Question

What is the impact of immigration on the supply of labor in (a) the immigration of originating countries, and (b) their destination country? Is it possible that immigration could leave wage rates in the originating and destination countries unchanged?

Answer 1

(a) In the originating country, emigration means a fall in supply of labor, since workers leave the country and workforce decreases.

(b) In the destination country, immigration means a rise in supply of labor, since more workers enter country and workforce increases.

(c)

In the originating country, fall in labor supply will shift the labor supply curve leftward and increase wage rate. But if demand for labor decreases at the same time, labor demand curve shifts leftward, decreasing the wage rate. So wage rate may remain unchanged if leftward shift in labor demand curve is equal in magnitude to the leftward shift in labor supply curve.

In the host country, rise in labor supply will shift labor supply curve rightward and decrease wage rate. But if demand for labor increases at the same time, labor demand curve shifts rightward, increasing the wage rate. So wage rate may remain unchanged if rightward shift in labor demand curve is equal in magnitude to the rightward shift in labor supply curve.