Addendum to Notes – More current data on Economic impacts of immigration to the USA

• Legal immigrants includes • permanent legal residents (green card holders) who have

the right to stay in the country indefinitely, • temporary immigrants on visas

• The spike in 89 & 91 resulted from an amnesty program • 1990: Fed. Gov. increased quotas from 500 K to 700K• H1-B provision = special provisions to immigration laws

allowing 65 K high skilled workers in “specialty occupations” to enter the country and stay for 6 years• 2009 : 1,300,818 became permanent legal residents

• 66 % were family-sponsored• 13 % employment based preferences• 21% Refugees, diversity immigrants and other

• Diversity imm. filed by annual lottery from countries with low imm. rates to the US

• Illegal Immigrants• Census Bureau Est. is found by finding the total # of all

immigrants through survey data then subtracts the sum of all past annual inflows• 2009 approx. 11 million illegal imm. Residing permanently w/in the

country• Decision to Migrate

• Superior economic opportunities• Escape political or religious persecution• Reunite with family members

• Earning Opportunities• Main driver: improve the immigrant’s earning and standard of

living• Economic theory: immigrants reap larger financial rewards from their stock

of human capital when working in the US rather than their home countries• By securing higher earnings they increase the value of their human capital• Larger wage differences (pull factor) strengthen incentive to migrate

• Moving Costs• Can be viewed as an investment opportunity

• Current sacrifices are necessary for future benefits• Out-of-pocket costs ….. For legal immigrants: Application fees (green card

$1010), transportation costs For Illegals: payment to expediter “coyote”• Opportunity cost of leaving one job, no wages while moving and looking for

work, loss of family connection, new culture………. For illegals the cost of getting caught

• Factors Affecting Costs and Benefits• Distance

• Greater the distance the less likelihood of migration

• Riskier b/c of the uncertainty about the job market at new destination (Internet has lessened)

• Farther the move the harder it is to maintain contact with friends and family

• Therefore most moves are to neighboring countries … Distance Decay

• Those that move far distances travel beaten paths : routes taken by family and friends ….. Chain Migration

• Chain Migration : along these paths ethnic enclaves evolve in cities where new immigrants can settle easier

• Temporary living quarters, job information, cultural continuity

• Reduces the costs and increases the benefits

• Over time step migration continues from these enclaves to new cities creating new clusters and networks for others to follow

• Factors Affecting Costs and Benefits• Age

• Younger workers much more likely than older

• Affects both benefits and costs

• Younger have more time to recoup from moving expenses

• More likely to be single and therefore don’t have the additional costs of supporting multiple family members

• Older are closer to retirement – means most see that moving abroad isn’t worth the effort or expense

• Other factors

• Those that lack English skills tend to not fare as well as those that do

• Some are willing to settle for low or even negative return on their investment so that their children will have greater economic opportunity

• Economic Effects of immigrations• Personal Gains

• The inflows of both legal and illegal immigrants indicates the investment has a positive return

• Real wages earned by Mexican males is 6 times higher than in Mexico

• Not all succeed

• Backflows : (Gravity Model – Ravenstein) returns to home country

• Reasons: job not found, higher living costs, costs of being away from family

• Skill transferability: migrants skills are not always perfectly transferable in new country…. Leads to earning less than native-born workers

• Immigrant Entrepreneurs have founded 35% of US semiconductor companies, 31% of US computer companies, 27% of US software companies

• Impacts on Wage Rates

• Elimination of barriers tends to create worldwide efficiency gains from migration leading to more output and income with the same numbers of workers globally

• Brain drains: the emigration of highly educated workers, particularly when their education was subsidized at home

• Economic Effects of immigrations• Remittances and Backflows

• Money transfers to the home country redistribute the net gain from migration between the countries involved

• $22 billion dollars annually flows back to Mex in the form of remittances (3% of their GDP)…. This explains why Mex generally opposes US policies to stem the flow of immigration

• Backflows of migrant to their home countries tends to help home country by increase in $ and human capital

• Research findings

• All economists agree: US immigration increases domestic output and income and highly educated immigrants and entrepreneurs benefit the society

• Evidence indicates that immigration reduces wages of native-born workers with low education levels as well as the salaries of some very highly educated workers

• Link to Article in the Atlantic….. Should borders and barriers to movement exist?