The economics of immigration

When people talk about immigration and the economy, the conversation often focuses on one question: Do immigrants take jobs from native-born workers?

It’s a reasonable question. More workers can mean more competition. But the economics of immigration is much more complex—and in many ways, more positive—than that.

Let’s start with the basics. When immigrants enter the labor force, they may compete with some existing workers. They may also make existing workers more productive, but I’ll leave that discussion for another time. What I want to highlight today is that immigrants also do two other things: they produce goods and services, and they consume them.

First, let’s talk about the importance of recognizing immigrant production. Suppose immigrants are willing to work for lower wages or are more productive in certain jobs. That can reduce the cost of things like food, childcare, and elder care—sectors where immigrant labor plays a big role.

Cheaper food benefits all consumers. More affordable childcare makes it easier for parents to work. Lower-cost elder care helps families with aging relatives, and in some cases also leaves them with more time to work. These cost savings ripple through the economy.

Second, immigrants don’t just produce—they also consume. They rent housing, buy groceries, go to restaurants, use public transportation, and see doctors. That means more demand for goods and services, which supports businesses and can create more jobs. So while immigration increases the supply of labor, it also increases the demand for it.

This is one reason why some studies find that immigration has little to no negative effect on average wages—and in some cases, may even raise them.

It’s also worth noting that immigration tends to increase innovation. Many immigrants start businesses, contribute to scientific research, and file patents at higher rates than native-born citizens. That boosts productivity and long-term growth, benefiting a large number of people.

Of course, some natives lose from immigration on net. Immigrants with similar skills to native workers may compete directly in certain labor markets, potentially putting downward pressure on wages, at least in the short run.

Economists generally agree that the overall economic impact of immigration is positive. And the benefits are spread across society while the costs may be more concentrated in certain sectors. That’s why many economists support using some of the gains from immigration to compensate those who are harmed by it, whether that’s through targeted job training, direct compensation, or other policies.

To sum it up, from an economic perspective, immigration brings both benefits and costs. It lowers prices in key sectors, increases overall demand, and contributes to growth and innovation. While some native workers may face more competition, the broader economy tends to benefit on net.