2006-2007 Essay Contest

Second Place Essay - Advanced Economics

A Dream Come True

Lavanya Srinivasan
Edina High School
Edina, Minnesota


Many immigrants pursue the "American Dream," a steadfast belief in the United States opportunities for freedom, prosperity, and happiness. In turn, the success of the American economy is contingent upon these immigrants’ participation. Each year, 1.5 million immigrants enter the United States, and currently, the foreign-born population within the continental U.S. is over 33 million people.1 With these massive numbers come profound questions as to the net benefit of immigration. In reality, immigrants equalize job distribution, influence the success of national fiscal objectives, and provide the United States with plentiful opportunities for expansion overseas.

David Ricardo, an eminent British economist, introduced the concept of comparative advantage in his Principles of Political Economy and Taxation. He believed that regardless of a country's ability to efficiently produce a set of goods, optimal gains result when the nation manufactures a single product that it is best at and trades with another nation for a different commodity.2 The premise behind Ricardo's Law is that relative ease supersedes absolute advantage; thus, a nation should only produce when it is at a lower-cost advantage than its trading partner.

Extending Ricardo's principle domestically to labor and services yields an interesting conclusion: that the balance between immigrants and natives boosts the American economy. Pia Orrenius, a senior economist at the Federal Reserve Bank of Dallas,3 writes that in the 1990s, "geographic dispersion of immigrants started to take hold." Immigrants began filling much-needed positions in the labor market, such as meatpacking in the Midwest. By doing so, they accounted for over 90 percent of employment growth. An additional factor in immigrant specialization is their relatively lower level of education in comparison to natives. According to the study "Immigrants and Labor Force Trends," 29 percent of immigrants do not graduate from high school, in comparison to only 14 percent of natives.4 While skeptics of immigration might argue that immigrants' proliferation around the blue-collar market hinders the United States, in reality, it fulfills Ricardo's principle of optimization. Orrenius' research indicates that because immigrants are almost seven times as likely to be employed as operators, fabricators, and laborers, the natives exit those industries to pursue administrative and executive professions. By allowing immigrants to participate in the United States' economy, we foster a healthy job distribution throughout the country. This in turn leads to job specialization, as each individual fits a niche within the economy. By the principle of comparative advantage, as each party is acting under its lowest opportunity cost, economic efficiency is being maximized.

The deregulated state of the American economy also brings success in several fiscal objectives. One major goal of the government is the reduction of unemployment. Contrary to popular belief, an influx of immigrants does not automatically decrease the employment rate. In fact, it can be quite the opposite: immigrants can boost the GDP and create more jobs. An increase in the working population logically implies an even larger increase in the number of consumers nationwide. Bob Dolibois, a director of the Small Business Legislative Council,5 notes that "Not only do immigrants consume the same resources as your typical American, but they also come at a lower cost." Dolibois explains that an average immigrant enters the country in his mid-twenties. While the government has not funded for this able-bodied worker for over twenty years, it reaps the benefit from his participation, both as a worker and as a consumer. Thus, the marginal benefit of each immigrant far outweighs the minimal cost. Empirically, we see that while California houses 24 percent of the United States’ foreign population, its unemployment rate is actually the lowest nationwide.6

Immigrants also aid the government in garnering funds for appropriation. Simply put, they pay their proportionate share of taxes. The nonpartisan Urban Institute studied Washington, D.C., and concluded that while immigrants account for 17.4 percent of the population, they pay 17.7 percent of the aggregate taxes.7 The American Immigration Law Foundation8 explicates that while illegal immigrants do pay a lower proportion of taxes, the revenue acquired from all foreign-born members of the population not only offsets that sunken cost but also gives the government excess funds.

Finally, no discussion about immigration is complete without an analysis of foreign opportunity. Dr. Vaduvur Bharghavan, a former professor at the University of Illinois, explains,9 "Repatriation is one of the most, significant contributions that an immigrant can make to the United States. As an entrepreneur myself, when I realized that [my company] Meru Networks had a future, I was quick to start branches in [my native country of] India. That is now my newest project." Dr. Bharghavan is not alone. A study by Daniel Griswold of the Cato Institute10 indicates that because most immigrants still feel ties to their homeland, they are more willing to form overseas enterprises to link their native country to their assimilated culture. An estimated 19.5 billion dollars of American revenue now comes from repatriation in India and China alone. The result is bountiful opportunities for the United States to improve its foreign ties and boost its exports.

Immigration brings a plethora of domestic and foreign advantages. It is more than a small group's pursuit of the "American Dream"; it is now every American's dream as well.

Endnotes/Bibliography

1. "Current Numbers." 2005. Center for Immigration Studies. 4 Mar. 2007.

2. "David Ricardo." The New Webster's International Encyclopedia. 1996.

3. Orrenius, Pia. "U.S. Immigration and Economic Growth: Putting Policy on Hold." Southwest Economy, Federal Reserve Bank of Dallas. Nov/Dec 2003. 4 Mar. 2007.

4. Lowell, B. Lindsay, Julia Gelatt, and Jeanne Batalova. "Immigrants and the Labor Force Trends: The Future, Past, and Present." July 2006. Migration Policy Institute. 4 Mar. 2007.

5. Dolibois, Bob. "Immigrants=Producers and Consumers." GrowerTalks, Oct. 1, 2006. 4 Mar. 2007.

6. Streitfield, David. "Illegal—but Essential." L.A. Times, Oct. 1, 2006. 4 Mar. 2007.

7. Brulliard, Karin. "Study: Immigrants Pay Tax Share." Washington Post, Jun. 5, 2006. 4 Mar. 2007.

8. "Immigrants Pay Their Fair Share." 2002. American Immigration Law Foundation. 4 Mar. 2007.

9. Bharghavan, Vaduvur. Personal Interview. 2 Feb. 2007.

10. Griswold, Daniel. "Immigrants Have Enriched American Culture and Enhanced Our Influence in the World." Feb. 18, 2002. Cato Institute. 4 Mar. 2007.

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