Economic Impact Of Immigration Research Assignment

ECONOMIC EFFECTS OF IMMIGRATION(Kynesian Theory Approach)NameInstitutional AffilaitionDate
Economic Effects of Immigration
There are three main ideas that come out from the Keynesian Economic Approach that can help us to evaluate the effects that immigration has on the economy of a country. The first principle is that the aggregate demand in a country is as a result of the economic policies and decisions that are made not only the government but also the private sector. Decisions that are made by the private sector can lead to numerous economic outcomes such as the reduction in the amount that the consumers spend in economic stagnation. The government therefore has to come with active policies to avoid more effects. Keynesian Approach supports policies that are mainly formulated by the private sector and regulated partly by the government.[Christian, Dustmann, Fasani Francesco, and Speciale Biagio. 2016. "Illegal migration and consumption behaviour of immigrant households,]
The second principle is that prices, which in this case would be viewed as the wages which the immigrants receive, show a very slow response to the changes that occur in supply and demand. This will in turn result to various shortages that will occur to the main factors of production that is capital and labor.
The third principle is that a change in the aggregate demand expected or not expected can have short term effects on the real output and the employment opportunities and not necessarily on prices of goods. This means that if fluctuations occur in any of the main aspects of spending (consumption, investment and government expenditures) there will be a change in the output. When there is an increase in the government expenses, the other components will remain constant.
The Keynesian Economic Theory seems to be very critical of the Classical Economics Theory on the issue of international migration. The Keynesian Theory, provides an argument that the supply of labor depends on two main items; the nominal wage and the real wage of the laborers. This view arises as a result of the different views of both theories on the role that money plays in the economy. Keynesian theory shows that money has two main roles that it plays in an economy. It is used as a medium of exchange and a means of saving. The neo-classical theories argues that money is only used as a medium of exchange. This makes the immigrants to be attracted to a regions that provide their workers with high nominal wages. In Keynesian approach, migration is an equilibrium that can be used to bridge the differences between nominal wages and the real wages even though the theory shows that international migration gets rid of the unemployment differences more rather than the wage differences.
Immigration is a big issue in most countries. Immigrants compose around 12%-15% of the total workforce in any particular country. The economic impact of immigration depends on the skills that the immigrants have. Different types of immigrants can have
Various effects on the economy of a country. Most of the business and other public service institutions make use of the skills and hard work of the immigrants. It should not be used to justify the increased rates of immigration in the world that even exceed the emigration of a country. The impacts of immigration can, therefore, be positive or negative. However, the issue is not whether immigration is needed, but rather to what level and what type of immigration is desirable. Over 3% of the total population in the world live outside their place of birth CITATION Ala08 \l 1033 (Alan and Yvonne 2008).[Alan, Barrett, and McCarthy Yvonne. 2008. "Immigrants and Welfare Programmes:]
The various governments in the world have been emphasizing the use of GDP in assessing the economic effects of immigration on the economy of the country. This can be misleading since the total size of a particular economy cannot be an index to be used to show the prosperity of a country. The analysis should, therefore, be focused on the effects of immigration on the income per head of the resident population. Evidence shows that the effects are small in the long run after the country has adjusted to the increase in labor supply. As such, the long run economic effect is to enlarge the country's economy with little costs and benefits on the incomes of the resident population CITATION Ala08 \l 1033 (Alan and Yvonne 2008). A rise in the population density of a country has economic consequences on the resident population. It can cause housing problems.
The theory of economic growth identifies several features of the economy that can be used to determine the effect of immigration on the income and the wealth of the country. Two main ways can be used to analyses the economic effects of immigration on the economy of the country. The first method is more centered on the immigrants, and the other is viewed from the national perspective. The two approaches are not mutually exclusive as such, but rather they are distinct. The one that is centered on the immigrants focuses on how the immigrants are faring on with their lives while national perspective views the economic effects of the immigrants on the society of that country CITATION Rob08 \l 1033 (Rowthorn 2008).[Rowthorn, Robert. 2008. "The fiscal impact of immigration on the advanced economies,"]
Labor Market
By use of the Keynesian Theory of Economics, the dual labor market can be divided into two main segments; the primary and secondary segment. On one hand, the primary segment is characterized by capital-intensive production while the secondary segment shows that the method of production is labor-intensive. Skilled workers in primary segment have more advanced capital goods, an increased social status, better employment opportunities and higher incomes than the unskilled workers in the secondary segment.
The easiest way to analyze the effects of immigration is by beginning to look at its effects on the labor market. The economic theory highlights the issue of the international labor mobility that arises as a result of the differences in wages across the different countries. Some students migrate from their developing countries to the advanced economies to study in the schools and universities. However, some of the immigrants are as a result of problems that they face in their country. The nature of migration can also have an effect on the education levels and their assimilation. If the immigrants have the mandate to choose the host country, then the selected country will be affected.[gin Christian, Dustmann, Fasani Francesco, and Speciale Biagio. 2016. "Illegal migration and consumption behaviour of immigrant households,]
The entry of the immigrants into the labor markets of the host country can be studied by comparing the rates of employment and wages that the immigrants earn and the natives from the time that they enter the host country and the rest of their stay duration. The first studies that were carried on the US immigrants showed that at their entry, they earned less than the natives. Their earnings would converge after approximately 15 years. After 30 years of their stay in the host country, the immigrants were found to be earning more than the natives of similar age and level of education.[Alan, Barrett, and McCarthy Yvonne. 2008. "Immigrants and Welfare Programmes:]
Similar to the US, European immigrants were observed to be earning less that the residents at their time of entry but their earnings increased over a given period. On average the US workers lost an average of about 3% of their real values of wages because of immigration. The values increased to 9% for the school dropouts. It was also realized that the less educated suffer fewer losses from the presence of the immigrants in their country. The earning gaps of the different countries are often explained by the lower levels of education by the immigrants. However, most of the studies agree that the earning gaps keep on diminishing as the time that the immigrants stay in the host country increases. It is because the immigrants become assimilated with the people and they also improve their level of education. One of the important things that is ignored by the assimilation studies is the actual mechanisms through which assimilation takes place that enables bridges the gap of earnings between the natives and the immigrants. It would be important to observe whether it is caused by increased levels of education, improved language skills or the interaction with the natives. A good understanding of the things that make the immigrants do better over a given period can enable economic policy makers to learn lessons and later use them when they are formulating policies to govern the country. Most of the Scandinavian countries offer language training programs to the immigrants as a way of assimilating them.[I, Gianmarco, P. Ottaviano, and Giovanni Peri. 2012. "Rethinking the Effects of Immigration on Wages."]
According to the Classical Economics Theory, the influx of the immigrant labor force into the labor market of the host country can result in a shock supply of labor force within a particular level of skills that can eventually disrupt the labor market equilibriumCITATION IGi12 \l 1033 (Gianmarco, Ottaviano and Peri 2012). There would be a wage fall for the non–immigrant workers as compared to the level of their skills thus they may displace non-immigrant workers and force them out of the labor force.
Recently, there has been an understanding that the labor markets operate and it is regulated on the local levels that define the local and the regional markets. It is characterized that most of the jobs are spatially located, and therefore most of the workers have committed themselves regarding distance CITATION Can15 \l 1033 (Cane 2015). The immigrants are randomly distributed across the local labor markets in the countries that they move even though they get attracted to a particular segment of the labor market that has the characteristics that they need.
The conclusions that are made from most of the studies are not as such very conclusive and therefore they do not meet the classical economics theory.
Employment Opportunities
An analysis by the use of Keynesian Approach on the rates of employment between the immigrants and the natives differs in many aspects from the analysis of the labor market that has been discussed above. Immigrants had lower participation rates and employment rates. Just as the case wages, the gaps in participation rates were higher in the new immigrants than the natives. For example, the recent influx of refugees into Europe lowered the participation rates due to the restrictions on the ability of the refugees to seek for employment in that particular country. Recent studies show that relative employment opportunities for the immigrants have worsened with the increase in the number of refugees CITATION Pir12 \l 1033 (Piracha, Matloob and Zhu 2012). The job displacement effect is a topic of discussion. A traditional view is that most of the immigrants take the jobs of the natives.
In his arguments, Keynes argued that an inadequate in the overall demand would lead to higher rates of unemployment .An increase in the demand should come from four main components; consumption of the people, investment opportunities that exist, purchases that are made by the government and the net exports which is calculated by finding the difference between what the country buys and what it sells from the foreign countries. Immigrants in a will lead to a large demand of goods and services leading to an increase in the demand of labor.
As long as the production factors that is labor and capital remain mobile across all the local labor markets, most of the studies fail to capture the degree of substitution between the immigrants and the natives. If the immigrants are willing to work and be paid fewer wages, then an influx of such immigrants will shift the labor supply and make it more elastic CITATION Pir12 \l 1033 (Piracha, Matloob and Zhu 2012). The changes in the wages of the native groups will result in variations in the employment of the natives and the number of hours that they have worked. In the instance of unskilled immigration even though the ...