Immigration is surging, with big economic consequences

From the Economist, with some good comparative stats:

…There is one context in which averages matter: the provision of public services. If gdp per person falls, their quality might deteriorate. For this reason, Milton Friedman once remarked that “you cannot simultaneously have free immigration and a welfare state”. The state is under pressure in much of the rich world. Roads are congested and in countries with public health care, hospital waiting lists are long. “Those are not externalities, those are direct effects of new market participants affecting supply and demand,” says Mikal Skuterud of the University of Waterloo.

The crucial question is whether new arrivals on net contribute to or drain from the public coffers. High-skilled types make enormous net fiscal contributions. But for low-skilled workers the question is harder to answer. In immigrants’ favour is the fact that, because they typically arrive as adults, they do not require public schooling, which is expensive. And they may even prop up public services directly. The largest increase in British work-visa issuance last year, of 157%, was for desperately needed health and care workers.

Potential trouble comes later. Immigrants age and retire. Social-security systems are often progressive, redistributing from rich to poor. Thus a low-earning migrant who claims a government pension—not to mention uses government-provided health care—could end up as a fiscal drag overall. They are most likely to have a positive lifetime effect on the public purse if they leave before they get old.

Quite how this shakes out depends on the country and immigrants in question. A review by America’s National Academies of Sciences, Engineering and Medicine in 2016 estimated that the 75-year fiscal impact of an immigrant with less than a high-school education, at all levels of government and excluding public goods like national defence, was a negative $115,000 in 2012 dollars. By contrast, a study by Oxford Economics in 2018 found that in Britain about one-third of migrants had left the country ten years after arrival, although it did not distinguish them by skill level.

If the fiscal impact is positive, it will not be felt unless the government invests accordingly. A windfall is no good if public services are allowed to deteriorate anyway, as in Britain, where the government is cutting taxes ahead of an election. Similarly, if regulations stop infrastructure from expanding to accommodate arrivals, migration risks provoking a backlash. Nowhere is this more obvious than in the case of housing, where supply is strictly curtailed by excessive regulation in many of the same places now experiencing a migration surge. Migrants, like natives, need places to live, which increases the imperative to build. Welcoming new arrivals means a lot more than just letting them in. 

Source: Immigration is surging, with big economic consequences