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Does Restricting Immigration Necessarily Reduce Unemployment?

Summary:
Skilled Immigrants Helped Saved our Butts. Does restricting immigration necessarily reduce unemployment? In the long run, it doesn’t, as there is an infinite amount of work to be done. If you doubt that, think of another group that entered the labor force, a group that, from 1950 to 2000, was a more important entrant over that time than immigrants. The group is women. In 1950, there were 43.8 million men in the U.S. labor force and 18.4 million women. By 2000, there were 75.2 million men in the U.S. labor force and 65.6 million women. So the number of men in the labor force increased by 31.4 million and the number of women increased by 47.2 million. And what happened to the unemployment rate? It was 4.8% for men and 5.3% for women in 1950. By 2000, it had fallen

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Skilled Immigrants Helped Saved our Butts.

Does restricting immigration necessarily reduce unemployment? In the long run, it doesn’t, as there is an infinite amount of work to be done. If you doubt that, think of another group that entered the labor force, a group that, from 1950 to 2000, was a more important entrant over that time than immigrants. The group is women.

In 1950, there were 43.8 million men in the U.S. labor force and 18.4 million women.

By 2000, there were 75.2 million men in the U.S. labor force and 65.6 million women.

So the number of men in the labor force increased by 31.4 million and the number of women increased by 47.2 million.

And what happened to the unemployment rate? It was 4.8% for men and 5.3% for women in 1950.

By 2000, it had fallen for both groups, to 3.9% for men and 4.1% for women.

In the long run, therefore, the entry of women did not cause an increase in unemployment for men. And notice that the number of women entering the labor force annually averaged just shy of one million. This is substantially greater than the number of immigrants entering the labor force annually over those years.

We could break out the employment of immigrants versus those already here if I had quick access to the data. But I don’t need to. Notice that during that era, when we had a fair amount of immigration annually, the unemployment rate for both men and women fell.

But what about the short run? In particular, what about now? That’s less clear a priori, but fortunately, Alex Nowrasteh at the Cato Institute had a nice blog post on the issue on June 19. The whole thing is worth reading, especially for the links that back up his claims.

His bottom line is that employment of immigrants has helped employment in general.

Why would that be? Because immigrants, like non-immigrants, are not a homogeneous mass. Think about what happens when the U.S. government, in this case Donald Trump, prevents a foreign worker from getting a work visa. The fact that an employer wanted this worker means that the employer’s estimate was that this worker would have produced something worth at least as much as he/she would have been paid in money and benefits. But when that job isn’t filled by an immigrant, it could take time to find a non-immigrant, and the non-immigrant might not be quite as good in the job. So with that job not being filled for even as little as a month, that’s part of the economy that isn’t producing as much as it could. Even once the non-immigrant is found to fill the job, he/she, as noted, might not be quite as productive.

Here’s an excerpt from Alex Nowrasteh’s post that gives a sense of his reasoning:

Among those visa programs on the chopping block is the H-1B visa for skilled foreign workers. In 2019, two‐​thirds of migrants received the H-1B visa to work in computer‐​related occupations with many of them employed in the information technology (IT) sector. IT is an important source of productivity growth, but it became more obvious how important it was for saving employment opportunities during the COVID-19 pandemic.

According to research by economist Adam Ozimek, “Remote work has risen rapidly as a result of the pandemic, with more than half of the American workforce currently working from home.” Crucially, he found that “the ability to work remotely has reduced the risk of job loss early in the crisis by 32 percent to 53 percent.” According to related research by Ozimek and others, “[S]tates with a higher share of employment in information work … were more likely to shift toward working from home and had fewer people laid off or furloughed.”

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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