America has always had a complicated relationship with immigration. There are supporters who praise immigration for providing ethnic diversity and economic stimulus. Others condemn immigration for taxing the country’s public services and being a drag on the economy. Sukkoo Kim, associate professor of economics at WUSTL, says the truth lies somewhere in between.
The conflict, in economic terms, is whether immigrants are substitutes for or complements to native U.S. workers. If immigrant workers are substitutes, then their presence lowers wages and, from a native citizen’s perspective, hurts the economy; but if they are complementary, then immigrants help strengthen the economy.
Kim has determined that immigrants have a long-term beneficial impact on the economy, an opinion that differs from many of his colleagues. An economic historian, Kim studied the economic effects of immigration’s peak during the late-1800s to early-1900s.
“My argument is that immigrants might have had a fundamental impact on the U.S. technologically. With the big surge of immigrants during that time period American firms began to shift production much more intensively into factories that utilize division of labor and unskilled workers,” Kim says. “With the increase in unskilled workers, it made sense for American industry to shift production processes.”
The shift gave rise to large factories and what is often called the “second industrial revolution.”
“Immigration had a strong impact on the transformation of American technology and fundamentally changed how American cities developed. It ended up having a positive economic impact on the United States,” Kim says.
Kim says there are some parallels between that historical period and today’s immigrant situation.
“Today’s situation is a bit more complex because the advent of computers has increased the demand for skilled workers,” he says. “Still, we can see some evidence of the impact that immigrants may have, especially in major cities like Boston or L.A., where there has been a shift toward the use of unskilled labor to make labor-intensive products.”
Kim says he doubts we will see a technological shift as big as in the last century, because the number of immigrants coming to the U.S. isn’t as large, and today’s economy is service-oriented rather than manufacturing-based, as it was 100 years ago. Nonetheless, he says, the history of immigration in the United States is proof of the country’s ability to soak up new people and ideas, which has a positive economic impact in the long run.
“The source of the great absorptive capacity of the American economy lies in its ability to develop and implement new technologies,” Kim says. “As a result, the country is adept at altering its use of resources and creating new economic and geographic landscapes.”
Kim has presented his research paper to the Federal Reserve Banks in St. Louis and Philadelphia, as well as numerous academic conferences including the Regional Science Association meeting in Toronto, the University of California-Irvine and the American Agricultural Economic Association meeting.
Editor’s note: Professor Kim is available for live or taped interviews using WUSTL’s free VYVX or ISDN lines. Please contact Shula Neuman at (314) 935-5202 for assistance.