Question

What happens to domestic wages when immigration increases? What are the economic arguments for more stringent restrictions on immigration? What does evidence from the Mariel boaflift tell us? How does immigration affect the standard of living of immigrant households? What changes in economic policy might be beneficial? How does immigration affect domestic GDP?

Answer 1

Solution

Immigration is the process in which people move to a country from a foreign country to live permanently.For example,people from developing countries like India immigrate to developed countries lie the United States of America.

When immigration increases,the domestic wages reduce.This is beause the supply of labour increases and also the immigrants are ready to work for the wages which are far below the existing wages in the country.The immigrants are ready to work for any wages provided they are better than the ones in thier homeland.

Economic arguments for more stringent restrictions on immigration

Allowing immigration on a smaller /controlled scale is good for any country since they can get high skilled / taented labour at a cheaper price from the other countries.But uncontrolled immigration causes a lot of problems to the countries which allow it.So stringent restrictions should be imposed on immigration.If there are no restrictions on immigration:

1.The average domestic wages would reduce repidly.The immigrants would continue to work but the national will not be willing to work at the lower wages.So unemployment among the country's nationals will increase.

2.The government would need to spend a lot of money for the unemployed in the form of subsidies and / or providing unemployment benefits

3.Even though the immigrants prosper,they would be conservative in spending when compared with the native nationals.So,the national spending reduces i.e.,aggregate demand reduces.Another reason for the national demand to reduce would be due to unemployment of natives.This situation if it becomes extreme,would lead to production to shrink which ultimately leads to unemployement.

GDP may boost real GDP of the country.Real GDP growth is the nominal GDP growth adjusted to inflation.Immigration helps to keep the price rise in control i.e., inflation in control.

Note:Please provide more information on Mariel boaflift i.e.,what is mariel boaflift so that I can answer this question also.

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