Since World War Two, countries have reduced trade barriers and have tended to move towards free trade. Should the world follow a similar path with respect to immigration and open all borders?

Subject: Since World War Two, countries have reduced trade barriers and have tended to move towards free trade. Should the world follow a similar path with respect to immigration and open all borders?

The British politician Priti Patel serving as Secretary of State for the Home Department recently proclaimed the post-Brexit immigration plan: “the new points-based system” with the aim to "encourage employers to invest in the domestic UK workforce, rather than simply relying on labour from abroad.” This announcement brought economists back to the controversial topic of immigration.

Although low barrier trade has been put into practice after World War two resulting in numerous benefits, human immigration is a matter too complex to follow the step of trade. In the short run, it may be reasonable to conclude that immigrants compete against the locals for limited job opportunities,which may have negative externalities on local wages. On the other hand, immigration may also lead to “brain drain” in less developed countries since people would all gather in certain countries in search of a better life. This phenomenon would lead to greater social inequality and greater gap of wealth. All benefits come with a fair share of opportunity cost, henceforth we should try and reach the equilibrium of immigration, in order to find the solution where everyone would be better off.

This essay seeks to analyse different aspects of immigration while taking different groups of migrants into consideration. First of all, migration allows low-skilled workers to earn higher wages simply by moving to a place with better institutions, effective policies, efficient capital markets, and modern companies. Better facilities allow them to explore their own intelligence and its possibilities as well as seeking their full potential.

According to statistics of theWorld Bank, migrants who move from lower- to higher-income countries typically earn three to six times more than they did at home. Accordingly they tend to have lower demand for wages because they would still earn a lot more than before, consequently, there would be less production cost and more profit for domestic firms. Immigration is also an emotion-charged matter, migrants tend to send a large percentage of their salary back to their home country for their families, thus the sending country also benefits.

However, it isn’t always easy for low-skilled workers to migrate, there are lots of restrictions. For instance, social care workers are not eligible for the rebranded NHS and care workers fast track visa in the UK. In that case, immigration can’t fill the vast majority of vacant positions in the social care sector. We can conclude that jobs with poor pay and career prospects are unattractive to British workers with the capacity of filling the roles while immigrants are not available. This phenomenon leaves a big gap between the supply and demand of care which is waiting to be solved.

There are also voices against immigration. Then-Sen. Barack Obama warned that mass migration “threatens to depress further the wages of blue-collar Americans and put strains on an already overburdened safety net.”. Similarly, Paul Krugman stated that “Immigration reduces the wages of domestic workers who compete with immigrants. That’s just supply and demand.”

Despite the strong presumption that an influx of immigrants will reduce native wages, existing empirical studies suggest that the effect is small. Giovanni Peri, a pro-immigration economist, finds that immigation actually raises the wages of native-born American high-school dropouts by 0.6%. Therefore we can say that the effect on wages for native workers as a whole is in fact mildly positive.

Generally low-skilled immigrants are willing to take up unpopular jobs that locals don’t want to take up, increasing the productivity of a wide range of fundamental businesses. “Immigrants and US-born workers generally do not compete for the same jobs,” the economists Michael Greenstone and Adam Looney wrote for the Hamilton Project. This is partly because they earn much more than they did in their native country, therefore what the job is doesn't matter that much to them. Furthermore, language barrier and lack of familiarity of local institutions are some of the reasons holding them back from better job options.

Borjas proposed in 1995 that the immediate short-term effects of immigration on the wages or employment of existing workers depend on the extent of production complementarities between immigrant workers and other factors of production. It depends on whether migrants have skills that substitute or complement those of existing workers. Thus benefits are more compelling when immigrants possess adequately different skills than the native labour productive inputs.    

However, in the long run, demand for goods and services rises in response to a larger population, shifting the equilibrium to the right.

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Immigration also results in the inflow of high-skilled workers, also known as “brain gain”. Priti Patel said the UK‘s new immigration aim to “attract the best and brightest from around the world”. Skilled migrants make locals more productive, they improve domestic human capital, and they tend to focus on innovation, research and development, increasing efficiency and productivity of the local economy.

Immigrants bring new perspectives as well as knowledge of foreign markets, and connections. William Kerr of Harvard Business School said “multinational firms that hire lots of skilled immigrants find it easier to do business with their home countries”. We can infer that forein talents speed up the flow of information and knowledge between countries, making communication and negotiation easier. For instance, scientists in rich countries make more breakthroughs because they have better equipped laboratories and a wider selection of other expertise of various fields to work with.

The Economist voiced “ Mobility and connections make the world brainier.” Lowell and Findlay argue that a certain percentage of the movement of skilled personnel is needed for low- and middle-income countries to enter the global market. Harvey and Saxenian reached similar conclusions that skilled migration from low- and middle-income countries propose brain gain or even brain circulation as a way to keep the global economic machinery functioning. Two-fifths of America’s Nobel science prize-winners since 2000 have been immigrants.

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