The Impact of Immigration on Jobs and Income

Antony Davies,

Release Date
April 29, 2011



Is it true that immigration raises the U.S. unemployment rate? Is it true that immigration affects U.S. income distribution? The conventional wisdom says that both of these things are true. However, economist Antony Davies says there is evidence to suggest that they are not. Looking at the data, there is no relationship between the rate of immigration and the unemployment rate, nor is there a relationship between the rate of immigration and income inequality. Further, there is evidence to suggest that immigrants actually CREATE more American jobs.
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The Impact of Immigration on Jobs and Income
Two things that concern people when it comes to immigration are, is it the case that when immigrants come into this country they take jobs away from Americans, thereby increasing unemployment? Two, is it the case that immigrants, when they come into this country, are generally poor and therefore create a large number of people who are lower income and then become dependant on the Americans’ welfare system?
Here you’re looking at the United States. Each dot is a year from 1970 to 2008. Across the bottom, we’re measuring immigrants as a percentage of the population, and across the top, we’re measuring the unemployment rate. And you find there are periods when immigration is particularly low, unemployment might be high, might be low. There are periods when immigration is quite high and unemployment is actually somewhere in the mid to low range. There seems to be no relationship between unemployment and immigration.
Here you’re looking at the income distribution, and this is measured by what’s called the Gini coefficient. The Gini coefficient ranges from zero to one, where zero is complete equality—everybody’s earning the same thing—and one is complete inequality—where one person earns everything and everybody else is destitute. And across the horizontal, we’re again measuring immigrants. And what you see is there are periods where our income inequality is higher or lower and immigration is constant. Or here we have particularly high levels of immigration, and our income inequality is at a medium to low level. It seems from looking at this that there’s no clear relationship between immigration and income equality in the United States.
Let’s look for a moment at skilled immigrants. Skilled immigrants over the period 2000 through 2005 were paid a total of $40 billion for their labor. So these are people who came into this country, and they were paid by American companies a total of $40 billion. People look at that and claim, this is $40 billion that would otherwise have gone to Americans had these immigrants not come here. What we’re forgetting is that amongst those immigrants are people like Andy Grove who founded Intel, or Sergey Brin who founded Google. In fact if we look at just these six immigrants who came into this country during this period, by 2008, the companies they founded were worth a tremendous amount of money. In fact the combined market values of those five immigrant-founded companies are more than six times the total amount of money that American companies paid to immigrant workers over the period 2000 to 2005. What that suggests is that far from being an influx of low-income people who eat off of the American welfare system and far from being people who come in and take American jobs, in fact, immigrants create companies that generate more wealth and create more jobs for Americans then the jobs that the immigrants themselves occupy.