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The Effect of Immigrants on the US Economy


The levels of illegal immigrants crossing the boarders into the United States have been increasing rapidly since the year 1990. The status of the workers in the United States of America is that of a skewed population having poor educational background and distinctively engaged in the low skilled labor markets. This predominant observation is empowered by the perception painted by various press houses that shows masses of immigrants crossing into the United States seeking for a better livelihood. Most of the immigration scholars share the view that most of these immigrants, most of whom are illegal, have extremely low educational backgrounds, and they end up finding manual jobs as farm attendants, cooks, house keepers or nannies. Most of these immigrants stay and work in the United States for many years without ever being detected by the government machineries.

Research question

The United States of America receives the highest number of immigrants every year. Some of these immigrants enter the country illegally as they such for a chance for a better living than their home countries. A host of others apply for a chance to immigrant to the United States through the relevant department and are flown there upon qualifying. The issue of the immigrants into the United States has raised mixed reactions among different groups among its nationals and the international community. The national and international interest is attracted by the contention over the issue as one group of experts supports the puzzling government’s immigration policy while the other group opposes the idea. Interestingly, the arguments by the two opposing groups are based on the effects that immigrants pose to the America’s economy.

This paper attempts to look at the issues of immigrant into the United States of America, with an aim of trying to find out the net effect that such immigration has on the national economy. To answer this question the paper examines the economic factors such as the employment situation of the native workers and how it has been affected by the surge of the immigrants into the nation.

The immigrants have contributed positively and extended benefits to the member States especially in their contribution in lowering the prices of commodities and services as well as the increase in profit margins and revenue collections, these benefits have been realized from the point of perspective of the nation as a unit. However the costs and expenses relating to these immigrants are always on the shoulders of the demographic groups within the localities in which they are concentrated.


Immigration has positively contributed to the enormous economic growth of the United States of America.


Literature review

Most research records and estimates of the contribution of the immigrants to the national economy, reveals that the United States benefits considerably from the presence of the immigrants. Once the immigrants have been given a humble and reasonable time to settle and adjust to the labor market, they contribute to the production of great national income compared to their consumption in basis of government services extended to them. On average therefore, an average American, will receive great economic benefits though in short term analysis the population from specific localities where these immigrants concentrate may initially suffer especially in competition over job market.

The flow and attributes of labor by the immigrants has considerably changed over the years. The census for the year 1990 concurs with the fact that general flow of the immigrants is most importantly characterized by the unskilled masses that are poorly educated. The census paper records that 25% of the immigrants above the age of 25 years had hardly attained the 9th grade level of education. Astonishingly, this only compared to 10% of the native population. Researches show that the unemployment rates of these two groups of the population is significantly higher compared to the rates of those with higher levels of education. The unemployment rate for the foreign persons residing in the U.S.A in the in 1990 was recorded at 7.8% this varied significantly to that of the native born workers that stood at 6.2%. The same 1990 census paper revealed that 79.1 % of the immigrant over the age of 5 years spoke other languages different from English compared to only 7.8% of the native born population. The U.S.A economy is a service driven economy and the ability for the workers to speak English contributes significantly on the level of performance that one can engage in such an economy. It is for this reason that poverty rates recorded among the immigrants’ households was surprisingly 50% higher than that of the native households (Chermayeff, W et al 1991).

The USA General Accounting Office recorded that over two million immigrants consisting of young children and middle aged youth were admitted in various schools between 1985 and 1995. The report observed that those children were highly likely to perform poorly in schools given the levels of poverty that they were raised in. Children born and raised in abject poverty are less likely to perform significantly well in the labor market and in most cases grow up to become liabilities to the economy. There is a growing pattern since 1965 of the local concentration of the immigrants entering the USA territories a fact that explains the variations in the economic load borne by these localities. The states that bear the greatest burden of the immigrants are, New York, Illinois, Texas, Florida, New Jersey and California with most of the current immigrants concentrating in the urban centers. The unemployment rate among the cities that contains the influx of the immigrants has always been relatively higher than that of the nation’s average (Ungar, S. 1995).


Research design and Analysis

This section of the paper seeks place a detailed research analysis of immigration which is the independent variable in focus. Immigration is the movement of people from their country of origin to a second or third country and effectively becomes a residence of the new country. The paper will focus on the United States of America as the dependent variable and relate how the immigration affects the economy of this super power.

This research assumes the case study as its main methodology to introspectively examine the wider picture of the immigrants concentrated in various geographical localities in the United States of America and the effects that they pose to the national economy. To achieve this objective the paper examines the short tem and long tem effects on the supply of labor, population and wage disparities and its effect on the economy at both local and national levels of the USA market.

From April 1991 the USA economy has recorded the highest growth rates since the 1965 postwar times. Despite cases of poor unemployment rates at some of the localities and problems in labor market, the wage growth was seen to decline in the year 1999, a fact that has helped in checking inflation.  The year 1998, show a fall of 17.3 % of the immigrants into the USA that constituted to more than 660,000 persons. The sudden decline was caused by an increase in the number of unapproved application. However the applications rose steadily in the successive years bringing the total number of the immigrants in the 1990s to 10,039,459 persons ((James P, et al 1997).

The major effect by the immigrants is in the increase in the supply of labor force, most of which is unskilled from Hispanic population. This flow of the immigrants has helped in ensuring that the labor market remain in a balanced state a fact that has helped to control the inflation especially in the times of rapid economic growth. The populations of the immigrants tend to grow significantly faster than that of the natives given that the fertility rate of a Hispanic woman is almost twice that of a white woman. In essence this scenario means that the presence of the immigrants assures a steady growth of the labor force which is a good attribute for a growing economy. Projection from the bureau of statistics indicates that if the immigration was to be stopped then the USA population would reduce by 76 million persons by the year 2050, an 18.9% reduction from the median projection. The economic growth spurred by the increase in the labor force sparks a virtuous cycle in that the favorable growth in the economy technically increases the birth rates among the whites a fact that further boosts the labor force and fuels further the economic growth. Immigration therefore contributes to the growth of the economy in short term engagements as well as long term (Daniels R, 1990).

The skilled immigrants especially in Information technology (IT) have proved very productive in the industries a factor that has helped in suppressing growth in unit labor cost that can harm the economy. Similarly the unskilled immigrants, who constitute the bulk of the total immigrants, are absorbed in the labor intensive industries where they earn less than half of the wage of the national workers. These inflow of cheap labor helps in suppressing possibilities of sudden surge in the growth of wages in the areas where production is low thereby effectively reducing chances of inflation that can hurt the economy. For example, earlier researches recorded 2% wage suppression effect caused by the unskilled immigrant labor force in 1999 the year that had recorded a wage growth rate of 3.4%, this implies that if there were no immigrants, then the wage growth rate could have hit a high of 5.4% a rate that could have added excessive pressure on the inflation and thus the economy. The unemployment rates have steadily gone down reaching 3.9 % just before the global recession of 2007, and the presence of cheap labor has continuously kept the inflation at check. While the highly skilled labor among the minority migrants and the majority nationals have been absorbed in highly productive IT jobs with huge salaries, the rest of the unskilled immigrants continue to get absorbed in the lesser productive labor intensive and low-wage jobs these distribution allows the economy to achieve the required growth while at the same time keeping off the inflation (Handlin, O. 1972)

The capacity of an economy to grow in any country is normally measured by adding the quantities in growth of its labor force and productivity. For example in 1999 the labor force and the productivity for the USA was quantified as 1.2% and 2.3 % respectively. This means that the potential growth rate (capacity to grow) for the year was 3.5%. It should be understood here that immigrants contributes directly to the labor force of the USA and therefore they contribute directly to the growth of that economy. Skilled immigrants tend to concentrate in specific localities like the Silicon Valley where they build major knowledge bases that contribute heavily for the ideas in the development and extension of the various professional services especially IT that that they offer in their respective industries. This collective move stimulates economic growth. Generally, when a nation’s economy expands causing the labor market to be strained, the lack of laborers leads to rise in labor costs a move that eventually would lead to diminishing returns. However, the case in USA, is different, the presence of the immigrants always pose to fill any upcoming vacancies that is brought about by expansion of the economy thus ensuring that the economy would grow without  undue rise in marginal costs of labor. When marginal costs in labor remain low amidst steady growth in production then there is a definite increase in returns on production as well as increase in general productivity. This means that the immigrants contributes to economic growth both through synergy building from their skilled counterparts and also through creating a stage where benefits related to economies of scale are realized driven by the cheap labor that they offer (James P, et al 1997).

Many skilled immigrants with specialized skills, for example, in micro-biology, medicine or sports have represented the US government in many global events that has attracted a lot of foreign currencies to the nation. Many developmental researchers for the country and respected leadership in the US are immigrants that have already been assimilated as nationals. This group of immigrants have also contributed largely in stimulating the growth of the economy, either by contributing in decision making, liaising with their countries of origin for trade agreement that favor growth of the US economy or hosting important meeting that would attract delegates from all over the world. That link by these senior and highly educated immigrants to their original countries creates a natural network that favors trade and boosts the economy.


It is now clear that the trend of immigration in USA is expanding the supply of labor as well as setting economic effects that assist in suppressing wage growth as a way of boosting production. With productivity expansion getting an induction as it has been projected the move may mount a pressure on inflation that is a precursor for recession. With such an occurrence the employment of the immigrant may reduce significantly especially for those who are unskilled and are working in the areas of low production and low wages. This move can harm the employment rate in the nation a case that is presently not significant. However, when the issue is considered in long term the immigrants flow is seen as to continue as it stands presently sparking a continued stimulation to the growth of the economy. With the Information Technicians in high demand across the globe, the USA stands a great advantage because the immigrants that have already settled there produce synergies that drive the economy and work as attraction points for their colleagues outside the USA. Therefore as the other European countries and Japan struggle to source for the IT technicians, the USA based industries use the available infrastructure that work out effectively to source for technicians through the immigrants.

The research finds that from the economies point of view the immigrant question in USA has great benefits to the overall nation and outweighs the costs that may be accrued by the government on them. A quick observation on the effects of the immigrants on the job prospects for the native citizens especially the unskilled shows that though the effect is negative it is modest enough and only significant in a few industries located in certain geographic locations. A comprehensive cost benefit analysis comparing the expansion in the income of the nationals with the costs of the immigrants reveals that on average the US nationals receive more benefits from the immigrants as seen in the boost of the economy (Handlin, O. 1972).

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