Immigration restrictions make us poorer

Arguments both for and against open immigration often take place in ignorance of the economics of immigration. It’s important to recognise that immigration has enormous benefits to indigenous populations as well as immigrants. (Full disclosure: I am an immigrant from the Republic of Ireland, but I’ve contributed a lot more in taxes than I’ve used in services.) As Bryan Caplan has argued, immigrants allow a greater division of labour in a country, effectively bypassing trade barriers, and drive per capita production upwards. Technological advancement and the entry of women into the labour force have displaced workers and created frictional unemployment, but created large long-term increases to per capita income. The same is true of immigrants. Any argument that immigrants create unemployment uses the same fallacious logic that open trade makes us poorer.

This argument is sometimes countered by the claim that immigrants will simply become net drains on the welfare state. Even if this evidence pointed in the other direction, it would be an argument against the perverse consequences of the welfare state rather than against immigration. But it is simply not borne out by empirical evidence, which (in the UK) suggests that immigrants have a higher labour force participation rate than the indigenous population and a lower per capita utilization of public services. A 2007 Home Office report (PDF) found that immigrants’ net contribution – that is, taxes paid minus the cost of services used – is equivalent to one percent off the basic tax rate. Immigrants are subsidizing indigenous welfare users. (See also this 2002 study with similar conclusions.)


To those concerned about ”brain drain”, immigrants send huge amounts of money home in the form of remittances. The development economist William Easterly says that remittances are a great way of relieving poverty in poor countries, because they pervert incentives less than NGO aid and don’t carry the same risks of corruption that bilateral aid does. The only long-term solution to developing world poverty is free trade and good governance in those countries, but open borders are a good step too. Does, say, Vietnam really benefit from its most talented people being wasted in rice fields? I would say no – better to unlock those talents in Western economies and let some of the benefits flow to that person’s family back home.

Yes, there are other issues associated with immigration, like the preservation of indigenous culture. As a libertarian, I don’t believe that it’s the state’s role to try to influence or protect culture, but I accept that many do and arguments about economics won’t do much to persuade these people. There is also a worry that liberal democracy would be less viable in a country made up of people with little attachment to liberty. Again, this is a separate argument to the one made above, and one that should be considered on its own merits, which I won’t go into here.

Economics may not be the whole story, but it’s not insignificant either. The immigration cap that the government wants to bring in is a case in point – if the government wants to argue that reducing immigrant numbers is worth making Britain marginally poorer I’d disagree, but it’s not a ridiculous argument. But right now, they’re not doing that. I want to see them making the argument honestly, on those terms, not based on voodoo economics that claims that Britain will get richer out of protectionism and reduced specialization of labour. We won’t, and we’re kidding ourselves if we think that immigration restrictions will make us rich.

This entry was posted in Ekonomi and tagged , . Bookmark the permalink.

4 Responses to Immigration restrictions make us poorer

  1. Anders says:

    First of all well written text and appologies for my poor English skills.
    However i wanted too express my views on your text.
    Your anectotal claim that you as and Immigrant from ireland have contributed more with your taxes then you have used carries no value to this debate. Its fallacious logic to use one example for justify a certain immigration politics as a whole. Its no different from saying: A immigrant raped and murdered 20 people and cost 2 million in tax money therefor we should not have immigrants! Would that be evidence to restrict immigration?
    Second of all you are mixing apples and oranges by saying that brilliant people in Vietnam are used in rice fields. Not many politicians are opposing that these people could contribute a great deal in other countries, the debate today however is focused on the immigrants that DO NOT contribute. I too am for immigration but not the way its being done now. I´m not to familiar with the studies being conducted in the U.K but i am familiar with more then a handfull of published studies in Sweden that contradict the thesis that immigration as a whole is a net profit for Sweden. (if you like I´ll happily give you the references).
    I´ll end my comment with a question too you.
    Is it not intellectually dishonest to say that skilled workers are being waisted in rice fields when the debate has never been about these people, but instead about the people that do not contribute? Simply labeling all incoming people as ”immigrants” and the picking the success stories does very little too answer questions about immigration politics in my eyes.
    Best wishes Anders from Sweden

    • Sam says:

      Hi Anders,

      Thanks for your comment and for taking the time to read my piece. To answer your questions: That point was not meant as an argument. I was simply trying to point out that I was not engaged in rent-seeking by arguing for open borders.

      My point is that, as I’m sure you would agree, we have no way of distinguishing between the brilliant people and the less brilliant people when they are both working in subsistence agriculture. The only cost that immigration can impose on countries is to drain the welfare state. Empirically this has not been an issue in the UK but even if it were, it would be an argument to reform the welfare state, not to restrict immigration.

      • Anders says:

        Dear Sam,
        Thank you for your answer. As you surely would agree we have a very different view of the world. We have ways of distingishing between the brilliant and harmfull people. Unfortunetly these ways include errors and i am guessing you do not accept that normal people are caught in these margins. But NOT to recognize ANY differences among immigrants is for me unacceptale. Let me give you an example. A few years back a study (unpublished) concluded that almost half of the rapes in sweden are conducted by a certain immigration group while the only make upp for a few procent of the total population. THAT FOR ME IS UNACCEPTABLE. I could never look the victims in the eyes and say that this is a neccesary evil. Sweden now has one of the highest rape/capita in the world. So do i belive we should restrict immigration from these groups? No, but rapeist/murderers fleeing the justice in their home countries can not be allowed to roam free either. What i am trying to say is that these questions are double edged knife, and claiming that one policy is optimal is for me not regarding the whole truth.
        About your second argument that the welfare state should be reformed. I am not sure i understand what you mean, the reforms you must be talking about are so large that the state would be reformed beyond recognision. There are billions of people living in poverty, by opening borders to all of them the amount of help we could offer each one would be so insignificant that it would not matter. If i have 100.000 euro i can feed probably 1000 children in africa, but only 1 if he is migrated here. I dont know how the situation is in the UK, but in Sweden a lonely migrated child costs about 1-2 million swedish crowns a year. Selecting 3000 of these and letting 300.000 others starve is for me not a act of compassion. But of short-term thinking, and releaving your own personal stress by helping a selected while neglecting that others die. It is proof that you are neglecting the whole issue disregarding big majority. Second of all there are currently large unemployment numbers in Europe, ”baiting” people here with their preceptions of better lives and then leading them into a life in welfare and unemployment is for me no answer to question of open/closed borders. In my eyes there are no easy solutions too these questions whatever we do some people are going to suffer. I belive we should search how LEAST people suffer and this is not done by letting our emotions guide us in specific individual cases. No matter how bad we feel about some decisions we must not forget the full picture…Best wishes from Sweden

  2. Anna says:

    We all know what ”…reform the welfare state…” means. And I think the Swedish people should be asked the question if they want so deconstruct the welfare state.
    There is no free lunch, at least not for the indigenous people. We get stuck with the bill.


E-postadressen publiceras inte. Obligatoriska fält är märkta *