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There is debate on the e ects of immigration of wages. Answer the following using demand...

There is debate on the e ects of immigration of wages. Answer the following using demand and supply graphs.

a) Show how an increase in immigration can decrease wages.

b) Show how an increase in immigration can increase wag

Solutions

Expert Solution

a) An increase in immigration will result in an increase in labour supply in the economy since now there are more people who are part of the labour force and actively looking for jobs. As a result, the supply curve for labour will shift outwards, resulting in a fall in wage rates for all labour.

[This is also because any labour can now easily be replaced with another and hence he has no bargaining power].

b) An immigration of more people can also lead to an increase in wages if seen from the demand perspective. If more people enter the economy, there will be a higher demand for goods and services. In order to produce this demand, more people will be hired. Thus, the demand curve will shift rightwards and will result in an increase in wages.

[ It will also be the case when we assume that the people who immigrate to the new country are not job-seeking but entrepreneurs (say)].

Rahul Sunny answered 1 year ago
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