Immigration: Trade by Other Means?

By Steven A. Camarota on April 1, 1998

pp. 9-10 in Immigration Review no. 31, Spring 1998

Immigration is often compared with international trade. In fact, the similarities between the two have led some to conclude that they are roughly equivalent. However, while they are alike in many ways, there are also a number of important differences that are often overlooked by immigration enthusiasts. Because these differences are at least as important as the similarities, both should be considered when formulating a sensible immigration policy.


The most obvious similarity is that both trade and immigration alter the supply of labor and change the mix of skills in the economy. With trade, the product of foreign labor comes to the United States in the form of goods. In the case of immigration, the laborers themselves come to the United States. Whether the workers come or only the goods they have produced, the supply of some kinds of labor relative to others is increased. When we import finished goods, for example, we are importing both the unskilled labor that went into assembling the product as well as the skilled labor that went into designing it. To the extent that immigrants possess skills that are different from those of natives, they too will alter the mix of labor in the economy.

While workers who tend to be in competition with imports or immigrants will suffer wage and employment losses, these losses should generate economic benefits for owners of capital, consumers, and other workers who can now be paid more. The primary benefit from changes in the supply of labor is that they allow workers in the receiving country to specialize in areas in which they do relatively well, leaving those tasks they do less well to immigrants and imports — the concept of comparative advantage. Since workers are doing what they do best, there should be some overall economic gain from immigration. Some natives, however, will suffer economically — primarily those in low- and unskilled jobs, because this is where immigrants are concentrated.

Immigration and trade also make it possible for the receiving nation to consume products that it might not otherwise have access to. Just as trade allows us to enjoy Russian caviar, for example, immigration allows us to eat at authentic Chinese restaurants.


While those who advocate high immigration tend to emphasize the similarities between trade and immigration, there are also a number of important differences between the two that should not be overlooked. First, immigration, unlike trade, alters the supply of labor permanently, not just in the year that a product is imported. With trade, a society can quickly alter the mix of labor it consumes to suit its changing tastes and needs. By importing workers, however, some of this flexibility is lost. This could become a significant problem if, for example, a receiving nation that has admitted large numbers of unskilled immigrants finds that, because of technological change, its modern economy no longer requires such workers.

The long-term impacts of immigration are not confined to the lifetime of the immigrant. Even after the original immigrant dies, his or her children remain and continue to have an impact on the receiving society. Trade, on the other hand, does not affect the labor market for generations to come once an imported good is consumed, it no longer has an impact on the receiving society.

Immigration also increases the supply of labor across a broader range of occupations than does trade. For example, natives can avoid competition with imports simply by finding employment in nontraded goods, such as retail or government service. Because immigrants can hold jobs in all sectors of the economy, however, their impact is more widespread.

Recent immigration has also skewed the labor supply much more than trade has. Harvard economist George Borjas has found that, because current immigrants are so much less skilled than natives, immigration has increased the supply of high school dropouts by 21 percent, compared to only 4 percent (implicitly) for trade. For the lowest-skilled, poorest workers, therefore, immigration has a much more harmful effect than does trade.

In addition to the direct effect on the economy, there are other significant differences between importing goods and importing people. One of the most important is that immigrants consume public services. By coming to the United States, an immigrant becomes eligible for public services that would not be provided if he or she had stayed at home. For example, if a low-wage agricultural worker who heads a large family picks vegetables in his home country, we can have access to the product of his labor simply by importing the produce. If he comes here and does the same work, however, he and his family will have access to taxpayer-provided public services. And his low income makes it very unlikely that he will pay enough in taxes to cover his consumption of these services.

A study by the National Research Council (see Immigration Review No. 30) found that during the course of his or her lifetime, the average immigrant without a high school degree will use $89,000 more in public services than he or she pays in taxes. For an immigrant with only a high school degree, the corresponding figure is $31,000. As these figures suggest, public service consumption means that large-scale migration of low-skilled immigrants has the potential to harm native-born workers in a way that importing products made by low-skilled workers will not.

Finally, the most important distinction between immigration and trade is that immigrants are human beings with rights and are entitled to be treated in accordance with certain principles. An immigrant, unlike an imported plastic toy, cannot simply be discarded when he or she wears out.

As human beings, immigrants also have a profound influence on the cultural, political, and demographic situation in the receiving country. For example, projections of the size of the U.S. population in 50 years indicate that, barring a change in policy, immigration is likely to add an additional 80 million people to the U.S. population (see Leon Bouvier's article on page 1 of this issue). Trade, on the other hand, does not alter the size or makeup of the population. While these considerations are outside the scope of economics, they have wide-ranging implications, which make immigration very different from importing inanimate objects.

Many advocates of high immigration, especially in the business community, see only the benefits from increased access to foreign labor. Unfortunately, this one-dimensional view of immigration has led some to advocate policies that are unlikely to be in the long-term interests of the country as a whole. If we are to have a beneficial immigration policy, we need to better understand immigration's effects. Proceeding from the assumption that immigration is only "trade by other means" is clearly inadequate.