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Thread on how we collectively frame #immigrants as economic actors. Main point: they are NOT substitutes for native workers, and they are not *just* labor/workers. Now for the longer explanation...
The dominant economic view for many decades was that immigrants mainly bring “labor” to the economy, and that an immigrant worker is similar/identical to a native worker. Under this view, immigrants harm the economy by competing for the same exact jobs as natives.
For those with an economics background, you can think of immigrants as the L in the classic production function: Y = L, K. And “a worker is a worker is a worker” regardless of origin.
This is the view taken by the current administration in the US and by all governments with restrictionist agendas. It plays well to voters with nativist fears, especially in times of economic downturns and following wars and other national security scares.
But the reality based on LOTS of evidence is that this view of immigrants as substitutes for natives in the labor market is incorrect. In fact, immigrants enhance jobs, increase innovation, and increase capital inflows.
This modern evidence is consistent with a production function consisting of labor, capital, and innovation. To simoly Romer’s formula: Y = L, K, R, where R = research/innovation/knowledge.
On labor, immigrants without a college education (low skill) don’t harm job or wages of natives because they fill different jobs. Why? They have different skills and natives move into positions where they can use skills that immigrants don’t have. https://pubs.aeaweb.org/doi/pdfplus/10.1257/app.1.3.135
Still on labor, immigrants with a college education *create* new jobs because they bring new technological skills, introduce new ideas, and start new firms that create jobs. https://www.nap.edu/catalog/23550/the-economic-and-fiscal-consequences-of-immigration#:~:text=First%2Dgeneration%20immigrants%20are%20more,economic%20growth%20in%20the%20U.S.
On capital, research shows that immigrants increase capital flows across the sending & receiving locations. This applies to FDI, venture capital, remittances, and other forms of investment. For example: https://academic.oup.com/restud/article-abstract/86/4/1448/5078456
or https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3331264
or https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3331264
On innovation/knowledge, there's lots of evidence that immigrants play a huge role in increasing invention by bringing in novel ideas that make *native* inventors more productive. And those ideas often get commercialized through startups, (continued)
in which immigrants are disproportionately represented. For example: https://www.nber.org/papers/w27040 or https://bit.ly/3fR2IU2
Besides these contributions to the supply side of the economy, immigrants also enhance demand by making the market larger and by introduce novel/different categories of products. https://www.sciencedirect.com/science/article/abs/pii/S002219961630040X
Why do all these effects happen? Because immigrants bring DIFFERENT skills and interest in the labor market, bring NEW ideas and technologies, bring NOVEL sources of capital to the economy, and introduce NEW products. Thus immigrants are COMPLEMENTS, not substitutes for natives.
Like any person, their contributions to the economy are not *just* labor. Like you and me, immigrants are also consumers, investors, innovators, tax payers, etc. So the economy grows with people from different backgrounds. Therefore, we don't need to fear immigrants.
Rather, the best way to protect the national interest is to allow more immigrants in and to have sensible policies to allow them to make their full economic contributions.
And yes, we need to have an element of protection/security in mind. But when we view immigrants as economic substitutes for native workers, we end up with dumb policies that work against the best interests of everyone involved. END
