Low-Wage Immigration - Part 1


This week I am trying to get my head round whether or not low-waged immigrants are a net contributor to the economy. It's a difficult issue, relying on many assumptions which, if changed, can greatly change the answer. It is complicated by making reference to the average immigrant, without explaining how different immigrants might have different effects.

For example, a low-waged immigrant who brings his family with him, compared to a high-waged immigrant who comes alone, may reasonably be expected to have very different impacts on the country.

I'm not an economist, so my reasoning may well be faulty. I am genuinely trying to understand the issue and would love to be able to believe that every immigrant results in more jobs, higher incomes and better quality of life for natives - but I'm not yet convinced. And if it were true, I'd be worried that the immigrant's birth country is losing out by the emigration of its citizen. I'm not sure it can be a win for both source and host country.

Anyway, moving on to part one of my thought circles...

There are two ways to increase demand: increase population size, and increase spending power.

There are two ways to meet demand: hire more workers locally, or buy in goods and services from abroad. If demand is not met, then people may wait longer, pay more, accept an inferior product, go without, or go into debt and hope for more money later.

We have supply deficits in housing, transport, education and healthcare. i.e., we have more people in need of these services than we have the staff to cater for.

Population cannot increase forever. There isn’t the physical space or natural resources to manage this. We could hope for a technological future, that allows us to house people one on top of the other in ever-higher high-rise flats, and grow food underground with artificial light in ever-deeper caves. But the quality of life would be drastically reduced, and we still couldn’t increase population size indefinitely.

Additionally, the very demands that an additional person inevitably creates (healthcare, transport, food, housing, clothing, education) are the very areas where our country already does not produce enough to meet the demand.

Therefore increasing demand by increasing population size is not a viable option. We can’t afford the congestion.

The other alternative is to increase spending power. It is widely accepted that an additional pound given to a poor person is worth more than a pound given to a rich person: the poor person buys something from a seller, and now that seller has an additional pound to buy something else off a different seller, and so the pound goes round the economy. The rich person puts their pound in a saving bank, or purchases something that devalues rapidly, or spends it in a different country.

Some immigrants also send money out of the country, back to their country of birth. Whether this is a net positive for that country or there are better ways to help that country is a different debate. The point here is that the money left the national economy, and thus demand within the national economy reduced.

So the conclusion is that the best way to increase demand is to increase the spending power of unwaged/low-wage citizens, who do not cause additional congestion (they were already here) and who spend the increase in their income in the national economy where it circulates and thereby boosts the economy.

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