Are immigrants stealing your job?
(picture from Wix's library)
Hi everyone! I saw that immigration is back in the news and I thought it was time to give you guys a relatively objective approach to this topic (being a Canadian, I suppose I am biased towards immigration as a good thing… but we’ll see).
Another little announcement before I start: I am leaving for around a month, which means that I will probably skip another monthly article… I know, I know… how can I torture your curious minds like that? I’ll make it up to you guys by having my app ready soon!
Before we start, a little recap of some of the recent trends: the USA’s new president keeps referring to these “immigrants” that steal their jobs; The UK’s vote to leave the EU is often believed to be related to immigration concerns; The party gaining the second highest number of seats in the Dutch elections this year is heavily focused on anti-immigration promises; and finally, one of the main parties in the upcoming French elections is also running an anti-immigration campaign… coming with the last three, EU politicians are receiving substantial pressure to allow countries to control the movement of people much more directly.
I wrote an article on the incentives of immigration and emigration a few months ago, you can find it here. (https://www.professorpro.net/single-post/2015/10/02/Economics-of-migration) For the current article, I’m going to focus on the effect immigrants can have on the labour force of a country (the “host”). I’m not going to elaborate much on the potential impact they can have on the economy as a whole… although it is obviously related to the current topic.
Please keep in mind that what is presented in this article doesn’t just come out of my head. I am trying to show you guys both sides of the coin. Some arguments can be very valid in some situations and not valid in others, it’s important that you guys always look at the context of each case.
OK! Let’s get on with it…
Let me start with the idea that immigrants can be bad for workers in the host country.
It is often argued that more immigrants leads to a reduction in wages of local workers. The idea is fairly straightforward: more workers leads to more competition for the same amount of jobs, which leads to lower wages for those workers. This can indeed be true for locals that have the same set of skills as immigrant workers coming in their country. Not only do the immigrants need to have the same skills but these skills need to also be equally recognised by potential employers in the host country. In addition, there needs to be a substantial amount of new arrivals (proportionally to the existing labour force of these markets) for wages in the country to be affected.
Another concern is that immigration leads to a decrease in labour conditions in the host country. This idea adds to the previous one: not only are there more people competing for the same jobs, immigrants also don’t require the same labour standards as local workers. Because immigrants accept lower working conditions, which are cheaper for the firm, everyone must accept the same conditions to be able to get a job. This is made much worst when there are illegal immigrants that are willing to accept almost any working conditions. Firms can exploit them because they are not within the law.
The first two arguments are often more relevant to what we call low-skills workers. We don’t mean that these people have no skills… we mean that their skills are fairly common, which means that many people can do the things they do (at work). In cases where there is a large number of immigrants in a short period of time, they either tend to have skills that are not directly applicable to the host country (maybe because of language or cultural issues) or have skills that tend not to be recognised. Such a wave of immigration can indeed lead to lower wages and working conditions for local workers in low-skill industries. High-skill Immigrants tend to be dispersed in many industries, making their impact on wages and working conditions of these markets relatively insignificant.
Immigrants can also bring with them a disruptive culture that may lead to more criminality and bad cultural norms to the communities where they settle. This is usually supported by individual experiences or large-scale data. As an Economist, I cannot take personal experiences as a support to anything… there are too many biases and randomness associated with our everyday lives, including my own. As for the empirical evidence I have seen so far, it is not very convincing. Some increase in criminality can be expected when immigration is sudden and from ethnic groups that are significantly different from the communities they enter. I have seen more precise reports that this increase in criminality can often come from the locals themselves rather than the newcomers. This is often due to frustrations and fears that come with the uncertainty they are faced with. I have to admit, however, that communities can find it very difficult to integrate people from very different backgrounds. It can be equally difficult for these individuals to integrate into new communities.
Finally, immigrants can abuse social programmes of their host country, which can lead to higher taxes for everyone in the country (including income taxes) to cope with these higher costs. This argument is particularly strong these days. Governments of many countries with strong social programmes are finding it more and more difficult to justify these expenses as their economy grows relatively slowly. If immigrants have a higher propensity to use social programmes, the cost per person in the country will indeed increase. This money can either come from lowering budgets of other things or by raising more money (normally through taxes)… both can be bad for the locals. The evidence I’ve seen so far is that immigrants tend to use much less social programmes than locals. They usually don’t know about them and they don’t know how to apply to them. This is made much more difficult when they are not comfortable in the local language. Countries do have to be careful with some groups that may immigrate mostly to receive social programmes. These immigrants exist but it seems that they are at least as uncommon as locals that aim at living on the social net of their own country.
Now, let’s see arguments supporting that immigrants can be good for workers in the host country.
The starting assumption is often that immigrants are employed in jobs that locals don’t want to do. They provide labour for industries that would naturally offer very low wages and difficult working conditions. If this is true, immigrants are not stealing jobs… they are filling gaps that locals don’t want to fill. The underlined argument is that individuals in richer countries are mostly educated and that they aspire at working in more technical employment, leaving burger-flipping and street-cleaning to immigrants. Even in the most “educated” countries of the world, a substantial portion of the population doesn’t have more than a secondary education. Also, several jobs that tend to offer harsher working conditions (including minimum wages) are often a starting point for younger people entering the workforce (including students). Although firms may prefer to hire immigrants (sometimes illegal ones) when they can pay substantially less for them than for locals, this is not a good argument in favour of local workers. Industries that have traditionally offered difficult working conditions to their workforce need to update their practices and offer better conditions… when this happens they will probably not find anymore “shortage” of labour.
A similar argument is that low-skills immigrants help firms be more competitive, which brings more well-paid jobs to more educated locals. Having more workers competing for the same jobs normally brings salaries down (or slows down their increase). This can be interpreted as a bad thing, as we saw earlier, but it can also bring some benefits to some groups of workers. This is especially true if these firms compete internationally in industries where price is a big factor. If wages are an important part of their costs, firms can sell their products at lower prices and capture more market share. This in turn can lead to more employment, both for low-skills workers and for high-skills workers in the industry. This will probably have somewhat of a neutral effect on locals with low skills but a positive effect on locals with high skills, which tend to earn more and have better working conditions.
High-skills immigrants can also bring knowledge that can improve the efficiency and profitability of local firms. This has been true in the IT industries, where immigrants did not only bring knowledge and know-how that improved existing firms but they also created new firms that employed more people, including locals. Because high-skills immigrants normally come in relatively small numbers spread out in different industries, it is very unlikely that they have a negative effect on local workers. If their skills are recognised by the local institutions and employers, they will probably be beneficial to the labour force of the host country. Immigrants also have ties with their country of origin, which can open new markets for firms of the host country, potentially leading to even more employment of local workers.
Lastly, immigrants need to consume to live, leading to an increase in demand for most products of the host country. This higher demand often translates to more employment for local firms. The types of products that will be demanded depends on the types of immigrants that enter the country. If immigrants are from a range of low and high skills similar to the host country’s labour force, we would expect a relatively even increase in demand of all products in the country. However, if immigrants tend to be more of a group or of another, industries will gain in different proportions. This can unfortunately be mitigated when immigrants are marginalised and isolated in specific zones. In these cases, they demand products of firms around them, which are also run by immigrants. We can see an isolation spiral appear when they cluster in the same areas and deal mostly with their own culture and language… in extreme cases, immigrants can create (or be forced into) opaque communities that are disconnected from the host country.
Well guys, I hope you get a better idea of the possible advantages and disadvantages of immigration on the local labour force. I’ve tried to present these arguments as objectively as I could and I hope you guys see now that it’s not as simple as “they are stealing our jobs”… in Economics, the more simple the argument, the less applicable it is to real-life (for most things). Just a side note: it doesn’t mean that very complicated arguments are more relevant, beware the assumptions!
See you guys around and don’t forget to have fun!!!!!!