Immigration is another form of wealth redistribution, according to Harvard University economist George Borjas.
Instead of government’s traditional approach to funnel money to lower income households, however, immigration causes wealth to be redistributed from the existing workforce — residents competing with new immigrants — to employers that hire those new immigrants, Borjas argued Wednesday before the Senate Subcommittee on Immigration and the National Interest.
“If we look at the impact of immigration over the last few decades in the U.S., one rough rule of thumb that comes out is that when you increase supply of workers in a particular group by around 10 percent, the wage of that group will go down by three percent, which is not a trivial number but it’s not a huge number either,” he said.
According to Borjas, that impact transcends cities and skill groups over the past fifty years.
“The fact is that the groups that receive the most immigrants will tend to do slightly worse off after that by around three percent for every ten percent increase in supply,” he said.
The Harvard economist explained that the net gain annually from this trend is about $50 billion.
“And one of the lessons from that model that’s actually very difficult to manipulate the model in a way that would make that number much bigger,” he said. “So, we have a fifty billion dollar gain on net that accrues to natives and a huge redistribution [of wealth] from the people who compete with immigrants, to the people who use immigrants of around half a trillion dollars a year. And that’s what the laws of supply and demand tend to imply.”