30 April 2014

Want to Harm your Economy? Restrict Immigration

Yet another push for immigration reform in the US is underway. Lawmakers would be smart to cast aside their personal feelings about the issue and look at the evidence. It was already established that making a humanitarian appeal can lead people to support more relaxed immigration policies.

For the people who do not respond to empathy, there is another angle: our collective wallets.

Immigrants play an important role in the US economy and in other countries. Placing heavy restrictions that reduce the flow of migration can be harmful to economic health. That is the lesson from the UK, where economists with the UK-based National Institute of Economic and Social Research projected the impact of halving the nation's immigration rate.

Cutting immigration in the UK by 50%, as proposed by some conservative lawmakers in the country, would result in an aggregate GDP decreases by 11%, by 2060 as compared current projections. That is economics speak for saying that cuts to immigration will hurt the economy.

The damage goes much further that lower GDP growth. With fewer people coming into the UK, there are then fewer tax payers, which means less revenue, meaning fewer people have to bear the burden of taxes (aka higher taxes overall). It is a scenario that nobody really wants to face, but support persists to make cuts to immigration in the UK.

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