Wish EU were here a view on immigration policy

Brian Jacobsen, portfolio strategist at Wells Fargo argues that immigration can play a role in a countrys economic growth.

Wish EU were here a view on immigration policy


Do they drive up housing prices? Do they steal jobs and drive down wages?

The free flow of individuals across borders is similar, but not identical, to the free flow of goods, services and capital across borders. While a nation may benefit from free trade and free immigration, small groups are almost certainly harmed, fueling intense debates over the impact on jobs, housing and crime, for example.

Economically, new arrivals to any country tend to be younger than the native population, contributing more in taxes than they take in public benefits. However, this is not always the case. Natives may fear that new immigrants are not motivated by new opportunities to work but by new opportunities to draw public benefits.

For countries that are members of the European Union, immigration concerns are particularly complex. By virtue of being an EU member, reciprocity among member countries is more of a de facto right, especially for citizens in the 26 countries that make up the Schengen Area, where border controls have been eliminated for other Schengen Area countries’ citizens.

From a static perspective, full reciprocity can seem unfair. Some EU countries, like Germany and the UK, have strong, thriving economies; others, like Bulgaria and Romania, are faltering.

However, that is the situation right now. What about in the future? Many EU members feel they must maintain certain minimum standards to keep the reciprocal arrangements from leading to too much disparity in their economies and quality of life for citizens. The EU is faced with a growing perception that its expansion has come at a cost and that membership standards have been waived or diluted.

The widely diverse unemployment rates and real wage rates among member countries underscore this concern and almost guarantee that immigration will stay a political issue until there is more convergence in these metrics.
When it comes to assessing the impact of immigration on a country’s economic outlook, it is important to keep these points in mind:
Population growth, even coming from immigration, allows an economy to produce more and everyone to consume more.

  •  Legal immigrants typically benefit from public finances although there are exceptions. Free immigration can strain some individuals or communities while the nation benefits. This argues for centralised assistance for those displaced or strained individuals or communities.
  • Population growth from immigration can increase demand for housing, but restrictive zoning and regulations often impede the ability of the housing market to flexibly adapt.
  • Immigrants are, almost by definition, risk takers. In the US, for example, immigrants started 28% of all new businesses in 2011 while comprising only 13% of the population.
  • Immigrants are typically quite different from the native population. Some people view the diversity of foods, cultures and languages as beneficial; others view those things as costs.

Dealing with diversity can be a challenge when it comes to providing public services like education and even policing. However, on net, some of the wealthiest areas – like London and Manhattan – also tend to be rich in diversity, which may be evidence that immigration can play a role in a country’s economic growth.



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