US Economy with Mexican Immigrants - Essay Example

? US Economy and Mexican Immigrants Summary This paper discusses the role of Mexican immigrants in the economy of United States. The study identifies that the immigration process has adversely affected the economic stability of the country in several ways. The native unskilled workers are compelled to compete with Mexican immigrants. The adverse effects include notable increase in unemployment rate and unscientific wage structure. Introduction The US economy is the world’s largest national economy. It is estimated that the country’s nominal GDP was nearly $14.7 trillion in 2010 and this figure constitutes almost a quarter of global nominal GDP. A high level of output per capita is another prominent feature of the US economy. The US economy normally maintains a stable GDP growth rate and a low unemployment rate. Approximately 30% of the world’s millionaire population resides in the United States. Over the last decade, Mexican immigration to the United States has increased considerably. In contrast, as compared to non-Mexicans, Mexican immigrants get citizenship and employment in the United States at a slower rate. Many hold the view that Mexican migration to the United States has adversely affected the working conditions of lower-skilled workers who had already resided in the country. Immigration history Borjas reflects that the number of legal immigrants permitted in the United States increased notably from 2.5 million in 1950s to 9.1 million in the 1990s during the past few decades; and at the same time, there was also a considerable increase in the volume of illegal immigrant population in the United States (2). The Immigration Reform and Control Act (IRCA) 1986 was a milestone in the US immigration history as it granted amnesty to roughly three million illegal immigrants present in the nation. According to Borjas, the size of illegal immigrant population in the United States rose to 5 million by 1996 and eventually to 10.3 million by 2004 despite higher levels of border enforcement (2). The marked increase in the size of immigrant population over the past few decades can be directly attributed to the US immigration policy changes. Mexican population also played a crucial role in raising the size of the immigrant population in the United States. Studies show that there was an average of 30,000 legal Mexican immigrants migrated to US each year during 1950s and this figure represented 12 percent of the immigration flow. In the beginning of 1990s, the average number of legal Mexicans immigrants to the United States increased to 225,000; this population size constituted 25 percent of US immigration flow. The illegal Mexican immigrants in the United States also largely increased during this period. In 2004, the population of Mexican-born persons illegally residing in the United States constituted 57 percent of the total illegal population in US that time. In addition, data indicated that around 400,000 Mexican immigrants (both legal and illegal) entered the United States each year during the 1990s (Borjas, 2007,). Policy changes According to Borjas, Mexican immigrant workers dominated agriculture and many nonagricultural sectors in the United States. Approximately, immigrant workers from Mexico constituted 3.5 percent of US labor force. A study conducted by the National Agricultural Worker Survey (NAWS) reflects that 77 percent of the US farmworkers were Mexican-born during the period 1997-1998 (Borjas, 269). This situation affected the United States since the increased immigration from Mexico threatened the livelihood of US native workers. Hence, in order to prevent the increased immigration flow from Mexico, the US government brought certain immigration policy changes. Mainly, US government passed the Immigration Reform and Control Act of 1986 (IRCA) in order to regulate the growing size of illegal immigrants to the country especially from Mexico. As per the provisions of the Act, the government would legalize the illegal immigration before 1st January 1982 and offer amnesty for the illegal immigrants who had worked at least 90 days in agriculture sector in the year preceding May 1986 (“Immigration reform”). The IRCA banned the employers from hiring undocumented immigrants; hence, misbehavior from the part of employers would result in penalties for non-compliance. However, this Act could not bring a notable change in the number of illegal immigrants entering the United States. The US government also introduced the H2A Temporary Foreign Worker Program in order to control illegal migration. In total, governmental policy changes to immigration did not bear considerable effects on the scenario. Economic impacts of Mexican immigration US employers tend to hire Mexican workers as they are available at cheaper wages. Employers used the resulted savings to offer price benefits to the customers. The increased profitability by employing Mexican workers persuaded employers to hire illegal immigrants as well. However, the increasing number of Mexican immigration to the United States has been raising new threats to the US economy. However, as a result of reduction in wages for unskilled Mexican immigrants, organizations can lower prices for goods and services. At the same, it is also identified that uneducated native born workers are in direct competition with Mexican immigrants (“Impact of “). Hence, the increased level of Mexican immigration to the United States raises threats to the employment of native born workers to some extent. The 2007 study results show that Mexico reflects a GINI coefficient of 46.1 while United State’s GINI coefficient is 40.8 (Haas and Vezzoli, 2010). A lower GINI coefficient represents more equal distribution whereas a higher GINI coefficient reflects more unequal distribution. It seems that the GINI coefficient of US is not satisfactory even though the country maintains a higher economic growth rate. The bad income distribution level of the United States can be attributed to the increasing Mexican immigration to the country. According to Bureau of Labor Statistics, the wage declines between 1980 and 1990 in US’ major cities were attributable to increased immigration from Mexico (qtd in Martin, 1982). Undoubtedly, the Mexican immigration greatly impacted the wage structure of the United States. Since the Mexican immigrant workers were closer substitutes to native high school graduates, the Mexican immigrants largely affected the relative wages of natives having high school diploma. Similarly, a research done by RAND on California found that the state faced difficult challenges in 1980s when immigration threatened employment opportunities for unskilled natives. Different researches show that poorest ten percent of the American workforce was severely affected by Mexican immigration. However, these migrants also produced job opportunities through their own demand for goods and services; hence, it would be difficult to assess their net employment and wage effects. It has been identified that majority of Mexican migrants earn comparatively lower wages. Naturally, they pay lower income taxes as compared to average income tax rates in United States. At the same time, Mexican families that reside in US are larger in size and hence they consume more public education services than they pay in taxes. This situation forces the government to discover extra financial sources so as to meet public service needs. In addition, the school-aged immigrant children often need special facilities for bilingual education. Finally, Mexican workers do not adequately contribute to the overall US economy despite their large population size. ‘Center for Immigration Studies’ reports that Mexican immigrants constituted US’ 3.7 percent of fulltime workforce and 0.4 percent of part time workforce in 2010. Even though, the Mexican workers represented 3.3 percent of the US’ total workforce, their total earnings accounted for only 1.91 percent of total wages paid to workers in the US because of their poor skill levels. Similarly, Mexican immigrants impose extra burden on the US economy even though they account for only a very small share of GDP (“Impact of “). Total wages paid to Mexican immigrant workers as a share of total labor costs (Source: “Impact of “) From the table, it is clear that Mexican immigrants accounted for 14 percent of wages and benefits paid in fishing, agriculture, and forest sector. However, it seems that the Mexican immigrants account for a very small percent of labor costs in most other sectors of the economy. Out of total wages and other benefits paid, Mexican immigrants earned 5.2%, 4.7%, 2.8%, and 5.4% respectively in manufacturing, construction, retail, and personal services. Personal services include maids, butlers, and hotel service. The table shows that Mexican workers do not contribute notably to any industry that requires certain levels of operational efficiency. Likewise, it is evident that an increased rate of immigration would cause inequality in the distribution of income and wealth. Lorenz curve and Roy model 1 and 2 clearly illustrates this inverse relationship between immigration and national distribution of income. However, Lorenz curve is more useful to explain the impacts of immigration on equality in income distribution. As Arnold points out, the area between the line of perfect equality and the obtained Lorenz curve is the GINI coefficient (276). Conclusion In total, the increased level of Mexican immigration has adversely affected the US economy in numerous ways. The unskilled Mexican immigrants threatened the employment of US native unskilled workers since the Mexican immigrant workers were willing to work at cheaper costs. The availability of increased number of Mexican immigrants caused wage decline in the country, which in turn affected the 10 percent poorest workers across the United States. Although, Mexican immigrants represent a huge portion of US population, they do not effectively contribute to the national economic growth since they involve in unskilled workforce. The US government has enacted a number of regulations in order to prevent illegal immigration from Mexico; however, those policies have not yet brought positive changes because US employers are still willing to hire illegal Mexican immigrants. Works Cited Arnold, Roger A. Microeconomics: Concise Edition. USA: Thomson South-Western, 2007. Print. Borjas, George J. Mexican Immigration to the United States. USA: The University of Chicago Press, 2007. Print. Haas, Hein De & Vezzoli, Simona. “Migration and development: Lessons from the Mexico-US and Morocco-EU experiences.” International Migration Institute. (2010): 1-32. Web. 23 July 2011, “Impact of Mexican immigration on wages and prices in the United States.” Center for Immigration Studies. (n.d). Web. 23 July 2011, “Immigration reform and control act of 1986 (IRCA).” U.S. Citizenship and Immigration Services. (n.d). Web. 23 July 2011, Martin, Philip L. “Select commission suggests changes in immigration policy: A review essay”. Monthly Labor Review: Immigration Commission. (February 1982): 31-37. Web. 23 July 2011, Read More