goods which can then lead to productivity gains. This prevents overcrowding in workplaces as immigrants or other workers are demanded so the capital investment can be operated. An example of increased productivity due to the arrival of immigrants can be seen in the US as productivity was much higher after the immigration boom (Galadan, 2015). Productivity gains across the whole of an economy can increase its underlying trend rate of growth and increase its real national output. Growth in such a manner is sustainable and thus good macroeconomic performance can be achieved. Furthermore, due to the inflow of immigrants leading to downwards pressures on wages, the total supply of goods and services across an economy can increase as all firms can pay lower wages and supply goods at a lower price. This decreases the rate of inflation and real national output increases. Although lower wages may seem detrimental for an economy, by assuming that returns increase with scale, firms can pass on their lower costs to consumers, meaning that firms sell goods at a lower price. This means that although nominal wages will fall, real wages may increase as households may be able to buy more with their lower wages. In addition to a possible rise in real wages, firms could pass their lower costs onto foreign markets where they sell their exports. If exports are cheaper, then they are more competitive with other countries goods and more desirable for other countries. This would reduce a balance of trade deficit, and shows good macroeconomic performance.
(Diagrams above show the impact of immigration on the labour market and decrease in wages on an economy.)
Furthermore, immigrants come from all over the world from different cultures and have different specialities. These different specialities may be in particular demand in different economies. For example, in the UK, cuisines from many countries are often desired and the foreign restaurant industry wouldn’t exist without immigration. This is an example of how immigrants can fill skill gaps within an economy. By filling skill gaps in industries, new industries can arise within a country and open up more opportunities for jobs. By reducing unemployment in such a way, an economy can operate at full employment, illustrating good macroeconomic performance. Furthermore, immigrants will be more willing to move location to accept jobs as they will not yet have many ties to a specific location. Natives will have commitments such as family and friends in certain areas, so are geographically immobile. Since factor immobility can lead to both market failure and available jobs with no workers to fill them, immigrants prevent this as they are more willing to move places to accept jobs, due to their lack of commitments in the new country (Galadan, 2015). Lastly, foreign born workers make up a large part of the home services sector. This industry is mainly made up of foreign workers. This ranges from childcare to cleaning and gardening. As more immigrants come in, the price of the childcare service will
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