The Economic Foundations of Immigration: The U.S. Experience

by David Kennedy & Mario E. Delgado
U.S.D.A.

Immigration policies unsupported by sound economic rationale are unsustainable in the long-run and intrinsically disruptive of the civic and cultural life of nations and their trading and investment partners. Social and political considerations do play a role in the decision mix, but will never replace the primacy of economic variables. Sound and sustainable immigration policies can only flourish if they are born from economic origins rooted in a framework of free and competitive markets within which either monopolies or empires do not last.

The following is a schematic exposition of the major national perspectives and policies on immigration adopted since the formation of the original colonies. Its purpose is to highlight the roles played by economic, social and political forces from the beginning, to the current critical cross-roads we face.

Although specific immigration policies may on occasion spring from humanitarian and other social concerns, to be sustainable the overall policy must be grounded on objective economic rationale. At minimum, immigration must pay its own way in cost-benefit terms but preferably, it should also contribute to the expansion of productivity and the skills base of the host nation, hence shifting its existing production possibility frontier to a higher plane. As with any of the other factors of production, the mix of unencumbered immigrant labor flow and labor quality are also indicators of the compatibility and profitability of the remaining factors in the productive blend, that is, the economic profile and prospects of the receiving national economy.

From the first part of the 17th century until approximately the middle of the 20th century, our immigration flows occurred in response to the needs and position of our markets in regional and global economies; in response to their relative competitiveness and extent of internationalization. Immigrants have represented the "flow of productive resources which links domestic and international markets much like international finance and trade of goods and services linked" (Council of Economic Advisors, 1986). There is no denying that during this period there were at times discriminatory policies that excluded specific nationalities and races, but economic rationale remained the common and ultimate denominator in determining at least the numbers and skills needed. It is also of note the significant role played by Mexicans in the economic expansion and development of our economy from its inception.

Another proof of the relevance of economic forces in the design of immigration policies has been their influence in the original shape of the Republic and the common practice of equating shortages in domestic labor supply with additional supplies of immigrants. One of the justifications given for a strong federal constitution shortly after the nation gained its independence was the creation of a larger common market from the set of the original thirteen states. "Then and now there were three key dimensions through which economic integration functioned, trade, immigration and investment. All three were important in the development of the U.S. as a continental economy and all three continue to be important as the U.S. becomes increasingly integrated into the world economy." (National Commission for Employment Policy, 1988.)

It is easy to observe, once the history of immigration is reviewed from an economic perspective, that our conflict with immigration originates not from our lack of labor absorption capacity, but from our inability to objectively analyze the actual extent of our fundamental need for immigrant workers and from the tendency of politicians to be short sighted and parochial in their decisions. What is amazing is that the entry of undocumented workers has not been larger than it has, especially labor from Mexico, which from both social and economic standpoints has always been an integral part of our economy and society. What has made this labor force "illegal" has been pure political incompetence and negligence in the design and revisions of our immigration policies, now collapsing after over 40 years of neglect. Moreover, the ongoing delay, due to political wrangling, in finalizing an economically viable Immigration Act is costing the country unaffordable losses of jobs, investments, both from domestic and international sources, and international reputation.

On a related topic, the de-Americanization of the nation, which has been blamed on illegal immigrants, does not have anything to do with them. Our pernicious de-Americanization originates from three major forces evolving from long before the dysfunctional 1965 Act and the influx of "illegals." First, our historical immoral acts such as slavery and the discrimination against blacks, the oppression of women and the robbing of Indian lands, all which contributed to the civil rights revolution of the early 1960s, began the disuniting trend exemplified by the now popular hyphenated Americans, e.g. African-Americans, Asian-Americans and Hispanic-Americans. Second, the popular hippie culture, also started during the early 1960s, questioned the very validity of the conservative nature of our culture in the 1950s. The second factor with help from the first, lead many segments of our society to doubt even the moral right of our nation to exist. Third, support-pandering politicians, reinforced instead of opposed the above splits. These are the real culprits behind the de-Americanization of the nation. Immigrants on the other hand, by the nature of their predicament, need and want to belong. If, when they arrive what they find is a splintered nation, what are they to do, remain in limbo? No, they naturally and normally end up joining one of the many "domestic tribes" at hand recruiting them.



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