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A simulation analysis of the longer-term effects of immigration on per capita income in an aging population

Going the other way — reducing immigrant productivity by 20% — produces similar
results, but in the opposite direction, again depending on the assumed age distribution. We
interpret these results as implying a lower education level among immigrants. An alterna-
tive interpretation though would be that the education level is the same but the lower
productivity reflects a higher rate of immigrant unemployment, or that there is underem-
ployment — employment of immigrants in jobs beneath their education level. Any of these
interpretations, or any combination, would have the same effect — a reduction of the
productivity of the immigrant labour force.
We consider only overall income per capita in relation to education and productivity,
not the actual distribution of income between immigrants and the domestic population.
However, if immigrants were to have a higher marginal product than domestic workers but
receive the same per capita income there would be implicit discrimination — in effect a
transfer of wealth created from the immigrant to the non-immigrant population. If immi-
grants were to have a lower marginal product there would be a transfer in the opposite di-
rection. (More generally, the education characteristics of immigrants and their implications
for the economy, and for the immigrants themselves, is a topic on its own that deserves
greater attention than we are able to give it here.)

4. Conclusions

Our mythical country of Alpha faces a problem common to many industrialized countries:
a shift in the age distribution of the population towards a lower proportion in the labour
force and consequent downward pressure on national income per capita. Immigration can
be used to moderate the shift but to be effective the quota level may have to be high, the
distribution of adult immigrants highly concentrated in the working ages, and the propor-
tion of child immigrants low. While immigration will bring about an increase in aggregate
national income it will also add to the number of consumers sharing in the increase. The
worker/dependent ratio among immigrants is therefore a fundamental consideration in
policy design. A larger quota will of course produce a larger effect but how large a quota is
acceptable from a social point of view is another fundamental consideration. A higher
overall level of productivity could offset the aging-induced decline in per capita income
but to be realistically interpreted, productivity would have to be defined in relative terms
— relative to the level in the rest of the world, that is. A higher level of education and
hence productivity for immigrants alone would increase overall per capita income, a lower
level would decrease it, and in either case there is the issue of how the difference would be
shared between immigrants and non-immigrants. An increase in fertility would raise the
proportion of dependents in the population and lower per capita income, both immediately
and subsequently. Falling death rates and rising life expectancy would increase the propor-
tion of older dependents; that could be offset by higher labour force participation rates of
older people but the increases would have to be proportionately large, and even then might
provide only a modest contribution.

Conflict of Interest and Funding

No conflict of interest has been reported by the authors.
Acknowledgements

The authors wish to thank the two reviewers of an earlier version of this paper for their
helpful comments and suggestions.

Ethics Statement

The analyses described in this paper were performed using secondary data obtained from

International Journal of Population Studies | 2015, Volume 1, Issue 1 90