The Economics of Immigration

A shortage
[Fig. 1](http://i.imgur.com/6zT5s3y.jpg)

This is the economic definition of a shortage. There is a shortage of people willing to work a low skill low paying job. The argument is that Europe needs immigration to close this gap. This is not the whole truth.
Market equilibrium is when buyers and sellers agree on a price at which to trade. In the labour context the workers are the suppliers of labour and firms are the consumers (demand). Equilibrium is the intersection of (S)Supply and (D)Demand on the graph.

How a market returns to equilibrium.

Option 1 Raise the price at which trade is conducted

[Fig 2.](http://i.imgur.com/Q0T8xR8.jpg)

If a company pays a higher price more workers will be willing to work covering the shortage of labour. If you for example offered a million euros per hour you could get a line of people from Calais to Krakow willing to work any menial job.

Option 2 Shift the supply curve (immigration)

[Fig 3.](http://i.imgur.com/u3a6eaW.jpg)

If you import more supply you can push out the supply curve forcing the equilibrium price of labour down. This is the path taken by europe.

Option 3 Shift the demand curve inwards

[Fig 4.](http://i.imgur.com/CIcdn6C.jpg)

Automation or gulags will significantly reduce demand for labour shifting the demand curve inwards and keeping prices low.

Argument 1 Pensions

Option 1 Don't pay low skill foreign workers pensions a la Saudi Arabia.

Pros: The labour shortage is filled and europe doesn't have to pay their pensions when they retire.

Cons: Keeping a semi slave population is rather unethical.

Option 2 Pay low skill foreign workers pensions when they retire a la european socialism.

Pros: Ethical

Cons: Who will pay these immigrants pensions? It just delays the problem and makes it bigger for the next generation, a ticking timebomb. The low wage workers certainly won't be paying much into the pension system but will get as much out as everyone else. Unless you tax all of their money it simply isn't feasable.

Argument 2 GDP

The argument is that immigration is necessary for real GDP growth which is true, however it lowers GDP per capita which is the most important factor in determining the standard of living for the people. India has a much higher GDP than Luxembourg but Luxembourg has a much higher GDP per capita and standard of living.

Summary

Immigration is basically a subsidy for businesses. The business doesn't have to pay the external cost given to the taxpayer of having to support the foreign worker, healthcare, welfare, etc. In economics there are winners and losers, here the winners are companies and immigrants and the losers are the population of the country.

EconofImmigration