Is immigration good for the economy?
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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.