[MUSIC]
Let's move on then to see what the effect is on the host
country when migrants come there, okay?
So in the example that we were working with, this would be the United States
in the case of Mexicans migrating to the United States.
We looked at the effect on Mexico, let's look at the effect on the United States.
And again, we're going to use the same diagram.
May I encourage you to use these diagrams when you're thinking about
economic issues, particularly this one which is so poorly understood.
And we're going to come to some really surprise conclusions here.
And you're going to want to repeat it on your own because you're going to
say that's not possible, that's not what the politicians are telling me,
this is not what public discourse is telling me.
Anyway, we've got the same diagram.
We've got our average supply curve, which slopes upward.
This is all production in the economy.
And remember it can be affected by investment,
the amount of capital goods we have, by our infrastructure,
by the number of workers we have, by how well educated they are, okay?
So that's an upsloping aggregate supply curve.
Here's our downsloping aggregate demand curve.
This is all spending in the economy, consumption, investment,
government spending, net exports.
We've seen this elsewhere in the course.
Remember we've got the price level here, we've got GDP down here.
And let's say that this is our equilibrium.
This is the US.
And then Mexican migrants begin to arrive, okay?
The first thing that's going to happen is that aggregate supply shifts, but now,
it's going to shift outward to the right, okay?
Remember in Mexico it shifted inward to the left because they lost workers.
But here the labor force is expanding, okay?
And so aggregate supply shifts outward to the right.
Okay?
Now we have to remember, and again, there's a lot of confusion about this.
We have to remember that this occurs whether those migrant workers are skilled
or unskilled.
Okay?
And again, just like we saw with the home country, if they're very skilled,
it might shift more, right?
Because they bring a lot of productivity, a lot of brainpower.
But if they're unskilled, it also shifts, right?
Because we do need people, and any of you who come from countries
with a large number of migrants, there are migrants working in the restaurants,
working in the hospitals, working in all kinds of jobs, skilled and unskilled.
And often there aren't natives to cover those jobs,
that are willing to cover them, okay?
So aggregate supply would shift outward to the right,
allowing us to produce more than we could just with our own labor force, okay?
Now at the same time, aggregate demand will also shift outward to the right
because the migrants are adding to consumption, or
domestic demand in the country, because they have to buy a house, they have to buy
a car, they have to buy their food, they have to buy their clothing.
Now, they will be sending some money home, but obviously,
they have to spend quite a bit of money in the host country.
So aggregate demand increases as well.