The economics of immigration

Abstract

A larger population results in a larger economy. A greater number of people generate more demand for goods and services and provide an increase in the number of workers available to meet that demand. Since immigration has contributed a major part of Australia’s population growth over the two centuries since European settlement, it follows that it has also contributed substantially to creating the Australian economy as it is today. A summary measure of the economy is gross domestic product (GDP). Australia’s GDP at the end of the 20th Century is approaching $600billion. Migrants and the children of migrants have provided almost 60 percent of post-war growth in the Australian workforce. Without migration it is likely that the economy might have been as small as one half of its current size, a much reduced presence in the world economy. Of course while GDP is relevant, and is seen by many as a measure of the contribution of migration to ‘development’, there is much more that is of interest in the linkage even from immigration to the economy, let alone to broader issues. In the long-run a crucial question is whether immigration also increases per capita income and not just aggregate national income. There is also the question of how income growth is distributed, including between existing residents and newcomers, and effects on broader social considerations, including demographic ageing. In the shorter-term there are basic economic issues such as the implications of immigration for unemployment, training, public outlays, the balance of payments, wages and inflation. There are also some interesting questions concerning the linkages from the economy to immigration itself, both through the motivation for migration and through the influence the economy has on government and its migration policies. These are the issues that are looked at in this article.