Why immigration is so important for economies

  • person with luggage at airport
Published on 2021-11-08 at 10:00 by Ester Rodrigues
Developing countries host more than one-third of international migrants in the world. Most of them are migrant workers and are employed either formally or more often informally in their countries of destination. But, let's address some misconceptions about immigrants and expats critically: immigration and expatriation are good for countries, communities, and economies. 

Recently, we have seen several efforts, especially in the USA, Europe and in the UK, to cut legal immigration, which diminish expatriation – particularly amid the unprecedented coronavirus pandemic – which kept families and couples separated, hurt public health, and damaged crucial recovery efforts for the economy. Immigration helps drive business creation, fuel innovation, fill essential workforce needs, and strengthen the economy by adding additional value. 

According to the OCDE report from 2018, immigrants enhance their contribution in different contexts through appropriate policy responses. The report highlights the fact that the impact of immigration is not straightforward. It depends on the country context and economic conditions, as well as on the characteristics of these immigrants. However, based on this study, any country can maximize the positive impact of immigration by adopting coherent policies aimed to better manage and integrate immigrants so that they can legally invest in and contribute to the economy where they work and live while staying safe. Therefore, countries, rather than avoiding immigrants, should include them, and both will be benefited. 

A selfish perspective 

Le Pen. Farage. Salvini. Orbán. Kurz. Bolsonaro. Far-right xenophobia is in vogue across the globe, but the rejection of immigrants come from other governments indirectly as well. In the UK with the Brexit and in France with Macron's statements, to give simple examples. The fear, or rather hatred, of immigrants and foreigners is shaping political landscapes. Nations that were considered stones of liberal democracy are showing another face. 

The misconceptions usually suggest that when immigrants move to a nation, they compete for employment with locals, depressing their wages or in a racist point of view, they are not from the same ethnic and race as the locals, “threatening their existence” as if they are the only ones that “exist”. Likewise, with stereotypes of terrorism, many associate migration with higher hate crime rates. These and other points against immigration tend to trigger a populist backlash. 

The “justifications” for rejecting immigrants work as a purely selfish national perspective. The reduction of immigration would be detrimental to the economy, and to society as miscegenation helps to open the natives' minds to the existent diversity, by recognizing, learning and exchanging with the difference. It is a question, for governments, of increasing tolerance to the population, but it certainly depends on focusing on recognizing the roots of this social insecurity and prejudice. Moreover, this implies understanding and diminishing their effects whilst allowing migrants to keep enriching society and, in some cases, also finding a safe place to live. 

Economic effects of labour immigration in developing countries

It is important to understand why the misconceptions about immigration are not true and limit developing countries to further their development. On the report of OCDE, immigrants affect not only a country's economic prosperity, but also the well-being of the native-born population as they play a diverse set of economical, social and cultural roles. As workers, immigrants are part and have an impact on the labour market, increasing the income. Students contribute to diffusing and exchanging knowledge. Entrepreneurs and investors create job opportunities, promote innovation and technological change. Immigrants as consumers contribute to increasing the demand for domestic – and foreign – goods and services, and as taxpayers, they contribute to the public budget and benefit from public services.

Through these different roles, immigrants can help stimulate economic growth in their countries of destination and thus promote development. Immigrants also contribute to the social and cultural diversity of the communities in which they live. 

Although labour market outcomes may differ depending on the group and personal characteristics of the immigrants, they are generally workers, who are more often employed and earn lower wages than native-born workers, according to OCDE. Besides, still based on the report, immigration has a limited impact on the labour market outcomes of native-born workers, which means the relationship between the share of immigrant workers and employment of the native-born workers is generally negligible in the partner countries.

Dismantling the myth, immigrants are not a drain on the economy and reducing immigration would not make the economy stronger. For instance, as the US economy starts to reopen, individuals who create jobs are absolutely critical to recovery. They added $2 trillion to the US GDP in 2016 and $458.7 billion to state, local, and federal taxes in 2018. 


Expatriation is connected with immigration, and sometimes it also depends on it, as many expats from not emergent or poor countries might find issues and extra regulations when trying to move abroad. Another report from OCDE, from 2004, analyses the number of immigrants and expats and their roles in the countries that belong to the group. The study shows that international migration is quite selective towards highly skilled migrants, which means that the number of immigrants with higher education exceeds the number of highly qualified expatriates to other OECD countries. Therefore there are not as many European expats as immigrants. 

Whereas in non-member countries, the impact of the international mobility of the highly skilled is diverse: the largest developing countries seem not to be significantly affected. On the contrary, they may benefit from indirect effects associated with this mobility while some of the smallest countries, especially in the Caribbean and in Africa, face significant “emigration rates” of their social and educational elites. So, instead of reproducing misconceptions and stereotypes about immigrants, governments should pay attention to OCDE and adequate their policies in order to better integrate immigrants, and by doing so, get the economic and social benefits for their countries. Also, exchanging life with different people might help some extremists get out of their bubble, and, who knows, they might be interested in seeing a map and, being very optimistic, even move abroad.