In this eBook, I will discuss some very common fallacies regarding population and immigration, together with some important neglected points. I will try to do so in a way easy to understand and give some references for more rigorous discussions
When one is in a congested bus with no seat or driving in a congested road, one is likely to think, if the number of people/cars is only half as many, wouldn’t it be much nicer. However, if this were the case, with the same amount of per-capita investment on road/transport, the width of the road would likely be much narrower and the frequency of buses much lower. Travelling would be much slower and less convenient.
When I was an undergraduate student at Nanyang University in Singapore from 1962-5 [when the population of Singapore was only about 1.7 million], there was only a bus leaving the campus every half an hour. If you missed one, you had to wait a long time. Half a century later, from 2013-9 [when Singapore had more than three times the previous population size at over 5.5 million], I was visiting Nanyang Technological University [with a larger campus than Nanyang University, but in the same general location] as a Winsemius Chair Professor in Economics. Earlier on, I once had to catch the 179 bus from the campus to a shopping centre. I saw one 179 bus just having left but another one stopping at the bus stop and I tried to rush there. However, I was too late. I thought I just missed two 179s; I probably had to wait for more than twenty minutes for another one. However, the third 179 came within less than 2 minutes. This is one of the benefits of a larger population size. This is not confined to Singapore. Consider: Is transportation more convenient in sparsely populated towns/villages than in such large cities with high population density like London, Shanghai, or Tokyo?
Also, when offered a similar job with a similar salary, most people prefer one in a big city to one in a small town, despite much higher rental expenses in the former. As reported in February 2016, a medical doctor, Dr. Alan Kenny, in the small town of Tokoroa (less than 14,000 inhabitants) in New Zealand, attempted unsuccessfully for two years to hire an assistant doctor. Despite offering a very attractive (especially in 2016) annual salary of NZ$400,000 (around £190,000), four working days a week, 12 weeks of annual leave and no night or weekend shifts (working out to be more than NZ$300 or £145 per hour), not a single person applied for the job, despite Kenny having contacted four medical job companies. If a larger population is undesirable, why do fewer people want to reside in small towns and the countryside? Let us consider some specific factors that make people think that a larger population (through either immigration or natural births) is bad for the existing people.
I. Some common fallacies on population and immigration
1. A larger population size reduces per-capita resources and hence per-capita incomes
This looks like a compelling reason for making a larger population clearly bad for pre-existing/ indigenous people, at least economically. However, the truth may well be the opposite.
First, despite a reduction in per-capita resources, a larger population may not reduce per-capita incomes. This is so as a larger population may increase the economies of specialization through more division of labour (more on this in Subsection II-2 below); these may offset the lower per-capita resources, even ignoring other benefits of the population discussed below.
Secondly, even if a larger population, including through immigration, serves to lower the per-capita income of a country/city, normal economic effects (not counting factors which may possibly cause disharmony) act to make the indigenous/pre-existing people better off. The basic point is that the lower per-capita income of the larger population applies to the ‘newer’ population, i.e. immigrants or the newly born. If we focus on the per-capita incomes of the people before the population increases, their incomes are actually raised by the expansion in population.
For example, consider a country of six million persons with a per-capita income of $50,000. An increase to eight million persons may reduce the per-capita income to $48,000. However, this may (in fact likely) be consistent with: The two million new people having a lower per-capita income of $40,000 and the indigenous six million people having their per-capita income increased to a higher level of $50,670. The main reason for such a result is that immigrants cannot obtain the assets (ignoring crimes) owned by the indigenous population without paying for them. The existing resources of a country are largely owned by current domestic residents. When new migrants enter the country, the only way they can acquire domestic assets such as houses, land, securities and bank deposits is by paying for them with their hard-earned money (ignoring the very few cases of criminals and those needing net government assistance). Moreover, these transactions are made at prices that are attractive to the existing owners of these assets. The demand (especially for accommodation) by the immigrants pushes up prices of resources (especially land and housing) owned by the indigenous people, making the indigenous people economically better off. [A numerical illustration is in Appendix A.]
2. Immigrants take away jobs fillable by locals and hence increase unemployment
The view that immigration increases unemployment has been thoroughly demolished; Withers & Pope (1985) https://doi.org/10.1111/j.1475-4932.1985.tb02010.x , Simon (1999), Shan, et.al. (1999) https://doi.org/10.1080/026921799101698, Islam & Fausten (2008) https://doi.org/10.1111/j.1475-4932.2008.00485.x, Card (2017) https://digitalcommons.csbsju.edu/clemens_lectures/27 and others have shown convincingly that immigration and higher population growth, at least within limits, neither increase unemployment nor slow the rate of growth in income per head. If anything, the reverse is true. (See also Human Development Report 2009 on the arguments and evidence for the benefits of migration).
The fact that some immigrants come in and take up jobs is very direct and visible. However, this is a very incomplete view. While some migrants take away jobs that would otherwise be available to existing residents, they also help to create jobs in various ways.
First, with the capital migrants bring in and the incomes they generate after migration, migrants add to the demand for goods and services. Second, some migrants are entrepreneurial and set up their own enterprises which provide employment both for new migrants and residents. Third, some migrants provide skills not available among existing residents and hence help to make certain business ventures possible. This helps to create employment opportunities for the existing residents. If immigrants only took away jobs from the local residents without creating other jobs, countries like Australia and the U.S.A. would have more than 90% unemployment.
3. Immigration makes domestic residents worse off by worsening the terms of trade
A more sophisticated argument that immigration makes existing residents worse off relies on the worsening terms of trade (the prices of our exports relative to the prices of our imports) with other countries. However, this result is largely based on the assumption that while immigration increases import demands, it does not increase our opportunities for exports and, hence, decreases our terms of trade. At best, this is a one-sided assumption. At worst, it is in the same boat as the argument that immigration reduces job opportunities for existing people. If such an assumption were realistic, the terms of trade of such countries of large immigration, like America and Australia, would have fallen towards zero in their two centuries of immigration. We may also easily see that immigrants have closer contact with people in their countries of origin and, hence, are able to help export to those areas.
4. Immigration worsens the domestic distribution of income
It is argued above that immigration must increase the average economic welfare of current residents. However, immigration can adversely affect the welfare of certain groups of residents. For example, low-income workers who own little or no assets could be made worse off since such workers might have their wages reduced by competition from immigrant workers without any compensating increase in the rents they receive. Thus, they could be made worse off. This argument, however, is an unconvincing reason for restricting immigration for several reasons:
- Firstly, since virtually any social change creates gainers and losers, it is essential to balance the value of gains against losses. Since immigration produces a net average gain to current residents, average gains, in fact, more than offset average losses. In principle, this means that gainers could compensate losers (by, for example, redistributive income taxes) so every existing resident could be made better off as a result of immigration.
- Secondly, there is no presumption that the redistribution will be unfavourable. Retirees benefiting from higher rentals may have low incomes; their gains from immigration may more than offset the losses of low-income workers, preventing the distribution from getting less equal.
- Thirdly, if migrants with high work skills also enter in significant numbers, low-income wages may not be reduced but may instead be increased. Also, these low-income workers may be made better off through the improved availability of workers with high complementary skills which may improve the ultimate employment prospects of the unskilled. Furthermore, the increased competition in markets for skilled services will decrease the prices of these services, so low-income workers may, for example, pay less for medical or other services.
- Fourthly, it may be argued that, on specific issues, including immigration, efficiency considerations should rule, leaving the overall redistribution of incomes to the general tax-transfer policies. (On this principle of ‘a dollar is a dollar’ or ‘efficiency supremacy in specific issues’, see my piece in OAG in early 2024 on: Welfare Economics: Promoting Equality through General Policies.
- Fifthly, even if immigration into a country increases inequality in the host country, the distribution of income for the world as a whole is typically improved. This is so since most migration tends to originate from countries with lower per-capita incomes to those with higher per-capita incomes.
II. Some neglected benefits of population and immigration
We turn now to discuss some important benefits of having a larger population, including through immigration and natural growth, that are usually ignored.
1. A larger population provides more opportunities for mutual interactions with others for everyone
This is an obvious, important, but largely neglected benefit of the population. If you are Robinson Crusoe before meeting Friday, you have no one to interact with. The more people in a given island/city/ country, the more opportunities for mutual interactions with others are available to each person. These interactions include economic ones like an exchange, (economic) cooperation, and employer-employee relationships. They also include social ones like making friends, mutual help, making love, and even starting new families. Thus, these benefits are very important and wide-ranging.
It may be argued that, for a given island/city/ country, as the area and natural resources are limited, the increase in population will lead to congestion and eventually, the net benefits of having a larger population must be negative. True, the increase in population has limits. However, the limits arise from fewer or even no immigrants wishing to enter (or desired births become so low as to making natural population growth non-positive), as the place has become very congested. If more people still want to come in or more births are desired, the arguments in the previous Section I that a larger population benefits the existing people still apply, as further discussed below.
First, on migration. If person P wishes to migrate from country A to country B, paying for the costs of doing so herself, what is the justification for preventing her from doing so? After arrival in country B, if she buys things from others (rather than stealing or robbing) and lives off her own labour/talents/past savings, as shown in Sub-section I-1 above and Appendix A below, she would make people in country B better off, by having an additional person to interact with economically. For social interaction, you do not have to interact with P if you do not prefer to. Thus, one should think that net benefits are positive also on the social front. Significant negative effects from P’s entry may apply if she is a criminal or if she imposes heavy untaxed external costs like pollution and congestion. However, these problems should be dealt with by banning criminal activities (including preventing criminals from entry) and taxing pollution and congestion (including by using the low-cost method of taxing petrol heavily).
With such efficient methods, P’s entry cannot make existing people worse off even if pollution in country B may increase (but the increase in pollution-tax revenue will offset it). Instead, existing people may be made better off through higher opportunities for interactions.
What about the point that migrating to country B, P may make people living in country A worse off? First, assuming the case of market payment for P (in accordance with her marginal productivity or the increase in production due to her contribution) while in country A. Then, it can be seen that the gain of P fulfilling her will to migrate to country B will provide a larger gain to her than the possible losses to people left in country A, with these losses being marginal to begin with. Thus, before the migration, people in country A as a whole (including P) should regard the chance of migration as being positive in net terms overall. Allowing for migration is good for country A as a whole. On the other hand, if P is paid much below her contribution for some reason, then her leaving country A may make people left in country A worse off as a whole. However, should this not be seen as a rectification of the injustice P is suffering in country A? Also, no country justifies its restriction of immigration on the grounds of helping people in the countries of origin.
Turning to natural population growth through planned births, the family concerned is made better off, the rest of the country have more individuals to interact with. Thus, at least for the majority of the expected average person who will live on their own earnings, the larger population will be beneficial for the pre-existing people. [For unplanned births due to ignorance of effective family planning, I am not against providing information to avoid unwanted births.]
2. A larger population allows larger economies of specialization through the division of labour
We already mentioned this point in Sub-section I-1 above. Here, we wish to emphasize its importance. Also, this point may be regarded as an important element of the benefits of more mutual interactions discussed in the previous subsection.
Obviously, Robinson Crusoe, before Friday, cannot have any division of labour; he has to work on everything himself. Population obviously facilitates more division of labour. The division of labour also obviously allows people to have a higher degree of specialization in producing goods. Instead of producing all the goods you consume like Robinson Crusoe, you now produce a much smaller number of goods or even just one only. This helps to increase their efficiency in production, including saving the time of learning to produce many goods, accumulating more skills, learning by doing, etc. The importance of the division of labour may be seen in some specific points:
- The universally accepted ‘father of economics’ Adam Smith, credited the division of labour as the principal source of wealth for a nation, as analysed in his 1776 magnum opus: An Inquiry into the Nature and Causes of the Wealth of Nations. This book is regarded as heralding the commencement of economic analysis as a science.
- While many may think that technical progress is more important than the division of labour, the former is hardly possible without sufficient division of labour. I know that I cannot survive on an island by myself or even with several persons like me. Even those who could survive would not have much, if any, time for leisure, thinking, and invention. A sizable population and the use of market exchange have facilitated the division of labour, which in turn has helped to promote scientific and technological advances. These have resulted in huge increases in productivity and have increased the per-capita real income of the world by well over 10 times since 1800, to a population of well over 6 times, or an increase in total GDP by over 60 times in real terms, not counting price increases. Though the increases have been uneven, even the poorest in Africa have more than tripled in real per-capita income (McCloskey 2006).
- The industrial Revolution happened in Western Europe with its high population densities (which facilitated the division of labour and technical progress) instead of the sparsely populated Africa.
3. Immigrants bring in multi-cultural factors and help develop the domestic economy
Immigrants from different countries bring in multi-cultural factors typically good for the indigenous people, provided that social harmony can be maintained. For example, without the immigration of many people from China and Vietnam, Melbourne would not have so many Chinese and Vietnamese restaurants with excellent food at very reasonable prices. Without big immigrants, countries like Australia and the U.S.A. would not have developed so fast to be very wealthy, happy, and powerful countries. This is as said in a Chinese proverb: The sea accepts hundreds of rivers; it becomes big through tolerance. 海纳百川，有容乃大。
4. A larger population reduces drastically the per-capita costs of public goods
If I eat my piece of apple, the same is not available for you to consume. In contrast to such private goods, a public good is available for all to consume/ enjoy simultaneously; examples are defense, broadcasting (including TV and radio), knowledge acquisition and propagation, research and the publication of books and academic periodicals. A doubling of the population typically roughly halves the per-capita costs of providing public goods to a given extent. For defense, it is likely more than halved. A country with x units of armaments and 2 y persons is typically more difficult to conquer than one with x units of armaments and y persons.
Given the importance of spending on public goods, this per-capita cost reduction of population size is very important. Moreover, as the amount of public spending on public goods as a share of GDP tends to increase historically and with GDP and also argued to be desirable (Atkinson and Stiglitz 1980, pp.326-7; Ng 2000, Ch.8; Lamartina & Zaghini 2011 https://www.degruyter.com/document/doi/10.1111/j.1468-0475.2010.00517.x/html; Dudzevičiūtė et al. 2018 https://www.emerald.com/insight/content/doi/10.1108/IJSE-12-2016-0365/full/html), this important role of population size will likely be even more important in the future.
5. More people, more geniuses
As long as certain minimum nutritional and educational standards are met, the existence of more people increases the probabilities of society’s producing another Aristotle, Beethoven, Copernicus, Darwin, Einstein, Franklin, Goethe. Their contributions are usually greatly beneficial to the whole of mankind for a very long time.
It is true that the existence of more people also means more criminals. The harm inflicted on an average person by criminals, however, is more a function of the number of criminals per million inhabitants, while the benefits of contributions in science and arts to each person are more a function of the total quantity and quality of these contributions, due to the nature of knowledge as a pure public good. An increase in population increases the total contributions and hence the benefits to each person, as well as increasing the number of people enjoying these benefits. The same increase in population may not significantly change the number of criminals per million persons.
