How immigration influences global world and economy

Immigration can help economies become more dynamic and efficient, and research shows that inclusive policies create a net benefit, but they are increasingly a politically difficult sell. How are countries and regions around the world handling the challenge?

Voters concerned about immigration helped swing both the Brexit vote and the election of Donald Trump, but the anxiety doesn’t end with Britain and the United States. Workers in many countries are putting pressure on their lawmakers to counter perceived threats from immigration. While there are common drivers of such anxiety, immigration in each nation operates within a very different legal, historical, and sociological context. Global Network Perspectives asked faculty members from schools around the Global Network for Advanced Management to provide local context.

Asian countries face some of the same political challenges around immigration, says Albert Park of the HKUST Business School, “There are a lot of benefits from more immigration in East Asian countries, especially because many of these countries are aging at a very rapid pace, so that they are increasingly facing a scarcity of workers, especially low-skilled younger workers.” He predicts good outcomes from potential regional agreements that would allow for an easier back-and-forth flow of migrants and guest workers, especially if constituents understand the benefits. Tools that lower barriers to movement are also helpful—for example, regional job qualification systems and standardized employment contracts and visa procedures.

Meanwhile, “Switzerland is a remarkable success story,” says Jean-Pierre Lehmann, professor of international political economy at IMD. He points to the numerous corporations, universities, and NGOs based in the country, in part because it is so open. Indeed, he says, “All of this would be absolutely impossible without immigrants,” who occupy every level of those organizations.

Studies have shown that immigration can have a positive effect on a country’s economic growth and productivity, innovation, education, and more.

In July 2019, there were approximately 44.9 million immigrant people in the U.S., making up 13.7% of the nation’s population at the time, according to data from the Census Bureau’s American Community Survey. 

One common misconception is that immigrants take jobs away from native citizens of a country. Studies suggest that while some jobs are taken, the most likely scenario is that jobs are actually created. In a 2020 study, Azoulay et al. posit that immigrants are 80% more likely to become entrepreneurs and create jobs for people in the country. Most immigrants are of working age and they move to a new country to find (or create) jobs, thus having a positive impact on the labor force. An increasing number of immigrants have higher-level degrees, too, which can help increase innovation. Immigrant people make up 18% of the labor force that is 25 years and older; hold 26% of science, technology, engineering, and math (STEM) jobs; and hold 28% of high-quality patents. 

Discussions about the economic effect of immigration are often influenced by larger ethical and political stances around this topic, positions grounded in questions about the kind of world in which people want to live. Many arguments against immigration, for instance, tend to emphasize rates of cultural change or assimilation, while those in favor often point toward the history of immigration and America’s moral promises.

Economically, those in favor of immigration argue that immigrants boost the economy by increasing the labor supply and promoting innovation. Those against argue that immigrants harm low-skilled laborers by taking jobs that American workers would otherwise get or depressing wages for native-born low-skilled workers.

How correct are these contentions? And which other factors contribute to the economic impact of immigration? With immigration continuing to be a serious national concern, it is worth taking the time to look at the data as best as we can assess it.

We find that immigrants in advanced economies increase output and productivityboth in the short and medium term. Specifically, we show that a 1 percentage point increase in the inflow of immigrants relative to total employment increases output by almost 1 percent by the fifth year

According to the Brookings Institution, immigrants are taking an increasingly large role in the American economy, one that is separate from that of native-born workers.

 They tend to work different jobs with different skill levels, for example. They also lower the cost of some labor activities, including child care, food preparation, house cleaning and repair, and construction, and provide more demand for housing cleaning and repair, and construction and provide more demand for housing.

Higher incomes in emerging market and developing economies will reduce migration pressures. But, as already discussed, this is not necessarily the case for poorer countries, like those in sub-Saharan Africa, where rising (though still low) incomes may enable more people to emigrate.

Other pressures (explored as alternative scenarios) will also impact migration. For instance, climate change is expected to lead to a significant increase in internal and regional migration in emerging market and developing economies. At the same time, our findings suggest that its impact on migration toward advanced economies is less clear-cut, given that lower incomes in many poorer countries may “trap” more individuals in their region of origin.