By Pawel Styrna
FAIR
Ever since it became painfully clear that post-Covid inflation was not “transitory,” the open-borders lobby claimed that high levels of immigration would help reduce inflation. However, a recent article in the otherwise socially liberal, pro-immigration, pro-globalization U.K.-based weekly, The Economist, argues that high levels of mass migration may actually exacerbate inflation.
Entitled “Immigration is surging, with big economic consequences,” the April 30 article makes many common-sense points that FAIR and others have long made about open-borders. In looking at several developed countries, the author points out that “immigration’s impact goes well beyond an arithmetical effect on GDP—it extends to inflation, living standards and government budgets. And recent arrivals differ from previous ones in an important way: more are low-skilled.” This is an important recognition that mass migration has many impacts, not just an addition of cheap foreign labor to the economy.
Regarding inflation, the article challenges the arguments of global policymakers. “Many policymakers,” the article writes, “have recently argued that migration is helping contain price rises by relieving labour shortages.” These policymakers include Gita Gopinath of the International Monetary Fund, Jerome Powell of the Federal Reserve, and Michele Bullock of the Reserve Bank of Australia. Nevertheless, “the evidence is weak and may, in fact, point in the opposite direction,” particularly since “there is no doubt that immigrants need things as soon as they arrive, boosting demand.”
The Economist article in particular notes the impact immigration has on rental housing, a serious concern for many Americans. Research recently published by Goldman Sachs suggests that in Australia, each 100,000 increase in annual net migration increases rents by about 1%. A paper by the Bank of Canada in December noted that: ‘The initial rise in immigration that Canada has experienced is more likely inflationary in the near term.’” This is backed up by evidence from other sources, including Mexico’s southern border where migrants from other parts of Latin America drove up prices for local residents.
The article also shows that although mass immigration may well increase the overall size of the GDP “pie” in absolute terms – by adding in workers and consumers – the more important metric is GDP per capita, i.e. how much of that economic “pie” everyone gets. Mass migration may cause the per capita GDP to decrease or stagnate, the author argues, due to the lower-skilled composition of the current immigration wave, especially the record numbers of illegal aliens. This is also true of new arrivals in the UK, Canada, and Australia. As FAIR has argued, the economic contributions of this demographic, being both low-skilled and low-wage, are unlikely to make an outsized addition to our GDP or to lower inflation.
The Economist article also undercuts the “labor shortage” myth that the open-borders lobby uses to promote mass migration. It states, “Industries that are most vocal about a lack of workers and are hiring lots of migrants, such as agriculture and hospitality tend to require no qualifications or experience, and offer poor pay and conditions. Meanwhile, higher-paying sectors that do require qualifications or experience tend not to be benefiting much from the migration surge. Take Canada’s construction industry, which requires skilled tradespeople. Just 5% of employed non-permanent residents work in the sector, below its 8% share of total employment.”
Ultimately, the author makes the point, consistent with FAIR’s long-time argument, that “[t]he crucial question is whether new arrivals on net contribute to or drain from the public coffers.” The pro-mass-migration lobby only points to the short-term contributions of new migrants, including low-skilled, low-wage ones, but “[p]otential trouble comes later. Immigrants age and retire. Social-security systems are often progressive, redistributing from rich to poor. Thus a low-earning migrant who claims a government pension—not to mention uses government-provided health care—could end up as a fiscal drag overall.”
As The Economist article makes clear, the fact that the immigration flow consists of a large number of dependents is a significant driver of costs that is usually ignored by the open-borders lobby. In the U.S. context, FAIR has shown that illegal immigration alone imposes (as of January 2023) a net fiscal burden of $150.7 billion annually on American taxpayers.
Hopefully, The Economist article will spark a broader and more honest debate about mass migration, inflation, and costs. Since American citizens are shouldering the various costs and impacts associated with open borders, they certainly deserve such an honest debate.
