United States Technological Superiority and the Losses from Migration

Donald R. Davis and David E. Weinstein, Center for Immigration Studies, Feb. 2005

This study employs a new approach to examine the impact of immigration on the U.S. economy. Unlike earlier studies, we do not treat the movement of immigrant labor into this country in isolation.

Older studies assumed that abundant resources and demand for labor was the primary reason for immigration, assumptions more appropriate to the 19th century. We start by assuming that the technological superiority of the modern American economy and resulting high standard of living is the primary factor motivating immigration. The study also takes into account the new global economy, including the movement of capital as well as trade. Our findings show that immigration creates a net loss for natives of nearly $70 billion annually.

Among the report’s findings:

  • In 2002, the net loss to U.S. natives from immigration was $68 billion.
  • This $68 billion annual loss represents a $14 billion increase just since 1998. As the size of the immigrant population has continued to increase, so has the loss.
  • The decline in wages is relative to the price of goods and services, so the study takes into account any change in consumer prices brought about by immigration.
  • The negative effect comes from increases in the supply of labor and not the legal status of immigrants.
  • While natives lose from immigration, the findings show that immigrants themselves benefit substantially by coming to America.
  • Those who remain behind in their home countries also benefit from the migration of their countrymen.

The model used in this study can be summarized as follows: High U.S. productivity motivates the entry of foreign workers and capital. As a consequence, the movement of foreign labor and capital into the United States expands U.S. exports and reduces exports by foreign countries who now have fewer workers and less capital. This depresses the prices of U.S. exports while raising the price of its imports, which is bad for U.S. natives. While the addition of immigrant workers makes the overall U.S. economy larger, natives in the United States are worse off because immigrants take not just the increase in income, but other income as well. This is because American workers are now competing with foreign workers who, because they have entered the United States, now have access to superior American technology, which is the primary source of American workers’ competitive advantage in the international economy. In other words, American workers are better off competing with foreigners if the foreign workers stay in their own countries and don’t have access to American technology. By allowing the foreign workers into the United States, Americans face competition with foreigners equipped with American technology.

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