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Q: US Economic Dependency on Immigration ( Answered,   0 Comments )
Subject: US Economic Dependency on Immigration
Category: Relationships and Society > Politics
Asked by: amrb-ga
List Price: $25.00
Posted: 20 May 2005 11:31 PDT
Expires: 19 Jun 2005 11:31 PDT
Question ID: 523792
I was recently told by an economist at a respected State University,
that immigration, both legal and illegal, in the USA was necessary for
the health of our economy.  He said that immigrants were filling jobs
that we could not fill otherwise.  He also maintained that the
stability of the economy of the Western Hemisphere was dependent on
immigrant labor in the USA.  Has this been seriously studied and
what were the results of those studies?
Subject: Re: US Economic Dependency on Immigration
Answered By: livioflores-ga on 21 May 2005 00:26 PDT
Hi amrb!!

The relationship between immigration and economic growth in USA was
been widely studied last decades and the conclusion that you heard
from the economist is also accepted.
Since I am not an specialist on this field I will refer you to
different workpapers and articles where you will find the requested
sources. I hope that this satisfies your needs, but in the case that
you feel unsatisfied with this answer just use the clarification
feature and I will work on the missing points to improve it. In other
words this answer is not considered ended until you feel satisfied
with it, and you can use the clarification feature all times you want
to request for further assistance on the requested topic.

Now the answer:
Two quotes,
?By keeping labor supply down, a restrictive immigration policy tends to keep
wages high.? 
Paul Samuelson, Economics, 1973.

?While the pool of officially unemployed and those otherwise willing to work
may continue to shrink, as it has persistently over the past seven
years, there is an effective limit to new hiring, unless immigration
is uncapped. At some point in the continuous reduction in the number
of available workers willing to take jobs, short of the repeal of the
law of supply and demand, wage increases must rise above even
impressive gains in productivity? In short, unless we are able to?
continuously augment immigration quotas, overall demand for goods and
services cannot chronically exceed the underlying growth rate of
Alan Greenspan, 2000.

The following short article is excellent as an introduction to this
answer; "Immigrants Keep U.S. Economy Supple", Minnesota Star Tribune,
September 4, 2002 - By John McAuley:
"NEW YORK (AP) - Throughout the economic boom of the 90s, when the
unemployment rate got as low as 3.9 percent, economists marveled at
the U.S. economy's ability to grow jobs without sparking wage-led
Many speculated that the waves of low-paid immigrants had created a
"safety valve," keeping average wages low enough for the economy to
grow without an increase in prices.
Now, a recent article in the Labor Department's "Monthly Labor Review"
has laid out just how important those foreign-born workers were for
the U.S. economy.
Drawing upon the 2000 Census that registered for the first time where
workers were born, the article by Labor Department researcher Abraham
Mosisa notes that in that year some 17.7 million foreign-born people
comprised 12.6 percent of the labor force.
In retrospect, it seems these people may have helped alleviate
stresses that Federal Reserve Chairman Alan Greenspan worried about in
February 2000. At that time, Greenspan said in his semiannual
Congressional testimony that "imbalances in the labor market may have
more serious implications for inflation pressures," especially because
"there is an effective limit to new hiring, unless immigration is
In fact, the Census data show that immigrants played a direct role in
keeping wages low. According to Mosisa's article, "foreign-born
workers earned about 75.6 cents for every dollar earned by the native
born in 2000." These points highlight a long-standing harsh reality
for successive waves of immigrants to the United States: they tend to
start at the bottom of the income stream. And while that's unfortunate
individually and a contentious issue for some, their collective
willingness to accept lower pay provided what Greenspan dubbed a labor
market "safety valve."
Indeed, Mosisa noted that "foreign-born workers 16 years and older
constituted 48.6 percent of the total labor force increase of 6.7
million in the 1996-2000 labor force expansion." In effect, as the
demand for labor grew through the expansion, and low-skilled
native-born workers vacated low-paid positions, the hole they left was
filled by foreigners.
Now, with the expansion over and the economy only barely pulling out
of a brief recession in 2001, the question is: what role are
foreign-born workers playing in an environment in which there is now
greater competition for work among jobseekers? And here, the Census
data is quite illuminating, if sketchy.
It seems that while jobs have been hard to find for many native
workers, foreign born workers may have simply looked harder for them.
Mosisa notes that "the number of employed foreign born increased by
491,000 over the year, while the number of employed native born
declined by 897,000."
Notably, much of that gain, he says, consisted of foreign-born women
entering the work force in 2001. Of them, 54.5 percent were employed
or actively looking for work, compared to 54.0 percent in 2000, while
the participation rate for foreign-born men was unchanged at 79.8
percent. Among native-born workers, the participation rate for men
dropped to 73.5 percent from 73.9 percent, while women saw their rate
fall to 60.9 percent from 61.1 percent.
The suggestion here is that when times got tough, foreign-born women,
who'd often been more likely to stay out of the labor force, perhaps
because of childcare responsibilities, went out and sought work.
Presumably, many of the jobs they found were low-paid jobs. 
Indeed, the 2000 Census data on participation rates suggest a stronger
willingness to take on low-paid jobs among foreign-born workers than
native-born workers.
According to Mosisa, the data showed that in 2000, the participation
rate for foreign-born workers without a high school diploma was much
higher than for the native-born population (59.0 percent compared with
37.4 percent) and was also higher for foreign-born high school
graduates with no college degree than for the native-born (66.5
percent compared with 64.4 percent).
The greater presence of low education levels among the foreign-born
labor force may account for the fact that, as Mosisa points out, "the
foreign born tend to be over-represented in low-paying occupations,
which often do not require the completion of high school.
Poorer educational background, language difficulties, and
unfamiliarity with the U.S. job market are likely explanations for the
high proportion of foreign-born in lower-paying jobs.
But, according to Lehman Brother's senior economist Joseph Abate,
there's also "much less evidence of a so-called `discouraged worker
syndrome among immigrants ... they can shift in and out of jobs more
easily and they came here for opportunities."
Indeed, a greater willingness to work may be helping these workers to
more easily weather the current slump in hiring.
Even though the foreign-born saw a 1.1 percentage-point increase in
their unemployment rate to 5.3 percent in 2001, compared with 0.7
percentage point rise to 4.7 percent for native-born workers, the
increase in the number of looking for work explains much of the
In reality, the foreign-born have continued on an upwardly mobile path
- albeit a low-paid one - even while their native-born counterparts
seem to have moved backward since the recession.
That has implications, not only for the labor market, but for household spending. 
'I'm finding that immigrants form much of the upward pressure on home
prices," said Lehman's Abate. "Immigrants tend move up the income
stream quickly and try to buy a house after 10 years. This is one
reason I don't believe there's a housing bubble. It's real demand.' "

I will start this answer leading you to some articles in which the
contribution of immigration to USA economic growth is discussed:
"How Immigration Contributes to Economic Growth in the U.S." by
Tsuyoshi Yamada - Economic & Industrial Research Group:

"Immigration and its Effects on U.S. Labor Markets" By Kristopher Kaneta:

"U.S. Immigration and Economic Growth: Putting Policy on Hold -
Southwest Economy, Issue 6, 2003 - FRB Dallas"

"Immigration ? What Europe Can Learn From the United States" by Martin
Hüfner - The Globalist > > Global Society:
'Do the benefits of immigration outweigh the potential disadvantages?
This questions has long been debated in Europe. Martin Hüfner ? Chief
Economist at Munich-based HVB Group ? examines the U.S. example. He
finds that immigration not only increases economic growth and
unemployment, but also offers a range of other benefits.'

In the hope that the listed sources are enough to see how extent are
the studies on this topic and also give you a good outlook about it I
do not list more.

There are some additional references that I want to add, one of them
(Borjas' article) challenges the conclusion that immigration is good:
Two articles from Demetrios Papademetriou, Senior Associate and
Director of the Immigration Policy Program for the Carnegie Endowment
for International Peace.
"The National Forum: economic and labor market effects of immigration
on the United States", Summer 1994,  by Papademetriou, Demetrios G.:

"Think Again: Migration" by Demetrios Papademetriou:

Summary of the findings of a new report released by Northeastern
University (December 4, 2002):
"During the decade of the 1990s, foreign immigration reached an
all-time historical high in the U.S. when between 13 and 14 million
net new foreign immigrants flowed into the country and contributed
some 40 percent of the net growth in the resident population over the
As a consequence of both these immigrants? relative youth and strong
labor market attachment, they had an even more substantial ? and
heretofore unexamined ? impact on the growth of the U.S. labor force,
impacting the private sector to an even greater degree. New immigrants
made up more than half of the growth of the nation?s entire civilian
workforce between 1990 and 2001, but their impacts on labor force
growth varied markedly by age, gender, region and state. Among males,
new immigrants were responsible for 80 percent of the nation?s labor
force growth and within the New England and Middle Atlantic divisions
where immigrants generated all of the labor force growth between 1990
and 2001.
According to a new analysis of 2000 Census data and 2001 monthly CPS
surveys by Northeastern University?s Center for Labor Market Studies
prepared for The Business Roundtable?s Education and the Workforce
Task Force in Washington, D.C., neither the dimensions of immigrant
participation in the labor force nor the role they played in the 90s
boom has been fully appreciated. No longer solely relegated to
low-level service and manufacturing jobs, new immigrants increasingly
made up large portions of those who worked in retail, trade, and
business, high-tech, personal and professional services.
?At no point during the past century did new immigrants ever
contribute so substantially to the labor market growth of the
country,? said Andrew Sum, director of the Center for Labor Market
Studies at Northeastern and one of the authors of the study. ?New
immigrants? role in contributing to the 1990s job boom in both sheer
magnitude and breadth can no longer be ignored.? "

The report's page:
University site:

The full report:
"Immigrant Workers and the Great American Job Machine: The
Contributions of New Foreign Immigration to National and Regional
Labor Force Growth in the 1990s", August 2002.
Prepared by Andrew Sum, Neeta Fogg, Paul Harrington, with Ishwar
Khatiwada, Mykhaylo Trub?skyy, Sheila Palma, Center for Labor Market
Northeastern University.
Prepared for National Business Roundtable, Washington, D.C.

"The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of
Immigration on the Labor Market" by George J. Borjas, Harvard

Some other interesting sources:
"Immigrants and the Economy":

"Immigration Has Contributed to California?s Economic Growth":

"CBS News | Immigrants Driving Economic Growth | December 2, 2002":

"Speech to the Philadelphia Society: Immigration, Economic Growth, and
the Welfare State", April 30, 2005; Benjamin Powell:
Benjamin Powell, Ph.D., is the Director of the Center on
Entrepreneurial Innovation at the Independent Institute, an
Oakland-based policy think tank and a professor of economics at San
Jose State University.

"United Press International: Comment: Immigration-scarce labor
fallacy" by Sam Vaknin:


Search strategy:
immigration "economic growth"
immigration economy labor
immigration economy labor growth

I hope that this helps you. If you find tis answer incomplete and/or
feel that some points are missing, please request for a clarification
before rate this answer. I will be glad to continue the research until
you find this answer acceptable.

Best regards.
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