Are Immigrants Draining Money Out Of The United States?

Mexicans and other immigrants send billions back home. Then where does it go?

By SHARE

An article in this week's Economist looks at the issue of remittances—the billions of dollars that immigrants send back to their home nations. The article looks at recent research showing the "huge and benign" impact that remittances have on human welfare in developing countries.

But that facet of the remittance issue isn't the one that gets attention in the political debate over immigration, which will soon heat up in Washington. As I've discussed before, what really gets immigration opponents is the idea that foreigners are wasting resources that would otherwise be consumed by Americans.

So when you read about the $328 billion that is being transferred from richer to poorer countries every year, it is easy to start to agree with the assessment that the U.S. economy cannot afford more immigration.

Easy, but wrong.

The argument only makes sense if you look at the world economy as a closed system. But in reality, money that flows out, can, and often does, flow back in. Just look at the economic relationship between the U.S. and its most important source of immigrants, Mexico.

Mexicans in just one year bought $120.4 billion worth of U.S. exports. The richer Mexicans are, the more U.S. exports they can buy—and the more jobs they can create here. So remittances helps Americans to the extent that it increases Mexican (and other developing country) incomes.