposals had become law, though a partial border fence had been approved and subsequently canceled.
Contemporary immigration
Approximately half of immigrants living in the United States are from Mexico and other Latin American countries. Many Central Americans are fleeing because of desperate social and economic circumstances created in part by U.S. foreign policy in Central America over many decades. The large number of Central American refugees arriving in the U.S. have been explained as “blowback” to policies such as U.S. military interventions and covert operations that installed or maintained in power authoritarian leaders allied with wealthy land owners and multinational corporations who crush family farming and democratic efforts, which have caused drastically sharp social inequality, wide scale poverty and rampant crime. Economic austerity dictated by neoliberal policies imposed by the International Monetary Fund and its ally, the U.S., has also been cited as a driver of the dire social and economic conditions, as has the U.S. “War on Drugs,” which has been understood as fueling murderous gang violence in the region. Another major migration driver from central America (Guatemala, Honduras, and El Salvador) are crop failures, which are (partly) caused by climate change. “The current debate … is almost totally about what to do about immigrants when they get here. But the 800-pound gorilla that’s missing from the table is what we have been doing there that brings them here, that drives them here,” according to Jeff Faux, an economist who is a distinguished fellow at the Economic Policy Institute.
Until the 1930s most legal immigrants were male. By the 1990s women accounted for just over half of all legal immigrants. Contemporary immigrants tend to be younger than the native population of the United States, with people between the ages of 15 and 34 substantially overrepresented. Immigrants are also more likely to be married and less likely to be divorced than native-born Americans of the same age.
Immigrants are likely to move to and live in areas populated by people with similar backgrounds. This phenomenon has held true throughout the history of immigration to the United States. Seven out of ten immigrants surveyed by Public Agenda in 2009 said they intended to make the U.S. their permanent home, and 71% said if they could do it over again they would still come to the US. In the same study, 76% of immigrants say the government has become stricter on enforcing immigration laws since the September 11, 2001 attacks (“9/11”), and 24% report that they personally have experienced some or a great deal of discrimination.
Public attitudes about immigration in the U.S. were heavily influenced in the aftermath of the 9/11 attacks. After the attacks, 52% of Americans believed that immigration was a good thing overall for the U.S., down from 62% the year before, according to a 2009 Gallup poll. A 2008 Public Agenda survey found that half of Americans said tighter controls on immigration would do “a great deal” to enhance U.S. national security. Harvard political scientist and historian Samuel P. Huntington argued in his 2004 book Who Are We? The Challenges to America’s National Identity that a potential future consequence of continuing massive immigration from Latin America, especially Mexico, could lead to the bifurcation of the United States.
The estimated population of illegal Mexican immigrants in the US fell from approximately 7 million in 2007 to 6.1 million in 2011 Commentators link the reversal of the immigration trend to the economic downturn that started in 2008 and which meant fewer available jobs, and to the introduction of tough immigration laws in many states. According to the Pew Hispanic Center the net immigration of Mexican born persons had stagnated in 2010, and tended toward going into negative figures.
More than 80 cities in the United States, including Washington D.C., New York City, Los Angeles, Chicago, San Francisco, San Diego, San Jose, Salt Lake City, Phoenix, Dallas, Fort Worth, Houston, Detroit, Jersey City, Minneapolis, Denver, Baltimore, Seattle, Portland, Oregon and Portland, Maine, have sanctuary policies, which vary locally.
Economic
A survey of leading economists shows a consensus behind the view that high-skilled immigration makes the average American better off. A survey of the same economists also shows strong support behind the notion that low-skilled immigration makes the average American better off. According to David Card, Christian Dustmann, and Ian Preston, “most existing studies of the economic impacts of immigration suggest these impacts are small, and on average benefit the native population”. In a survey of the existing literature, Örn B Bodvarsson and Hendrik Van den Berg write, “a comparison of the evidence from all the studies … makes it clear that, with very few exceptions, there is no strong statistical support for the view held by many members of the public, namely that immigration has an adverse effect on native-born workers in the destination country.”
Overall economic prosperity
Whereas the impact on the average native tends to be small and positive, studies show more mixed results for low-skilled natives, but whether the effects are positive or negative, they tend to be small either way.
Immigrants may often do types of work that natives are largely unwilling to do, contributing to greater economic prosperity for the economy as a whole: for instance, Mexican migrant workers taking up manual farm work in the United States has close to zero effect on native employment in that occupation, which means that the effect of Mexican workers on U.S. employment outside farm work was therefore most likely positive, since they raised overall economic productivity. Research indicates that immigrants are more likely to work in risky jobs than U.S.-born workers, partly due to differences in average characteristics, such as immigrants’ lower English language ability and educational attainment. Further, some studies indicate that higher ethnic concentration in metropolitan areas is positively related to the probability of self-employment of immigrants.
Research also suggests that diversity has a net positive effect on productivity and economic prosperity. A study by Nathan Nunn, Nancy Qian and Sandra Sequeira found that the Age of Mass Migration (1850–1920) has had substantially beneficial long-term effects on U.S. economic prosperity: “locations with more historical immigration today have higher incomes, less poverty, less unemployment, higher rates of urbanization, and greater educational attainment. The long-run effects appear to arise from the persistence of sizeable short-run benefits, including earlier and more intensive industrialization, increased agricultural productivity, and more innovation.” The authors also find that the immigration had short-term benefits: “that there is no evidence that these long-run benefits come at short-run costs. In fact, immigration immediately led to economic benefits that took the form of higher incomes, higher productivity, more innovation, and more industrialization.”
Research also finds that migration leads to greater trade in goods and services. Using 130 years of data on historical migrations to the United States, one study finds “that a doubling of the number of residents with ancestry from a given foreign country relative to the mean increases by 4.2 percentage points the probability that at least one local firm invests in that country, and increases by 31% the number of employees at domestic recipients of FDI from that country. The size of these effects increases with the ethnic diversity of the local population, the geographic distance to the origin country, and the ethno-linguistic fractionalization of the origin country.”
Some research suggests that immigration can offset some of the adverse effects of automation on native labor outcomes in the United States. By increasing overall demand, immigrants could push natives out of low-skilled manual labor into better paying occupations. A 2018 study in the American Economic Review found that the Bracero program (which allowed almost half a million Mexican workers to do seasonal farm labor in the United States) did not have any adverse impact on the labor market outcomes of American-born farm workers.
Fiscal effects
A 2011 literature review of the economic impacts of immigration found that the net fiscal impact of migrants varies across studies but that the most credible analyses typically find small and positive fiscal effects on average. According to the authors, “the net social impact of an immigrant over his or her lifetime depends substantially and in predictable ways on the immigrant’s age at arrival, education, reason for migration, and similar”.
A 2016 report by the National Academies of Sciences, Engineering, and Medicine concluded that over a 75-year time horizon, “the fiscal impacts of immigrants are generally positive at the federal level and generally negative at the state and local level.” The reason for the costs to state and local governments is that the cost of educating the immigrants’ children falls on state and local governments. According to a 2007 literature review by the Congressional Budget Office, “Over the past two decades, most efforts to estimate the fiscal impact of immigration in the United States have concluded that, in aggregate and over the long term, tax revenues of all types generated by immigrants—both legal and unauthorized—exceed the cost of the services they use.”
According to James Smith, a senior economist at Santa Monica-based RAND Corporation and lead author of the United States National Research Council’s study “The New Americans: Economic, Demographic, and Fiscal Effects of Immigration”, immigrants contribute as much as $10 billion to the U.S. economy each year. The NRC report found that although immigrants, especially those from Latin America, caused a net loss in terms of taxes paid versus social services received, immigration can provide an overall gain to the domestic economy due to an increase in pay for higher-skilled workers, lower prices for goods and services produced by immigrant labor, and more efficiency and lower wages for some owners of capital. The report also notes that although immigrant workers compete with domestic workers for low-skilled jobs, some immigrants specialize in activities that otherwise would not exist in an area, and thus can be beneficial for all domestic residents.
Immigration and foreign labor documentation fees increased over 80% in 2007, with over 90% of funding for USCIS derived from immigration application fees, creating many USCIS jobs involving immigration to US, such as immigration interview officials, finger print processor, Department of Homeland Security, etc.
Wikipedia
Inequality
Overall immigration has not had much effect on native wage inequality but low-skill immigration has been linked to greater income inequality in the native population.
Dr.A.Jagadeesh Nellore(AP),India
Joel Chapman
Anyone can make any claim they want but the facts are american taxpayers built the roads schools hospitals we had wide open spaces .Then the worthless liberals flung open the doors to these worthless pos that overbred overpopulated their country..Then they come here competing with us Americans that family’s fought went through hard ships to build what we have had not to give it to hector or Hogi.we need to start an insurrection civil war and defend our country and drive them out by force