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Immigrants can be a force for economic growth, study shows

Research on the labor market impact of Puerto Rican migrants in Orlando finds a positive aggregate impact on local economy

Two Category 5 storms, Hurricanes Irma and Maria, made landfall on Puerto Rico in Sept. 2017—only two weeks apart. These storms caused massive property damage and killed nearly 3,000 on the island, which prompted over 120,000 Puerto Ricans to migrate to the mainland U.S., with most settling in Orlando, Fla. A study from UC Davis economists Giovanni Peri, Justin Wiltshire and Derek Rury examines the effects of a sudden inflow of Puerto Rican migrants on the labor market in Orlando. 

Puerto Rican migration to the mainland U.S. had been low during the first half of the 20th century, but began to rise during the later half, forming communities in New York City, Philadelphia, Chicago and parts of Florida. The migrants who arrive in the U.S. are American citizens, so they have immediate access to the labor market and also arrive with fairly similar levels of education as the mainland U.S. workers. 

Following Hurricanes Irma and Maria, the relocation of Puerto Rican migrants to the mainland presented a unique case study, mainly because their departure was due to an unexpected event and had little to do with the conditions in the local economy. Wiltshire, a Ph.D. candidate in economics and co-author of the study, explains how this sudden addition to the labor force, or “supply shock,” could be used to research the impacts of immigration in a new light, such as focusing on the demand-side of immigration. 

“It’s important to remember that, even in the period just after they arrive, migrants buy things like clothes and gas and meals at restaurants—especially if they’re working and have income,” Wiltshire said. “That’s how we understand how economies work: people go to work to earn money so they can buy things, and this creates job opportunities at the businesses where they buy those things, which in turn might affect similar workers at other local businesses.”

The researchers used data from the U.S. Census Bureau, specifically the Quarterly Census of Employment and Wages (QCEW) and Quarterly Workforce Indicators (QWI), which provide coverage and breakdown of employment and earnings. They found that with the arrival of immigrants in Orlando, employment increased, especially in the construction and retail sector, and that there were positive labor market effects in the aggregate for non-Hispanic and less-educated workers. 

When the researchers analyzed the impact on wages a year after the migration, they found a negative impact within the construction sector, but an increase in retail earnings for native workers and less-educated workers. In this case, the researchers found a small negative wage impact in sectors most exposed to the supply shock, such as construction, which is then offset by the positive wage effects in sectors that experience a positive consumer shock. 

Peri, a professor in economics at UC Davis, the director of the Global Migration Center at UC Davis and a co-author of the study, describes how the conclusions drawn about immigrants and their economic impacts are more nuanced than some assume.

“Immigration effects in the local economy are not as simple as some people say, […] they are much more complex, and much broader,” Peri said. “We find that they increase the local demand for goods and services and this actually increases jobs.”

The researchers found that, in Orlando, employment and the local economy grew after the migrants arrived, supplying new information to the constant American debate over immigration. Santiago Perez, an assistant professor of economics at UC Davis, explains how on various occasions, researchers have found that people might not have the correct idea about the facts and impact of immigration. 

“People are not very well-informed about immigration. Even [with] very basic facts such as, ‘What is the fraction of immigrants in the U.S. population?’” Perez said. 

This paper helps to bring forth evidence-based claims on the positive and negative effects of immigration, which, according to Peri, are more relevant than ever. Because climate change and other global issues are rearranging our human landscape, immigration patterns are likely going to remain a important policy discussion in the coming years. If weather events like Hurricanes Irma and Maria are projected to occur with a greater frequency, which likely means an increase in migrations, Peri noted that there is a need to gain a clearer, facts-based understanding of how immigration affects the country.

“We wanted to see how the US can respond to the type of migration flows that could become more common in the future because of climate change and climate migration,” Peri said. “And again, I think the message there is that one should be ready, but not be scared by the inflow of immigrants. They can actually bring positive impacts as long as people are organized and expect them.”

Although this paper in and of itself isn’t a conclusive analysis of the impacts of immigration, it certainly offers more credence to a body of research finding that immigration doesn’t harm native workers, at least not in the aggregate. With immigration numbers falling this year due to COVID-19 and from an otherwise stricter immigration policy due to the current administration, Wilshire noted that there is a need to study and understand how immigration impacts nations as well as local communities. 

“Immigration [not only] creates great opportunities for the migrants themselves, but for the local community in particular, and we need to understand how they work economically in order to make the best out of that, and this study was a little piece in understanding this,” Peri said. “I hope we continue to provide this type of research, and going forward this will become very relevant as the world opens up back again after the COVID closure.”
Written by: Simran Kalkat — science@theaggie.org

This article was updated on Dec. 9, 2020.


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