A Battle in the Background: Immigration’s Economic Effects

Posted In: General News

When Wolverine’s claws are out, you likely aren’t thinking about when the Dazzler will show up to help. When Deadpool is throwing a punch, you probably aren’t asking yourself where Cable is. There are some superheroes who have risen to first string notability, while countless others remain in the background.

 
Immigration, like social security and Medicare/Medicaid benefits, continues to be a “third-rail” topic both in Washington and across the country. Despite all the noise about other issues taking up our national attention span, however, immigration is relevant to many arenas, not the least of which is economics.

 
The political right worries about the loss of American jobs to both legal and illegal immigrants, the “burden” they pose from a social services standpoint, and the risk to National Security. The left counters by providing evidence that, without immigrants paying into the entitlement system, benefits will run out at a faster pace with more retirees entering the system. They also cite that immigrants are twice as likely as native-born citizens to start a business and potentially create more jobs for the society as a whole.

 
With rhetoric from the White House that immigration should be slowed, what could some of the effects be on the economy? Without laborers on the lower end of the pay spectrum (held currently by undocumented or less-than-skilled immigrants), businesses would be forced to raise wages in order to attract talent to fill the jobs. Although that may seem positive, the knock-on effects would include higher prices for the goods being produced and could lead to an inflationary environment that might have negative effects on the economy. Some likely effects include inflation pushed by wage increases, higher interest rates, reduced profit growth, and slowed business growth.

 
More troubling could be the exodus of American companies overseas in search of higher skilled workers. Currently, American companies can recruit highly skilled workers (engineering, information technology, biotechnology, etc.) using the H-1B Visa program. This program bypasses the traditional immigration system and allows employers to fill open positions with qualified candidates. If the number of H-1B Visas granted each year were reduced, American companies could be forced to relocate overseas, where it would be easier to attract the talent needed. The loss of tax revenue, as well as the number of American jobs that could be lost, could damage the US economy. Counter-balancing the threat of companies leaving the United States is the just-passed lower corporate tax rate and the administration’s threat to punish companies that leave.

 
Although quantifying the effects of a change in immigration policy is difficult, most researchers tend to agree that fewer immigrants would negatively affect the economy. With such a hotly debated subject, hopefully cooler heads will prevail and a compromise on this issue will allow both sides to reap the societal and economic benefits of immigration to the US. After all, even Superman was an immigrant….

 
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.

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