Wednesday, October 17, 2007

Immgrant shoppers help all consumers with lower prices.

Here’s something that is bound to send the anti-immigration crowd up the wall they are building on the border. Immigrants, legal or illegal, can bring down prices for the goods that everyone buys meaning everyone benefits by having more spendable income. The evidence comes from a report by economist Saul Lach.

The Washington Post reports: “For every 1 percent increase in the ratio of immigrants to natives, prices go down by about 0.5 percent, according to Lach's new study about the effects of 200,000 Jews immigrating to Israel from the former Soviet Union in 1990.”

American economist Aviv Nevo said the reason this happens is: “immigrants change the mix of consumers and will likely change the relative prices of different products.” Immigrants are more price conscious and more likely to shop around for bargains. The net result is that more and more businesses find it advantageous to attract these new customers by offering the bargains they are seeking. While the profit margin per item is lower it is made up by increased sales.

The Post writes: “Lach found that new immigrants spend much more time comparison-shopping than natives—perhaps because their economic circumstances force them to look for best deals, or because they have more discretionary time to compare prices, or because they have not yet developed brand loyalties.”

When shops compete by offering lower prices all consumers benefit including those who don’t have time to shop for bargains. It isn’t the extra money that immigrants spend that is the factor here -- though it is helpful in numerous ways. It is simply that the immigrants spend more time shopping for bargains and that increases the likelihood that more bargains will be offered. And when more bargains are offered even the loony Minutemen and the xenophobes benefit -- though of course they are unlikely to understand the economics behind the reason why it happens.