Theeffect of immigration on public financesImmigrationis one of the biggest problems that the most of the developed countries shouldconfront in their economies, and it has been a major problem for politicalparties in Europe and USA, which over years have had different agenda aboutdiscussing this problem. Illegal immigration is defined as a movement of peoplefrom origin country to destination country, without having legal documents andviolating destination countries immigration laws. The main reasons thatstimulate people to immigrate are wars and economic problems.
But how doesimmigration affect public finances in the receiving countries? This is aquestion that we cannot give an answer so easily. There are a lot of debatesbetween researchers if their effect is positive or negative. (Storesletten, 2003) in his study makes apresent value calculation for immigrants in host countries. For immigrants thatare between 20 and 30 the model predicts large possible gains from immigration,about 23,430 dollars and for immigrants older than 50 the net cost is 128,857dollars per immigrant. On average the net government loss per new immigrant is20,500 dollars. According to (S.Fetzer, 2016)immigration imposed a burden on each family in 1996 on each family about 1,178dollars.
Although in long run the effect that immigrants give in publicfinances is positive. (Preston, 2013)creates a model for a country with the assumption that has no immigrants andthen compares it with a country with immigrants. His main conclusions is thatthe effect of immigration on public finances depend by the selection pressuresof immigrant composition, nature of tax and spending rules and the stage of thebusiness cycle at which effects are assessed. (Hansen, Schultz-Nielsen, & Tranaes, 2015) in their study aboutthe effect of immigration on Denmark conclude that western immigrants have apositive impact on economy while non-western immigrants have a negative fiscalimpact. Immigrants can generate costs through costliness of provisions andconsumption of public services.In myopinion immigrants give a positive effect in the receiving country.
The effectthat they have depends on immigrant`s age structure and labor market situation.They can fill vacant positions in labor market. Here I can mention Germany thatis suffering by this problem and the rate of population with young age isgetting lower. Host countries, in this case Germany may have great interest byreceiving immigrants if they improve their abilities to work and offer to themtrainings for their professions. Today Japan is facing an economic anddemographic crisis. They have been an unfriendly country for immigrants and thebirth rate is getting lower. That’s why they have the oldest population in theworld. But I should notice that immigrants could work with lower salaries thannatives.
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This is good for the companies because they minimize their costs butit’s bad for the native workers because they should reduce their pretend forsalaries, or the company will prefer to take an immigrant as employee. AlthoughI can say that the most of the immigrants fit in with the culture andregulations of receiving countries.I canmention the case of Luxembourg, where the composition on the population is 48%immigrants and 52% natives. Luxembourg has about 100 years that hostsimmigrants, first Italians, which came here as workers and then Portuguese, andpeople from Balkan countries.
Knowing that today Luxembourg is one of the mostdeveloped countries in Europe can said that in long run this effect has beenpositive.(Nadadur, 2009) points out benefits on immigration. Accordingto him, immigrants pay taxes for the children who are born in the country andmaking them legal would impact positively on countries economic growth andbecause of this reason. (J.Borjas, 1994) observing the waythat immigrants affect public finances in the United States notices that thebenefits from them are from 6-20 billion dollars for a year. And he predictsthat these gains would be increased considerably if the government applies animmigration policy which will be attracted for high skilled immigrants.Imagine a scenario where you are surrounded by hundreds of people ofall ethnicities, cultures and genders that pass by you. You don`t know them butyou just see that they are different from you.
Therefore you cannot assume thatthey will play a significant role in society or that their role will be bad.They are just normal people trying to get from point A to B. FranklinD. Roosevelt in one of his conferences has said ‘Remember, remember always,that all of us are descended from immigrants and revolutionist”. Immigrantsdidn’t come to steal native people’s job. They are just looking for a betterlife where all should be allowed to live in harmony.
