Economics of undocumented immigrants: Myth and reality

Oct 5, 2009, 12:44 GMT

San Francisco - Alfredo Flores crossed the border 12 years ago from Mexico to the United States with two clear missions on his path to success.

First he bought forged identity papers that enabled him to get a job.

Then he sat for hours in front of the television, watching old movies and soap operas to teach himself English.

Now Flores provides a valuable service to the local economy in Minneapolis, Minnesota, running his own car repair shop and employing several mechanics. Living the same American dream as previous generations of immigrants, he owns a 350,000-dollar house with a white-picket fence.

But successful, hard-working immigrants like Flores seem to be lost in debates about new arrivals involved in crime, burdening health services or taking jobs from natives in their host countries.

Such attitudes represent a cyclical phenomenon that seems to follow every large influx of newcomers, says Aaron Terrazas, a researcher at the non-partisan Migration Policy Institute in Washington.

The trend is far from confined to the US. Across Western Europe, migrants are accused of taking jobs from native citizens, milking government benefits and worsening already tough economic times.

But such attitudes have little or no basis in reality, says Terrazas. Immigrants often fill vital but low-paid, low-status jobs that might otherwise go begging for applicants. Illegal migrants in particular rarely avail themselves of government services and are overwhelmingly law-abiding, apart from flouting immigration rules.

This is especially true in Anglo-Saxon countries and Japan.

'In these countries, low-skilled immigrants tend to be working more than not - and have higher employment rates than natives - due to their predominant age between 20 and 50,' Terrazas says. 'They come with the express intent to work and make money. Once they arrive, they have no choice because there is no social protection for them.'

In contrast, continental Europe offers a stronger welfare system and more protected labour markets. 'Employers there are more discriminatory,' says Terrazas.

Angela Kelly of the Immigration Policy Centre cites numerous studies that find that immigrants in the US use relatively few public benefits, account for very little of the increase in poverty in the United States, use the healthcare system much less than the native born, pay more in taxes than they consume in government services and are net contributors to the economy.

Other benefits of migration cited by Kelly include the upward mobility of many immigrants, who in the United States close the education gap with native whites within two or three generations.

A 2007 report by the White House Council of Economic Advisors that found immigration increases the US gross domestic product by roughly 37 billion dollars a year. The report estimated that 90 per cent of workers experience real wage gains from immigration.

But there is another side.

Wharton business management professor Peter Cappelli argues that without immigrants, employers would be forced to offer higher wages to native workers to fill those functions.

'That's how markets work,' says Cappelli. 'There are no jobs that we can think of where, over time, work doesn't get done. It doesn't happen.'

It may be true, but Tarrazes points out that the impact of immigration on US wages is much smaller than the influence of education, trade and service globalization, and the shift from a manufacturing economy to a service-based economy.

Lower prices brought about by cheaper labour may benefit 90 per cent of the population, but that's of little comfort to the 10 per cent who suffer, he acknowledges: 'As with every phenomenon there are winners and losers.'