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December 18, 2015

Three reasons immigrants are valuable for the host country

Each year on December 18, we observe International Migrants Day. Established by the UN General Assembly, it is a day devoted to the rights of migrants. This year especially, with the migrant crisis so high on European policymakers’ minds, it is the perfect opportunity to remind ourselves of the evidence on the impact of immigrants on host countries. I want to focus on three aspects—jobs, health and happiness—since they are important in our lives.

1. Jobs
My IZA World of Labor article “Do migrants take the jobs of native workers?” lays down the pros and cons of the impact of immigrants on natives and shows that “migrants rarely take native workers’ jobs, and indeed they tend to boost employment effects in the long term.” The article provides five reasons why immigrants do not take the jobs of natives: i) self-employed migrants directly create new jobs; ii) migrant innovators indirectly create jobs; iii) new migrants fill labor shortages and lubricate the labor markets; iv) high-skilled migrants contribute to technological adaptation and the low-skilled to occupational mobility, specialization, and human capital creation thus creating new jobs; and v) by raising demand, immigrants cause firms to expand and hire more workers.

Together with jobs go wages (the price of labor). Another IZA World of Labor article, “Do immigrant workers depress the wages of native workers?” by Giovanni Peri,  offers reasons why immigrants do not lower the wages of natives. It turns out that while in the short-run the effects are essentially zero, in the long run, immigration can boost firm productivity and natives’ wages “by stimulating firm growth and contributing a range of skills and ideas.” 

2. Health
Osea Giuntella’s IZA World of Labor article “Do immigrants improve the health of native workers?” neatly summarizes the literature and shows that, in fact, immigrants improve the health of natives. The mechanism is through the labor market.

Immigrants often work in risky jobs, thus pushing natives into less strenuous, higher quality work, such as jobs with better schedules, lower injury and fatality rates, and more security. These positive effects are more pertinent to the more vulnerable natives such as the low-skilled blue-collar workers. As immigration increases, “such market adjustments have positive impacts on the health of the native workers.”

Moreover, in most developed countries, with the exception of Israel, evidence shows that immigrants have better health than comparable natives when they arrive in the host country, a phenomenon labeled “the healthy immigrant effect”. This is dealt with in “Are immigrants healthier than native residents?” by Shoshana Neuman. She explains the healthy immigrant effect and why with additional years of residence in the host country the health status of immigrants converges with that of natives (from above) and can even go below.

3. Happiness
While we all want to be happy— the “pursuit of happiness” is even in the US Constitution—evidence on the impact of immigration on the happiness of natives is relatively thin. A recent paper, “The impact of immigration on the well-being of natives” investigated the issue for Germany and found evidence that immigrants make natives happy. The happiness of natives increases with increases in the migration rate, albeit at a nonlinear rate. Once immigrants are “assimilated” in terms of earnings, language, culture, etcetera the happiness of natives equalizes. More importantly, the paper finds that immigration influences the welfare of natives beyond objective outcomes (e.g. wages and employment).

Another paper from 2013 by Betz and Simpson, based on data from 26 European countries, corroborates this finding. Going a step further, more recent research finds that it is not only the immigration rate, but also the ethnic diversity in a locality. Places with higher ethnic diversity increase the happiness or well-being of native Germans, thus it pays to be multicultural.

Professor Amelie F. Constant is the Director of Migration at the Institute for the Study of Labor (IZA) and an editor of the IZA Journal of Migration.

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