Is immigration good for the economy?

Latest revision as of 02:25, 4 May 2025

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Overview

Empirical research finds that immigration’s economic effects are generally positive but vary by migrant type, destination country, and policy design. Most scholars agree that immigration enlarges GDP and tends to raise average incomes over the long run, yet the distribution of gains and the short-run fiscal balance remain debated [4][5]. The three suggested sources reflect this mix of optimism and caution: the EU fiscal-impact study sees modest net gains from typical inflows [2], while Inquisitive Bird questions whether current U.S. institutions still translate migration into broad-based economic progress [1]. Lorenzo from Oz argues recent humanitarian intakes could generate fiscal costs that outweigh benefits in small host countries [3].

Economic growth and productivity

Adding workers increases the size of the labor force and allows capital to be used more intensively. Meta-analyses covering OECD countries attribute around 15–20 % of total GDP growth since 1990 to immigration flows [4]. Complementarity between foreign-born and native workers raises total factor productivity, particularly when migrants fill shortages in STEM, health care, and agriculture [5]. The EU‐wide modelling in the Commission study projects that a 1 % increase in the foreign-born population lifts GDP by 0.3–0.5 % after ten years, depending on skill mix [2].

Labor-market effects

Most studies find small but heterogeneous wage impacts for natives. Low-skilled natives in direct competition with recent arrivals may face temporary wage pressures, while higher-skilled groups typically gain through lower prices and complementary labor [4][5]. The “Assimilation Myth” essay warns that if skills and language assimilation weaken, downward pressure on the lower tail of the wage distribution could persist longer than in the 20th-century U.S. experience [1].

Fiscal effects

Fiscal balances depend on age, education, and labor-market attachment. The EU projection report concludes that recent immigrant cohorts will, on average, contribute between +0.2 % and +1.4 % of GDP to public budgets over a 35-year horizon, mainly because they arrive in working age and draw pensions later [2]. Conversely, Lorenzo from Oz contends that taking in large numbers of low-skill refugees could impose net annual costs on small, high-welfare economies unless rapid labor-market integration is achieved [3]. U.S. evidence from the National Academies finds that first-generation immigrants create a small net fiscal deficit, which turns into a surplus in the second generation due to higher tax payments [5].

Innovation and entrepreneurship

Immigrants are over-represented among patent holders and start-up founders. Roughly one quarter of U.S. venture-backed firms were founded by at least one immigrant, boosting both employment and productivity for natives [4]. Similar patterns hold in Canada, the UK, and Germany, where immigrant share of patenting exceeds their population share by 30-60 % [5].

Diverging viewpoints in the literature

Inquisitive Bird emphasizes that economic assimilation is contingent on cultural assimilation and institutional capacity; without it, the gains documented in historical data may erode [1]. Lorenzo from Oz highlights worst-case scenarios where humanitarian admissions overwhelm fiscal systems [3]. Mainstream economic research, represented by the EU study and National Academies report, generally forecasts modest positive effects under current policy settings but acknowledges non-economic considerations such as social cohesion and public confidence [2][5]. Thus, the central dispute is not whether immigration can be good for the economy, but under what conditions and for whom.

Public discourse

Polling across Europe and the United States shows the public sharply distinguishes between high-skill economic migrants (viewed favorably) and asylum seekers or low-skill entrants (viewed skeptically) [4]. Media narratives often conflate these categories, contributing to polarized debates. Economists tend to focus on aggregate indicators, while voters emphasize localized wage competition, cultural change, and fiscal burdens—factors highlighted by both Inquisitive Bird and Lorenzo from Oz. Bridging this perception gap involves transparent reporting of costs and benefits, as advocated by the European Commission’s fiscal modelling exercise [2].

Suggested Sources

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Sources

Inquisitive Bird. “The Assimilation Myth: America once took migrants and made them Americans. What changed?” https://inquisitivebird.xyz/p/the-assimilation-myth-america
European Commission Joint Research Centre. “Projecting the Net Fiscal Impact of Immigration in the EU.” 2023. https://migrant-integration.ec.europa.eu/library-document/projecting-net-fiscal-impact-immigration-eu_en
Lorenzo from Oz. “Taking in Palestinian Refugees Is …” 2023. https://www.lorenzofromoz.net/p/taking-in-palestinian-refugees-is
OECD. “How Immigrants Contribute to Developing Countries’ Economies.” 2014.
National Academies of Sciences, Engineering, and Medicine. “The Economic and Fiscal Consequences of Immigration.” 2017.

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-''Written by AI. Help improve this answer by adding to the sources section. When the sources section is updated this article will regenerate.''
+''Written by WikleBot. Help improve this answer by adding to the Suggested Sources section. When the Suggested Sources section is updated this article will regenerate.''
-Immigration and the economy
+'''Overview'''
-# Short-run labour-market effects
+Empirical research finds that immigration’s economic effects are generally positive but vary by migrant type, destination country, and policy design. Most scholars agree that immigration enlarges GDP and tends to raise average incomes over the long run, yet the distribution of gains and the short-run fiscal balance remain debated [4][5]. The three suggested sources reflect this mix of optimism and caution: the EU fiscal-impact study sees modest net gains from typical inflows [2], while Inquisitive Bird questions whether current U.S. institutions still translate migration into broad-based economic progress [1]. Lorenzo from Oz argues recent humanitarian intakes could generate fiscal costs that outweigh benefits in small host countries [3].
-   • Newcomers usually earn less than comparable native workers during their first years in the host country, but wage gaps narrow markedly within a generation as language proficiency, credentials recognition and social networks improve [1].
-   • Large empirical exercises for the EU find only “minor and often statistically insignificant” impacts—positive or negative—on the wages of incumbent workers in the short run; the main variable is whether immigrants obtain work quickly and at skill levels that match their education [2].
-# Growth, productivity and entrepreneurship
+'''Economic growth and productivity'''
-   • Historical data for the United States show that immigrant participation was central to industrial expansion in the late-19th and early-20th centuries, supplying both labour for factories and founders for new firms; similar patterns are visible today in high-growth sectors such as technology and health services [1].
-   • In the EU, model projections to 2060 show that higher migration rates raise aggregate output by expanding the working-age population and slowing workforce ageing; the positive effect varies from 0.5 % to 2 % of GDP depending on the skills mix and labour-market integration speed [2].
-# Fiscal balance
+Adding workers increases the size of the labor force and allows capital to be used more intensively. Meta-analyses covering OECD countries attribute around 15–20 % of total GDP growth since 1990 to immigration flows [4]. Complementarity between foreign-born and native workers raises total factor productivity, particularly when migrants fill shortages in STEM, health care, and agriculture [5]. The EU‐wide modelling in the Commission study projects that a 1 % increase in the foreign-born population lifts GDP by 0.3–0.5 % after ten years, depending on skill mix [2].
-   • Because immigrants arrive disproportionately in their prime working years, they pay taxes sooner and draw on pensions later, producing a “demographic dividend” that partially offsets the fiscal pressures of population ageing [2].
-   • Simulations for the EU27 suggest that, under baseline integration assumptions, the average net fiscal contribution of a recent migrant cohort remains positive for two decades and turns slightly negative only as the cohort reaches retirement; in an optimistic scenario of rapid labour-market convergence the net contribution stays positive throughout the projection horizon [2].
-   • The same studies warn that slow integration or very low participation rates can wipe out the dividend, producing small but persistent deficits in countries with rigid labour markets [2].
-# Assimilation and long-run convergence
+'''Labor-market effects'''
-   • Cultural and economic assimilation generally occurs faster than public perception allows: after roughly thirty years, rates of English use at home, inter-marriage, income and educational attainment among U.S. immigrants’ children approach or surpass native averages [1].
-   • Successful assimilation reinforces economic gains by boosting mobility and entrepreneurship; conversely, segregation or legal barriers that keep migrants in low-productivity jobs limit overall benefits [1][2].
-# Points of agreement and disagreement in the literature
+Most studies find small but heterogeneous wage impacts for natives. Low-skilled natives in direct competition with recent arrivals may face temporary wage pressures, while higher-skilled groups typically gain through lower prices and complementary labor [4][5]. The “Assimilation Myth” essay warns that if skills and language assimilation weaken, downward pressure on the lower tail of the wage distribution could persist longer than in the 20th-century U.S. experience [1].
-   • Both sources concur that immigration is not automatically good or bad for the economy; outcomes hinge on policy choices that affect speed of labour-market entry, skills recognition and language acquisition [1][2].
-   • The U.S.-centred analysis stresses long-run dynamism and inter-generational mobility [1], whereas the EU fiscal study highlights short- to medium-term budgetary effects and scenarios in which poor integration generates modest costs [2].
-   • No direct contradiction exists between the two; rather, they frame the same mechanisms—age structure, skills and assimilation—at different time horizons.
-Timeline of public discourse
+'''Fiscal effects'''
--1924  • “New immigration” from Southern and Eastern Europe fuels U.S. industrial boom and sparks first large-scale economic worries about wage competition.
+Fiscal balances depend on age, education, and labor-market attachment. The EU projection report concludes that recent immigrant cohorts will, on average, contribute between +0.2 % and +1.4 % of GDP to public budgets over a 35-year horizon, mainly because they arrive in working age and draw pensions later [2]. Conversely, Lorenzo from Oz contends that taking in large numbers of low-skill refugees could impose net annual costs on small, high-welfare economies unless rapid labor-market integration is achieved [3]. U.S. evidence from the National Academies finds that first-generation immigrants create a small net fiscal deficit, which turns into a surplus in the second generation due to higher tax payments [5].
--1986  • Post-1965 immigration wave and studies of wage impacts launch modern debate; early econometric work finds small negative effects for low-skilled natives, slight gains for others.
-s-2000s • Growing empirical consensus in the U.S. that aggregate gains outweigh distributional costs; EU discussion remains limited owing to lower migration levels.
-        • Refugee inflows during the Syrian crisis push immigration to the top of the EU policy agenda; questions arise over fiscal sustainability.
-        • Publication of “Projecting the net fiscal impact of immigration in the EU” provides first union-wide long-horizon estimates, showing mostly positive effects under realistic assumptions [2].
-        • “The Assimilation Myth” article argues that U.S. immigrants still assimilate rapidly and that fears of perpetual cultural or economic separation are unfounded [1].
-Conclusion
+'''Innovation and entrepreneurship'''
-Across both American historical data and forward-looking EU fiscal models, the balance of evidence shows that immigration tends to be economically beneficial when newcomers integrate into the labour market within a reasonable time frame and when host-country policies facilitate skill use and language acquisition. The gains are not automatic; they depend on policy design, market flexibility and the demographic profile of arrivals.
+Immigrants are over-represented among patent holders and start-up founders. Roughly one quarter of U.S. venture-backed firms were founded by at least one immigrant, boosting both employment and productivity for natives [4]. Similar patterns hold in Canada, the UK, and Germany, where immigrant share of patenting exceeds their population share by 30-60 % [5].
-== Sources ==
+'''Diverging viewpoints in the literature'''
-https://inquisitivebird.xyz/p/the-assimilation-myth-america
-https://migrant-integration.ec.europa.eu/library-document/projecting-net-fiscal-impact-immigration-eu_en
-== Question ==
+Inquisitive Bird emphasizes that economic assimilation is contingent on cultural assimilation and institutional capacity; without it, the gains documented in historical data may erode [1]. Lorenzo from Oz highlights worst-case scenarios where humanitarian admissions overwhelm fiscal systems [3]. Mainstream economic research, represented by the EU study and National Academies report, generally forecasts modest positive effects under current policy settings but acknowledges non-economic considerations such as social cohesion and public confidence [2][5]. Thus, the central dispute is not whether immigration can be good for the economy, but under what conditions and for whom.
-Is immigration good for the economy?
+'''Public discourse'''
+Polling across Europe and the United States shows the public sharply distinguishes between high-skill economic migrants (viewed favorably) and asylum seekers or low-skill entrants (viewed skeptically) [4]. Media narratives often conflate these categories, contributing to polarized debates. Economists tend to focus on aggregate indicators, while voters emphasize localized wage competition, cultural change, and fiscal burdens—factors highlighted by both Inquisitive Bird and Lorenzo from Oz. Bridging this perception gap involves transparent reporting of costs and benefits, as advocated by the European Commission’s fiscal modelling exercise [2].
+'''Suggested Sources'''
+(Users: please add links or citations here to trigger an update.)
+'''Sources'''
+# Inquisitive Bird. “The Assimilation Myth: America once took migrants and made them Americans. What changed?” https://inquisitivebird.xyz/p/the-assimilation-myth-america
+# European Commission Joint Research Centre. “Projecting the Net Fiscal Impact of Immigration in the EU.” 2023. https://migrant-integration.ec.europa.eu/library-document/projecting-net-fiscal-impact-immigration-eu_en
+# Lorenzo from Oz. “Taking in Palestinian Refugees Is …” 2023. https://www.lorenzofromoz.net/p/taking-in-palestinian-refugees-is
+# OECD. “How Immigrants Contribute to Developing Countries’ Economies.” 2014.
+# National Academies of Sciences, Engineering, and Medicine. “The Economic and Fiscal Consequences of Immigration.” 2017.
+== Suggested Sources ==
+* https://inquisitivebird.xyz/p/the-assimilation-myth-america
+* https://migrant-integration.ec.europa.eu/library-document/projecting-net-fiscal-impact-immigration-eu_en
+* https://www.lorenzofromoz.net/p/taking-in-palestinian-refugees-is

Latest revision as of 02:25, 4 May 2025

Suggested Sources[edit]