Immigration is a hot-button issue in the United States, and one that has been heavily politicized in recent years. Immigration reform is always an issue that politicians discuss at length, but there seems to be very little that changes from year to year in terms of immigration policy in the United States. While immigration and immigration reform is often framed as a social and political issue, it is equally important as an economic issue. The economic effects on the United States would be very great if immigration substantially increased in the next decade, with both positive and negative effects on the financial situation and climate in America. However, even with the negative impacts of increased immigration, the overall impact of increased immigration would be generally positive.
When discussing immigration and the financial impact of immigration and immigration policies, there is an important distinction that must be made between illegal immigration and legal immigration. Illegal immigration generally has a detrimental effect on the economy of the host country, although this is not necessarily true in all sectors. However, in the United States, certain places have a much higher preponderance of illegal immigrants than others (Davidson). These places may be financially harder-hit than places with a lower rate of illegal immigration. In the United States, it is very difficult for an individual to acquire the legal right to stay and work for any extended period of time; acquiring citizenship, for instance, when accessed through the proper legal channels, can take up to ten years (Davidson). For this reason, creating a new immigration system that allows for easier access to work permits would alleviate some of the financial strain that illegal immigration puts on the economy, particularly in places with a large illegal-immigrant population (Davidson).
Some claim that illegal immigration forces legal workers and citizens to accept a lower pay grade for their work in certain sectors. While this is true, according to the New York Times, there are positive impacts elsewhere: “In states with more undocumented immigrants, Peri said, skilled workers made more money and worked more hours; the economy’s productivity grew. From 1990 to 2007, undocumented workers increased legal workers’ pay in complementary jobs by up to 10 percent” (Davidson). While it is disingenuous to make the argument that illegal immigration is good for the economy, there is certainly an argument here that the relationship between skilled workers, unskilled workers, and illegal immigration is much more complex and intertwined than anti-immigration activists would suggest.
An increase in legal immigration would be, overall, very good for the economy in the United States. An excellent example of this can be seen in the case of foreign students in tertiary institutions in the United States. Tertiary institutions, particularly state colleges and universities, obtain large amounts of government monies to educate their students. Some of these funds go towards educating foreign students (Kerr and Kerr). Upon graduation, however, most of these foreign students are required to return to their countries of origin because they have difficulties finding work environments in the United States that are able to provide them with the appropriate visas and work permits to stay (Kerr and Kerr).
If students who were educated at American tertiary institutions, for example, were able to more easily acquire work permits and the number of highly-skilled immigrants rose in the United States, there would be nothing but positive effects for the American economy (Kerr and Kerr). Those who misunderstand economics will often claim that immigrants take jobs from Americans, but in a free market economy, those who are the most skilled are hired to do jobs-- if an immigrant is more highly skilled than an American, it behooves the economy to allow a company to hire that immigrant to do the job.
Modern money theory suggests that budget deficits are financially beneficial for the private sector, because of the way money flows from the government into the private sector in a vertical manner (Wray). According to Wray, when a budget deficit is held in the governmental sector, it is the financial equivalent to adding those assets into the private sector, which clearly benefits business, research and development, growth, and so on. The other fundamentally important aspect of modern money theory is the idea that personal tax that is paid to the government is not a way for the government to fund its activities-- instead, it is a way for the government to manage its surplus or deficit. As it manages its surplus or deficit, the government can then control both inflation and unemployment (Wray).
In terms of immigration, modern money theory proposes that if immigration were to increase, particularly legal immigration, the government would be able to leverage more fiat money and therefore be more in control of the rates of inflation and the unemployment levels under their jurisdiction (Wray). For those who adhere to the modern money theory, imports are viewed as horizontal transactions-- transactions between entities in the private sector-- and are fundamentally important to a healthy economy. Imports, according to Wray, increase the value of a nation’s currency because they indicate that other nations value the currency and the business from this particular nation (Wray).
If immigrants are viewed as economic imports of sorts-- not as goods, of course, but as imports of marketable ideas and valuable skill sets, it is easy to see that within the framework of the modern money theory that an increase in immigration could and should easily be seen as a boon for the American economy. An increase in immigration means an increase in the amount of foreign individuals and entities who are interested in the currency of the United States, which, according to the theory, increases the value of the currency on an international level (Wray).
For the average American citizen, an increase in immigration would have an indirect effect on their lives, but it would have an effect nonetheless. If the theory is correct and an marked increase in immigration is a positive thing for the United States, the government will adjust its tax levels to ensure that the tax level is ideal for “maximum domestic employment” (Wray).
Allison suggests that the financial crisis that Americans find themselves in is the function of too much governmental interference in various financial sectors, which caused the disruption of the free market (Allison). He is a proponent of the idea that business should and must do what it can to be successful, and that when there is too much interference in the monetary system, the system will break down and cause a financial crisis much like the one that Americans are facing today. In terms of immigration, Allison would argue, there should be less governmental interference; businesses should be able to do what they can to function to the best of their abilities within the free market economy.
Unfortunately, the issue of immigration is often tinged by a sense of fear in the political sphere because people are afraid that an increase in immigration can and will be conflated with a decrease in employment for the average American citizen. However, there is no evidence to suggest that an increase in legal immigration would be correlated with a drop in employment for Americans; indeed, the evidence and economic theory seems to suggest that exactly the opposite would happen should America be faced with an influx of immigrants in the next decade.
Works cited
Allison, John A. The financial crisis and the free market cure. New York: McGraw-Hill, 2013. Print.
Davidson, Adam. "Do Illegal Immigrants Actually Hurt the U.S. Economy?." The New York Times, February 12. 2013: Print.
Elmendorf, Doug. "How Would CBO Analyze the Economic Effects of Immigration Legislation?."Congressional Budget Office, May 2. 2013: Print.
Greenstone, Michael and Adam Looney. "Ten Economic Facts about Immigration." The Brookings Institute, June. 2010: Print.
Kerr, Sari Pekkala and William R Kerr. "Economic Impacts of Immigration: A Survey ." Harvard Business School Review, (2011): Print.
Peri, Giovanni. "The Impact of Immigrants in Recession and Economic Expansion." Migration Policy Institute, (2010): Print.
Wray, L. Randall. Modern money theory. New York: Palgrave Macmillan, 2012. Online.
