Sutch describes immigration’s effects on residents’ lives

Richard Sutch, professor of economics and director of the Center for Social and Economic Policy at the University of California, Riverside, offered an economic analysis supporting immigration in Griffin Hall last Tuesday.

Sutch said that several years ago, while reevaluating national immigration policy, Congress asked the National Academy of Sciences to review what was known about the economic consequences of immigration. Sutch and his wife, Susan Carter, were hired for this project because they had done no prior work in the field and thus had no pre-conceived biases.

After explaining that immigration comprises 36 percent of the current population growth, Sutch focused on how and on whom the effects of immigration ought to be measured. Since immigrants come voluntarily and can leave if they wish, Sutch said that it is accepted practice to assume that immigration benefits immigrants:

“All students here are really happy that they have chosen to come to Williams,” he said. “If they got here and they weren’t happy, they would have already left.”

After establishing that it is “more useful to talk about the effects of immigration on the residents,” he focused on five main arguments regarding immigration.

“The first one is capital dilution,” Sutch said. As most immigrants come to the country with the ability to work but with little to no money, the ratio of capital to labor goes down. Conventional wisdom interprets this effect by assuming that since each laborer has less capital with which to work, productivity and therefore wages go down.

But because the ratio of capital to labor decreases, the ratio of labor to capital increases. This means, Sutch said, that each individual unit of capital becomes more productive: “With more labor, output rises. The immigrants only get a share of the increase, so residents as a group must be gaining.”

After discussing capital dilution, Sutch turned his attention to the increased pressure on the land that many feel immigration causes. Beginning with a parallel example, Sutch noted, “the bison were driven to near extinction at a time, in a place, with very few people. . .It wasn’t a population question; it was the fact that property rights were so ill-defined as to allow that.”

“Population growth is everywhere and universally associated with improving environmental conditions,” he said. Emissions of lead into the air in the United States, for example, have decreased as the population has risen. “One reason for that, of course, is that as the economy grows, we get richer and are able to afford cleaner technologies.”

Even nonrenewable resources benefit from increased population. While it might be intuitive that with more people the demand for and thus the price of oil would rise, Sutch said that with a greater population, it’s easier to find new deposits of oil and other similar resources. He cited statistics showing the increase in the country’s oil reserves that is proportional to population growth.

Moving on from the environment, Sutch next described what he called the “labor force participation of immigrants.” Since a greater percentage of immigrants than residents join the labor force, the working percentage of the country increases. This causes an increase in per capita output.

Sutch also suggested that having more tax-paying young workers may extend the solvency of Social Security. “Even illegal immigrants pay the payroll tax,” he said.

Sutch’s fourth argument focused on issues of capital formation. Because immigrants come relatively young, they arrive during their peak saving years. “They’re young workers, and like all young workers, they have an incentive to save for their future, be it old-age retirement, to send their kids to Williams College, or to buy a house for themselves,” he said.

This saving, Sutch said, translates into investments that help fuel the national economy.

Sutch also discussed issues of human capital and described immigration as a form of “getting stuff for free.” Because even a poor and relatively uneducated immigrant has been raised to adulthood, some sum of money has been invested in him. When this immigrant comes to America, he brings the value of the money that has been invested in raising him. From an economic standpoint, immigration is therefore more desirable to natural population growth:

“Let’s imagine that an immigrant is coming from Mexico who is not very well educated by American standards,” Sutch said. “Nevertheless, this person is coming as a fully grown adult, with all of the physical and intellectual vigor of an adult. . .And even though we consider his education to be pretty low-level, it’s still education that has value in the marketplace.”

Sutch’s final argument focused on the increase in demand for goods that comes with immigration. Because immigrants are also consumers (and buy goods from American merchants), they help drive the U.S. economy. But since this effect often takes years to manifest itself, lawmakers focused on the immediate future often ignore it.

In the end, Sutch conceded that economic issues are not the only factors shaping immigration policy. Content to leave sociological questions for sociologists, he said, “Those issues aside, the economic benefits of immigration clearly outweigh the economic costs.”