Is Immigration Bad For A Country?

Some fascinating insights on the impact of immigration

Hello there,

All over the world, we’re seeing the rise of authoritarian leaders.

And the one narrative they’ve been spinning to attract quadrillions of supporters is that immigration sucks. We need to build walls. We need to stop “them” from coming in and taking “our” jobs.

Trump, for instance, is rabidly against immigrants from “shithole” countries who’re spoiling the party for the whites- and this anger-fuelled rhetoric has worked wonders for his political campaign.

The logic does sound attractive- if life sucks, it’s because someone else is coming from outside, taking jobs and reducing the average wage.

But does that logic hold up to scrutiny? Is immigration bad for locals?

No, no, and no (the third “no” was added just for some extra drama).

To unpack the impact of immigration and why it is NOT a bad thing for locals, let’s look at the work of Nobel-prize-winning economist Abhijeet Banerjee:

1. Impact: Multiple studies have tried to analyze the effects of immigration. One famous study by David Card analyzed the influx of low-skilled Cuban immigrants into Miami and compared the impact on jobs and incomes of the locals after this happened with other cities where this hadn’t. The study found no wage dip or job loss for locals. The same has been found in many other cases- when Russians entered Israel, when Algerians mass-migrated into France, and when many people entered Denmark. That flies in the face of logic being peddled by authoritarians! Why does this happen? We can chart out 3 interesting reasons.
   
   
   

   

   Cities can function because of people like him

   
   
   
   

2. New demand: Firstly, while immigrants take up jobs, they also bring in new demand for goods & services: food, transport, haircuts, housing, and many other things. So an increase in labor supply is matched by a spike in demand- and doesn’t lead to the end-of-our-world scenarios politicians try to paint in their violent speeches.
   
   
   
   

3. Reduced automation: Secondly, the availability of low-cost labor reduces the incentive to invest in automation. American cities where harvesting machines could be used to automate much of the work on farms, didn’t because of the availability of cheap Hispanic labor. Only when the anti-immigration mob lobbied to get them kicked out of California did the farmers in that state start investing in these machines. The other states, meanwhile, continued to rely on cheap labor. We can see this at play in India as well- why invest in expensive SaaS tools when one can just hire 2 inexpensive resources at a much lower monthly cost? That is why India builds SaaS- but for the world, not local companies.
   
   
   

4. Taking up the lower jobs: A subtle fact overlooked by those harboring murderous instincts toward immigrants is that these folks typically end up taking the lowest rung of jobs- cleaning, doing the dishes, brick-making- jobs that the locals didn’t want to touch anyway (this is valid for the West but may not be fully true in India). This fact alone doesn’t lead to job displacement. On the contrary, locals can move up the ladder and take slightly more complex jobs that demand a bit of training, and understanding of the local language and can, thus, end up being a boost to their upward mobility. Labor that can take up childcare also frees local women to enter the economy, thus raising consumption levels.
   
   
   
   

5. The Irony: Trump derided immigrants from “shithole countries” and praised those who came from places like Norway. The irony is that in the 20th Century, the first Norwegian entrants were the poorest, and it is only over many decades that they’ve been able to rise. Another irony is that the locals are threatened less by low-skilled immigrants and more by the skilled ones- those who, say, go for a medical course and directly compete with local nurses.
   
   
   
   

6. Immigration helps the workers: Immigration is not just good for the country experiencing it: it’s also great for workers. Bangladeshi immigrants were observed to have 50% more food to feed their families when they decided to migrate to a nearby city for work. Icelandic inhabitants of a town who were forced to migrate when a volcano destroyed their houses ended up having salaries that were $3000 higher (after a couple of decades) than those who stayed back (since their houses weren’t destroyed, they continued with fishing- the most common local occupation in the village). Perhaps the former group, forced to move, had to re-evaluate what they wanted to do in life and were more enterprising, which might explain the greater economic success against those who stayed back and walked down the old, beaten path.
   
   
   
   

7. Resistance to immigration: Given the benefits, one might expect poor villagers to migrate to the cities (or abroad) in droves in search of work and opportunities. But that’s not the case! In an experiment in the same Bangladeshi village, when workers were educated about the earning opportunities in the city, it had no impact on how many went. When they were given a monetary incentive to do so (transport + 2 days of food), a puny 25% did. Even in this group that took the plunge, only 50% went back to cities in the next year despite their families faring better because of their income. Why do people resist migration even when it’s profitable?
   
   

   
   

8. Stickiness: Inertia, loss aversion, and a fear of the unknown unknowns. Not making drastic changes in the way things are is a constant of the human condition. Moreover, a practical reason why the poor stay back is the fear that they’d lose land rights and be kicked out of the inheritance pie when the family land is handed over to the next generation. This, combined with the pull of friends/family, and the harsh conditions offered by cities (forget migrants, even fortunate bozos like us crib about life in Mumbai) ensured that people were as open to migration as my grandma is to investing in Ethereum.
   
   
   

9. Conclusion: Immigration, both internal and external, helps the target country as well as the people who move their asses to a new destination. Despite the widespread benefits to all parties involved, people resist it as staunchly as the Income Tax department resists my attempts to retire. It’s because labor is sticky, and political rhetoric trumps the insights offered by numerous studies. If governments come up with ideas that encourage immigration- helping laborers in their job search, insurance against failure, and subsidized housing- it can create a win-win situation for everyone.

---

That’s it, friends. Hope you enjoyed the little economics lesson today.

If you liked this, you would also enjoy:

• The Monopolist’s Playbook [POPULAR]

• How Do You Spot An Authoritarian Leader? [IMPORTANT]

• How Humanity Prospered