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Unskilled immigrants generate few benefits for the economy

31 August 2005

Immigration policy pits the interests of native skilled workers against those of unskilled workers, the 2005 World Congress of the Econometric Society, which is hosted by UCL, will hear today.

A paper to be presented by Dr Michael Ben-Gad of the University of Haifa, Israel has shown that unskilled immigrants lower incomes of unskilled native workers but raise incomes for skilled workers. Conversely, skilled immigrants lower the income of skilled natives but benefit unskilled workers.

But, skilled immigrant workers still benefit the country because though they lower wages they raise substantially the income natives can receive from the capital they own.

The findings are the result of a unique study that analysed the effect of decade-long changes to the base rate of immigration in the US. Instead of only looking at looking at one aspect of the economy, such as the labour market, Dr Ben-Gad also considered the impact on the economy as a whole.

Dr Ben-Gad has calculated, for the average household, the benefit of admitting a skilled immigrant worker is over ten times higher than the admission of an unskilled immigrant worker.

“In most countries of the developed world immigration is the dominant source of population growth,” says Dr Ben-Gad.

“The combination of low birth rates and increasing life span means governments will be faced with a stark choice: admit more working-age immigrants or cope with the economic consequences of a declining pool of work-age citizens. However, if the immigrants are largely unskilled, rather than alleviating these problems, they may exacerbate them.

“This paper is not meant to be an anti-immigration manifesto - the unskilled immigrants themselves are not to blame for the smaller contribution they make. They may work very hard, but the skills they bring do not raise the return for native-owned capital by more than a trivial amount. Furthermore, they lower wages for the unskilled and increase inequality. But of course this is not their intention - they merely want a better life for themselves and their children.”

“The paper has a strong policy element, but also a positive prediction - that governments will intuit these differences and increasingly adjust their immigration policies to reflect them. Already we see the UK, Australia and Canada adopting points systems, and the US the H1-B visa program while tightening regulations on asylum seekers and illegal immigration.”

Dr Michael Ben-Gad will present his paper, ‘Capital-skill complementarity and the immigration surplus’ on Saturday 20 August at 14.15 BST.

For further information, please contact:

Judith H Moore
UCL Media Relations Manager
Tel: +44 (0)20 7679 7678
Mobile : +44 (0) 77 333 075 96
Email: Judith.moore@ucl.ac.uk

Notes to editors:

About the World Congress of the Econometrics Society

The Econometric Society is the leading international learned society in the field of economics, and its quinquennial world congress is recognised as the most prestigious in economics. UCL is hosting the ninth Econometric Society World Congress from 18-24 August 2005, which is the first time the Congress has been held in London and has not been hosted by a UK institute for 35 years. A full copy of the programme can be accessed on the 2005 Econometric Society World Congress website: http://www.eswc2005.com/

About the UCL Department of Economics

The Chair of Political Economy at UCL was created in 1828 establishing the first Department of Economics in England . The modern department has an outstanding international reputation in key areas of current research including applied theory, microeconometrics, game theory, labour economics, development economics, macroeconomics, industrial economics and environmental economics. It is one of only four economics departments in the UK to achieve the 'double 5*' rating in the two most recent (2001) national Research Assessment Exercises (RAE).