The Economics of the Caravan Crisis

The media has created a lot of buzz around a caravan of immigrants that is trying to make its way to the United States. According to the press, this caravan has started from the South of Mexico. Although, most of the 8000 people that compose the caravan, are of Central American origin.

This has stirred up a huge debate in America. The Republican Party led by Donald Trump believes that caravans are like an alien army which is trying to invade the United States. Donald Trump has warned that criminals are likely to sneak through into the United States if these caravans are allowed to come in. On the other hand, the Democrats have a more humanitarian approach. They believe that America has always welcomed immigration and should continue to do so especially if the people are fleeing persecution.

The migrant caravan issue is definitely a political as well a cultural issue. However, at its root, it is also an economic issue. In this article, we will have a closer look at the economics of this issue.

What is The Caravan?

As already mentioned above, the caravan is a group of about 8000 people. Most of these people are fleeing from countries like Guatemala, Honduras, and El-Salvador, etc. The reason behind this mass exodus is that most Central American countries have a massive law and order problem. This is the reason why these countries have some of the highest homicide rates in the world.

Democrats are concerned that forcing people to live in these countries is like willfully ignoring their safety concerns. On the other hand, Trump is aware of the danger that street gangs from these countries pose. As a result, he is concerned about the street gangs posing as caravan members to migrate to the United States and set up a network to distribute illegal drugs.

What Is America’s Response to Caravans?

At the present moment, America has ordered more army to be deployed at its southern border. America has also declared that light offenses like stone pelting will also be considered seriously and the army will be ordered to retaliate. People all over the world are concerned that a massacre may be brewing given the tough talk that President Donald Trump has been doing.

Will Work Visas Help?

Many economic analysts are of the opinion that this political crisis can be sorted out using economic policies. Firstly, Trump’s military response to the migrant problem would be expensive. Secondly, the military response will only be a temporary solution. A few months later, another caravan may be headed towards the United States.

Instead, the problem can be sorted out if the American government decided to issue some work visas. Work visas seem to be a viable solution because they will allow migrants to become productive from day one. America’s biggest concern is that these people will become a drain on taxpayer’s money. Work visas can help eliminate these concerns.

At the present moment, Americans only issue work visas to highly skilled laborers under their H1B program. Earlier, immigration programs for lower end workers had been created. They were called the H2A and H2B worker program which were meant to import foreign laborers who work at the bottom end of the market. However, due to excessive bureaucracy, businesses shy away from hiring foreign laborers. If Americans revamp their immigration program to ensure easy issuance of visas, the caravan problem will be permanently solved. America can then urge other developed countries to issue visas as well. The few thousand migrants who want to get out of countries with high crime rates can be easily absorbed by the developed nations.

What about Unemployment?

Republicans have been expressing concerns that allowing migrant workers in the country is likely to exacerbate unemployment. However, this argument is more political than it is economic. This is because the American unemployment is currently very low. If there is a time, when American can afford to take risks that would be now. Also, there have been many studies conducted to analyze the impact of migration of unemployment. These studies show that in most parts of America, migration has no correlation to unemployment. This is because most migrants are low skilled laborers that do not directly compete with American labor. Instead, they work low-end jobs most of which remain unfilled today. Many businesses are forced to hire illegal citizens because of the unavailability of licensed low-end workers.

What about Falling Wages?

Republicans also claim that more immigrants will lead to falling wages. This is not true. They only consider that more migrants will dilute the labor force. However, they do not take into account that more migrants also mean more consumption. Hence, more products have to be produced. A rise in production generally moves the wages upwards. Once again, empirical evidence does not show any correlation between increased migration and falling wages.

To sum it up, military action against a caravan of refugees seeking asylum would provide very bad PR for the American government. Instead, the government should think about using economic policies to create a solution that is acceptable for all. This will allow America to cement its place as a global leader.


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