Immigration policy musings based on an Australian study

The Australian Department of Immigration and Citizenship has recently published an update to their yearly analysis of the fiscal impact of immigrants in various categories.

The study's findings are quite simple. Immigrants in Australia generally pay for themselves. Parents of immigrant children and humanitarian immigrants do have net costs to the system. Parents are generally older and not working, and refugees must make considerable use of social services to establish themselves. Over a sufficiently long period, though, humanitarian immigrants will contribute more in taxes than they cost the system. In Australia, that period is 12 years.

At present, Canadian, European Union and Australian immigration policies are weighted more to skilled immigrants and business immigrants. The former have bachelors degrees or higher, or technical skills, and are admitted to work for local employers, the latter have business experience and are admitted to start businesses. The study finds that skilled immigrants in Australia make the largest positive revenue contribution out of all the categories.

Canada has long admitted large numbers of skilled immigrants, and I've heard anecdotal evidence that many of them are having trouble fully integrating into the economy and finding jobs that are actually at their skill level. If this is a significant trend, then skilled Canadian immigrants may not make as large a fiscal contribution as in Australia. However, it's likely that in the US and Europe, skilled immigrants are making large fiscal contributions.

In contrast, US immigration policy is weighted towards family reunification and humanitarian immigration.

Last year, our Aussie friends admitted 158,960 total immigrants, including the petitioners and their dependents. One person petitions for a visa for themselves, and may also petition for dependents.

Just over 40,000 petitioners were skilled immigrants. Another 6,725 were "employer sponsored". 1,700 were business immigrants. About 42,000 were family immigrants (parents and spouses), 3,200 were humanitarian immigrants, and 64,000 were the dependents of all the above petitioners.

In contrast, in 1995, the US admitted 720,000 immigrants total, and 10% were skilled. I haven't yet found more recent data, but the trend should be similar.

Sen. Robert Gutierrez of the US recently stalled a bill that would have increased the cap on the number of H-1B visas, which are used to admit skilled workers. He said, "I think we should give the high-tech industry the innovators they need. But what do lawmakers tell foreign workers who labor on farms and apply pesticides -- that "you're not really smart?"" He also called farm workers "just as critical and relevant to the innovation of that industry" as tech workers are to IT innovation. And he urged the committee to take a "holistic approach" to immigration so that the most vulnerable "are not stigmatized by actions of the Congress." One of the liberal arguments against the 2007 comprehensive immigration reform bill was that it seemed to place skilled immigration above family immigration in the points system.

In contrast, George Borjas, a conservative Republican descended from Cuban refugees, argues that the US should admit far fewer unskilled and humanitarian immigrants, and many more skilled immigrants. He argues that the former come in with far lower skills than immigrants of the past, and that they consume a disproportionate share of social services. He claims that in 1965, changes to immigration policy (I'm not sure what changes exactly) favored unskilled immigrants, especially Mexicans, who had a harder time integrating.

There may be flaws in Borjas' analysis. I haven't looked in detail at his arguments, and besides, my specialty is health policy, not immigration. However, Borjas is correct to point out that we need to fully account for the costs of immigration.

The United States should take some policy pointers from this study. The US shares a border with Mexico, and in the past has obtained land from Mexico by conquest. Many Mexicans have family in the US, and are entitled to family reunification. The US continues to admit humanitarian immigrants, and should continue to do so.

In 2006, 500 economists signed an open letter to President Bush published by the Independent Institute, arguing that economies are flexible enough to create enough jobs for any reasonable number of immigrant entrants, that the effects of wage depression on low wage American workers caused by immigrants are small, and that the net effect accounting for lower consumer prices is positive. Additionally, admitting an increased number of skilled immigrants would further offset whatever costs are incurred from humanitarian and low skilled immigrants.