Question

how might the output and the income gains from shown by the simple nmigration model be affect by a) employment the original nation

Answer 1

Immigration increases labor resources, which increase the productive capacity of the economy. Currently, foreign-born workers make up 16.3 percent of the labor force (see the chart). Stated differently, the increase in labor resources increases the economy's ability to produce goods and services. But how does immigration affect the average American? Once the costs and benefits are weighed, economists estimate the annual economic gains to the native-born population to be between 0.1 and 0.3 percent of gross domestic product, which might not seem like a sizable gain but is significant when extended over a lifetime. Some of these benefits take the form of lower labor costs for employers, lower prices for consumers, and increased employment opportunities for some workers. However, while the economy in general might be better off, there are negative externalities, or cases in which third parties are negatively affected. In the case of immigration, the concerns about negative effects are usually expressed by native-born workers and taxpayers. These concerns are explained below.

Immigrant Workers: Substitutes or Complements?

One of the most important distinctions between workers is their skill level: Some workers are more skilled than others. This is true of both native-born and immigrant workers. But in addition to having skills that differentiate immigrant workers from each other, the skills of immigrant workers also differ from those of the native-born labor force. Immigrant workers are overrepresented at the extremes of the skills spectrum—there are many at the low-skilled end of the spectrum and many at the high-skilled end. On the low-skilled end, 27 percent of foreign-born workers in 2013 had less than a high school diploma compared with 7 percent of the native-born population. At the high-skilled end, about 40 percent of U.S. PhDs and engineers are foreign born.

Immigrant workers can either be substitutes for native-born workers or complements to them. When immigrant workers are substitutes for native-born workers, they compete for similar jobs. Using a simple supply and demand model, an influx of substitutable workers constitutes an increase in the supply of labor, causing wages to fall for workers with similar skills. Because many immigrants are low-skilled workers, economic studies have found that an influx of immigrants depresses wages for low-skilled native-born workers in the short run. And because many immigrants are also high-skilled, a similar substitution effect occurs for some high-skilled workers.

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