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How Immigrants Benefit The Host Economy

September 25th, 2019

How immigrants benefit the host economy

An oft-debated topic in host countries is immigration. The term refers to the movement of people from their homeland to a host country. People leave home in search of a better life for themselves as well as for their families back home. As integral components for global development, migrants not just further the host country’s economic prosperity but also promote technological growth.

Today, developing countries are home to more than one-third of the immigrants in the world. The International Organization for Migration recorded the number to be around 285 million in 2017 alone. While immigration benefits those moving abroad, it also offers advantages to the host country. Take the economy, for example: while immigrants send money home in the form of remittances, they spend it locally on housing, food, healthcare and leisure activities.

Read also: Migration Stories: How Communities from Different Regions Flourished in India

Let us look at some other economic benefits of immigration and how these contribute to the overall growth of the local economy.

Expanding the labour market

Many people move overseas to improve their career prospects. Thanks to an effect known as the ‘immigration surplus,’ they boost the host country’s economy at the same time. How well immigrants blend into the host country’s labour force is directly proportional to their economic contribution to the growth of the nation.

By expanding the workforce, immigrants increase the level of output, which is one of the main drivers of economic growth. As immigrants are not bound to a particular part of the host country, they are free to move and take up jobs wherever the need is greatest.

By facilitating legal entry into the country, host nations can reap benefits from the economic growth of immigration. Once a host country has identified the actual reason for an immigrant’s shift, authorities can make positive changes in the system to expand the supply chain. These immigrants also send money home in the form of inward remittances, which in turn stabilizes the economic scenario of their home country.

Another way immigrants help is by rebalancing demographics. For example, if a country has an aging population, it needs younger people to join the workforce and support the economy as the older generation retires. An example: in the 1950s, when the birth rate in the US fell from 3.5 per woman to 1.93, a healthy influx of immigrants balanced out the demographics for the aging population. An average immigrant (age 31) was younger than a native-born American (age 36). These immigrants worked to sustain the economy, paid taxes, and mitigated the problem of the imbalanced demographic chart.

Introducing new skills

Why are migrants beneficial for the host country? As of 2017, 3.4% of the world’s population comprises immigrants. In some cases, immigrants bring with them skills that may be missing from the local economy. This powers innovation, which is a crucial driver of growth. According to UN reports, Asia hosted the largest number of international migrants in 2017 (80 million), followed by Europe (78 million) and Northern America (58 million)

According to research published by the National Foundation for American Policy in 2016, more than half of US startups valued at $1 billion and above were founded by at least one immigrant. What’s more, immigrants are essential members of management and product teams at 70% of these startups, filling positions like CTO or VP of Engineering. Immigrants partly founded some of the biggest companies in the tech industry. According to the World Bank, the richest countries in the world are those that have the power to provide a hospitable environment for immigrants. Indeed, 25 of the wealthiest and most developed countries in the world have recorded an average of 22.5 % immigrant-born population. While the US has 12.8%, Hong Kong has 42.6%, and Switzerland has 22.9%.

A remittance economy is funded by immigrants who send money home and make sacrifices to secure a better future for themselves and their families. ‘Skilled migrants,’ as they are popularly known, contribute to the host economy through inward remittances. They also bring additional abilities to boost innovation and research. Studies show that 30 million of these immigrants are highly educated individuals that harmonize skill levels in their host countries.

Making a significant impact

Here’s a question that is often debated: is immigration a net benefit to the host country? To put the positive contribution of immigrants into perspective, let us refer to the US as a case study. According to a report by the National Academy of Sciences called The Economic and Fiscal Consequences of Immigration, immigrants contributed $2 trillion to the US economy in 2016.

While all nations follow a sovereign method to manage immigration, the benefits of migration for a host country are most apparent when employing a mix of measures that are both productive and legal to contribute to the growth of the country. Encouraging regional mobility will reduce skill gaps and provide broader development goals for destination countries.

The topic of why migrants are beneficial for the receiving country is an essential discussion that both developed and developing nations need to have. A healthy influx of immigrants will positively impact inward remittances – and thereby, the economic growth of the host country – and contribute to its overall GDP.