Immigration and Open Borders

How would an open border policy be beneficial to the economy of the United States?

Few topics have sparked as much controversy and debate in the last few years in the United States than has the issue of immigration. The opponents of either open or freer immigration have argued that the arrival of much larger numbers of new immigrants to the United States would be harmful to the economic well being of the country. The basis for this concern, however, is weak.

First, the political aspect of open borders cannot be ignored. America was founded on the principles expressed in the Declaration of Independence. The Founding Fathers declared as "self-evident" that men are created equal and endowed with certain fundamental rights; among them being the rights to life, liberty, and the pursuit of happiness. They were clear that these were rights not only belonging to people already residing in the British colonies along the east coast of North America. No, these were rights considered to belong to all men as human beings, regardless of who they were or where they lived.

For men to be able to pursue their personal conceptions of happiness, they had to be able to seek their fortunes and opportunities wherever inclination and desire directed them. That barriers to migration were considered a hindrance to men's freedom was implied in the Declaration of Independence, when the Founding Fathers listed as one of the complaints against the King that, "He has endeavored to prevent the population of these States; for that purpose obstructing the Laws of naturalization of Foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of Appropriations of Lands."

How can a man be free when he lacks the liberty to make his own choice as to where he shall live and peacefully pursue the goals he sets for himself for the attainment of that happiness of which the Founding Fathers spoke? The German free market economist, Wilhelm Roepke, observed that:

"Man can hardly be reduced more to a mere wheel in the clockwork of the national collectivist state than by being deprived of his freedom to move. . . . Feeling that he belongs now to his nation, body and soul, he will be more easily subdued to the obedient state serf which nationalist and collectivist governments demand."

Second, the cultural fears often expressed by Americans about growing numbers of immigrants coming to our shores cannot be ignored. Every wave of immigration has resulted in voices raised with a concern that America's unique cultural qualities will be undermined. But America from its beginning was a composite of a number of cultures and peoples. The American colonies were not merely comprised of Englishmen, but also Dutchmen, Germans, and Frenchmen, as well as Irishmen and Spaniards. Beginning in the second half of the 19th and into the 20th century, millions of people came from central, southern, and eastern Europe, and from Asia, as well. And it would be remiss not to remember that thousands came from Africa--though brought here in chains and not of their own free will.

The familial and cultural mixing of these peoples for over two hundred years now is what has made the American culture. It is what has made us a unique people, a blending of many backgrounds and contributions into a distinct "one" among the family of nations. Even English law and constitutionalism and the conception of individual rights, considered the foundation of our political order, are the products of the "migration" of ideas to England from other lands--from the ancient Greeks and Hebrews and Romans and Christians.

Finally, there are the economic aspects of immigration.

What guides people to move between countries is no different than the factors at work in influencing people to move between regions of the same country. There can be a change in the individual's preferences: For example, he now considers a different part of a country more desirable to live in for "consumer" reasons, i.e., he prefers a different climate or he finds the people and culture of another region more interesting or attractive. He may also believe that he can find a job in this other region that will pay him as much or more than he has been earning, or he might be willing to accept a cut in his real income (either in the form of a lower money wage or a lower real wage because of the higher expenses of living in this alternative area) because the attractions of this other part of his country are "worth the cost."

He may change locations because the consumer demand for his services has decreased in the part of the country in which he lives and increased in another part of the country.

The same factors are at work in stimulating a person to leave another country and come to the United States. He no longer wishes to live in the political, social, or cultural environment of his birth, and he might be willing to accept the hardship (the "costs") of learning another language, acquiring new skills, and starting at a much lower salary than he is earning in his home country because the non-monetary benefits exceed the monetary costs of the move. Or the wages, fringe benefits and opportunities for promotion and advancement may be greater in the United States than in his home country.

The logic of what guides a person to move from region to region of the same country and from one country to another, therefore, is formally the same. The only difference from the economic point-of-view is that the crossing of state lines within the United States merely involves the passing of some signs on the highway that say "come back and see us in Michigan" and "welcome to Ohio," while the crossing of national borders requires passports, customs controls, and sometimes visas.

But the arguments that critics of open immigration usually make do not concern the motives of people who desire to come to the United States, but the economic effects or consequences from their arrival in large. These arguments fall under three general headings. Let us consider each of these arguments in turn.

1. There is not enough work for all these new people and immigrants will "steal" jobs away from Americans.

The thesis behind the argument that immigrants will steal away jobs from Americans is that there is a finite amount of work to be done, for which any additional hands will be merely redundant. A good way of responding to this argument is to ask if all of us have all the goods and services we would like to possess, use, and consume? The answer is obviously, "No." All of us have wants and desires that are going unfulfilled. Why? Because those goods and services are scarce and limited in supply, relative to everybody's demands for them. If more of those goods and services could be made available, they would easily find willing buyers for them if the price was right.

What limits their supplies? Fundamentally their supplies are limited because the means to produce them are limited, i.e., there is only so much land, labor, and capital available over any period of time out of which those desired goods and services can be manufactured. Given the scarcity of those means of production, if we are to produce more of any one commodity we will have to shift some amount of our scarce resources from other lines of production. But this means less of other products will be produced.

Anything that increases the means at our disposal will increase our ability to produce more of some goods without having to make the sacrifice of giving up some amounts of other things. An increase in the supply of labor means that additional hands are available to do productive things that the previously smaller supply of labor did not allow us to accomplish. We can use the analogy of the technological revolution in the late 19th and early 20th centuries that transformed the ways agricultural production was performed. Around 1900, approximately 50 percent of the American working population was directly or indirectly employed in farm production. Today, less than 3 percent of the

American work force is employed in agriculture. Machinery replaced labor, and the workers freed from the land "migrated" from rural areas of the country to urban and industrial parts of the country.

Was there work for them to do? Certainly. Some had to learn new skills and get used to a different environment, and urban Americans may have found their "country cousins" from "Hicksville" a bit embarrassing and irritating. But those hands freed from farming found work doing other things that previously could not be done because they had been tied up working on the land. Those hands built the automobiles, radios, electric iceboxes, telephones, and gramophones that became everyday goods and services for a growing number of Americans in the early decades of this century.

More hands added to the American economy today will have unimaginable types of work to do over the coming decades and even beyond, considering all the technological wonders that are already transforming both the U.S. and world economies. Even if the newly arrived immigrants do not have the higher quality skills for particular "high-tech" jobs, they free other hands for other market opportunities. For example, the unskilled immigrant who is willing and able to serve as a "domestic" frees a college-educated American woman from time devoted to caring for the house and raising the children. The "housewife" now is able to reenter the workforce as a market-valued professional, perhaps. And the income that she can earn makes it more than worthwhile for her to pay the immigrant for performing domestic work. At the same time, at the start of his new life in America, the immigrant finds the domestic work an opportunity for a step on the first rung of the ladder of success in America. A first step for himself and for his children--as was the case for previous waves of immigrants.

Anyone who has lived in a large metropolitan area, like New York City, has seen the process at work. Fifteen years ago many of the taxicab drivers in New York City were Russian. Now they are often Arab or Iranian, West Indian or African. Did they push the Russians out of their taxicab jobs? No. Over the last fifteen years, the Russian immigrants acquired the language and job skills to move on to better employment. And the next wave of immigrants replaced them in supplying a valued service--transportation around the city. In another ten or fifteen years, many of the present immigrant taxicab drivers will have moved up that ladder of success. And their place will most likely have been taken by another wave of immigrants.

Immigrants will be willing to work for less, resulting in the wages of American workers being pushed down and a decreased standard of living.

An increase in the supply of any commodity tends to result in a decline in the price at which it can be bought on the market. If a supplier has a surplus to sell, the only way he can attract buyers to purchase more of his merchandise is by offering it at a lower price. Will this mean that his income is decreased? It depends. For example, if previously he was selling 100 units of a good at $2.00 a piece, his total revenue would have been $200. If now he offered 125 units of the good on the market and could sell all of it only if he lowered his price to $1.50, his total revenue would now be only $187.50. If, on the other hand, he only had to lower his price to $1.80 to sell all 125 units, his total revenue would be $225. It all depends upon what economists call "the elasticity of demand," i.e., how responsive buyers are to a change in price.

Suppose that this seller has to lower his price to $1.50 to sell all 125 units. He now earns less than before, precisely $12.50 less than he earned before. But what happens to this $12.50? Consumers now have this amount of money in their pockets to spend in other ways. In other words, the demand for other goods on the market increases by this amount. This increased demand for other goods increases the demand for labor and other resources to manufacture them so a greater supply of these other goods can match the greater demand for them.

If immigrants increase the labor supply in various types of employment, they will make themselves attractive to hire by offering themselves to employers at a lower wage. This lowers the costs of production from the employer's point of view. He can now afford to market more of his commodity or service at a lower price. Consumers are now able to purchase more of the good at less of an expense to themselves. This increases their standard of living in the sense that their dollar incomes now enable them to buy more goods than before.

From the immigrant’s point-of-view, the wage he is earning is still more than he probably could earn in his home country. For him, this wage still represents a higher standard of living than he had in the "old country." What about the American workers who now face the competition of all these new immigrants? To retain their employment in the same industry they may very well have to accept a lower money wage. By how much will depend upon that elasticity of demand for labor by employers, which in turn will reflect the elasticity of demand on the part of consumers for the goods that they assist in manufacturing.

But at the same time, their dollar incomes over time will be worth more, because both the good they manufacture and other goods being manufactured by less expensive immigrant labor in other sectors of the economy is lowering the cost of buying goods and services on the market. For instance, hiring immigrants willing to work in a steel mill for $8 instead of $15 dramatically lowers the cost of producing the steel. As competitive pressures drive the price of steel lower, auto companies spend less purchasing steel to make automobiles, which in turn may lead to a decrease in the cost of automobiles. Simply put, less expensive labor means lower production costs, which in turn means lower prices.

Also, with the cost of buying goods decreasing, part of the savings on purchases will invariably take the form of actual savings, i.e., people will have the ability to save more. This saving will make the cost of borrowing decrease, which in turn will act as a stimulus for capital investment. This capital investment will raise the productivity of labor by supplying workers with more and better tools and equipment with which to manufacture goods and services. As a result, labor will be more productive and therefore more valuable on the market in the long run.

But is there no limit beyond which more immigrant workers added to the workforce would lower the general standard of living, rather than tend to increase it for the country as a whole? Yes. Economists often refer to this as "the optimum population," i.e., an amount of labor within a country beyond which any additional worker would be decreasing the total productivity of the labor force rather than adding to it. Empirically this is a slippery concept to quantify precisely because of the complexity of the American market economy. But as a generalization, in a country such as the United States, with its vast geographical area and its diverse and large quantities of resources, the economy could easily absorb tens of millions of more people, each of whom would be able to add to the general production of the country more than they cost the society.

It is important to remember, however, that geographical size is not the determinant of how many people can successfully work and prosper side-by-side. Hong Kong is made up of a group of islands and a small peninsula off the coast of China, including only 416 square miles of space with practically no natural resources or raw materials, and yet it not only sustains a population of almost six million, but has offered those people (many of whom came to Hong Kong as refugees escaping from Communist control across the border) a rising standard of living year-by-year.

Nor is this idea of an "optimum population" a static or given quantity. What the hypothetical maximum would be can always be raised if an economy has market incentives for savings and investment that increases the quantity and the quality of the capital with which to employ the workforce. Ten workers can be above the maximum population if the tools with which they can eke out a living are only productive enough to keep nine workers above starvation conditions. Ten billion workers can be far below that hypothetical maximum, if the capital equipment and resources with which the labor force produces their living is highly productive and efficiently managed within an open, competitive market arena.

Immigrants place an increasing burden upon the social services of the society (education, medical care, infrastructure) for which the wider American taxpaying community will have to pay.

Do we ever hear of Krogers complaining that too many people have moved into an area and want to shop in their supermarket? Or do we ever hear apartment owners or homebuilders complaining that too many people are wanting to rent or buy places to live in a particular area? No. In the private sector more customers are viewed as a benefit, a new profit opportunity for suppliers and sellers to take advantage of by satisfying the new consumers’ demands.

If medical care or education were a completely private enterprises, neither controlled nor regulated by the government, would it be very likely that we would hear complaints about a growing number of people desiring the services of doctors or teachers? No. It is only a problem for the socialist sectors of the American economy, i.e., those areas of the economy either directly managed or indirectly controlled by the state. For the bureaucrat, every public service "customer" is a burden and a "problem." For the private businessman, a customer is someone whose wants and desires are the source of profit and economic success.

The problem with the existing pressures on medical care and education, as two examples, are not due to the rising demands of immigrants. Instead, they are due to the fact that these are services that have been taken out of the market, or which are so increasingly regulated and controlled by the government that the same positive market-oriented incentives that are normally at work to solve problems have been prevented from operating. If there is a "crisis" in social services, the fault is with government control of their provision, not with immigration.

Both the principle of freedom and the logic of the economic benefits of more hands to do more work leads to the conclusion that open, or at least freer, immigration would only improve the American society and economy and not harm them.

For additional reading on Immigration and Open Borders, I recommend:

Richard M. Ebeling and Jacob G. Hornberger, ed.,
     "The Case for Free Trade and Open Immigration" (Fairfax, Va.: The Future of Freedom Foundation, 1995)

Julian Simon,
     "The Ultimate Resource" (Princeton University Press, 1982)
     "The Economic Consequences of Immigration" (Blackwell, 1989)

Thomas Sowell,
     "Race and Culture" (Basic Books, 1994)
     "Migration and Culture" (Basic Books, 1996)