The Economy Needs Immigrants

Image result for The Economy Needs ImmigrantsPresident Donald Trump has promised to snap the United States out of its slow growth doldrums by adopting policies to raise the nation’s growth to 3 percent or more. But that worthy goal will be more difficult to achieve if he takes the advice of some of his supporters to sharply curb legal immigration to the United States.

America needs immigrants to grow and prosper, especially highly-skilled immigrants who fuel innovation and spur higher productivity gains across the economy.

Immigrants boost the nation’s economic growth rate in two important ways: by increasing the total number of workers employed, and by raising the overall productivity of workers, both immigrant and native born alike.

Without a healthy inflow of immigrants, the U.S. labor force would soon begin to decline, imposing a drag on growth while adding to the strain on our retirement programs. Annual growth of the labor force has slowed from 1.2 percent in the 1990s to 0.5 percent in the current decade. And with the number of native-born Americans of working age on a path to decline by 8 million between now and 2035, according to the Pew Research Center, we need immigrant workers and their children to maintain our economic growth into the future.

Without a growing workforce, U.S. companies will find it increasingly difficult to hire the workers they need to meet domestic and global demand. Along with the high-tech sector, manufacturing, agriculture and construction are expected to suffer the most acute shortages of workers. A declining workforce would impose a drag on potential growth and reduce our economic power and influence in the world.

Immigration also helps our society to support older Americans in their retirement. In 2010 there were 24 Americans aged 65 and older for every 100 who were in their prime working years of 25 to 64; by 2050 that ratio will double to 48. An increased inflow of immigrants in their prime working years would spread the cost of funding old-age pension payments across a larger pool of workers, reducing the need to raise payroll taxes, cut benefits or both.

Immigrants not only increase the size of our economy but also the productivity of its workers. Immigrants make up 17 percent of the U.S. workforce, but account for more than one-third of workers with PhDs in the STEM fields of science, technology, engineering and math. Of the immigrants who were admitted to the United States in 2011-15, 48 percent were college graduates, compared to 31 percent of U.S.-born adults.

More highly skilled immigrants fuel innovation and entrepreneurship in the broader economy, creating new products and services and job opportunities for the native-born. A major 2016 National Academy of Sciences report on the economic consequences of immigration concluded that “immigrants are more innovative than natives; more specifically, high-skilled immigrants raise patenting per capita, which is likely to boost productivity and per capita economic growth.” The study found that immigrants who hold advanced degrees are three times more likely to be awarded patents than are native-born Americans.

Immigrants are also more likely to found new enterprises, from an ethnic restaurant to a billion-dollar technology company. Some of the most famous and successful U.S. companies today were founded or co-founded by immigrants.

Forty percent of America’s Fortune 500 companies were founded by immigrants or the children of immigrants. According to a 2016 study by the National Foundation for American Policy, more than half of the start-up companies in the United States today that are valued at more than $1 billion, so-called “unicorns,” were founded by immigrants. The 44 unicorn companies founded by immigrants employ an average of 760 workers.

An inflow of educated immigrants is also a boon for government coffers. In its 2016 report, the National Academy of Sciences calculated that an immigrant who arrives in the United States at age 25 with a 4-year college education will, over his or her lifetime, contribute a net surplus of $504,000 to the finances of governments at all levels (net present value, 2012 dollars). An immigrant with an advanced degree will contribute almost twice that net amount, $972,000, in their lifetime.

Contrary to myth, the United States in recent decades has not experienced a flood of immigrants. The net annual inflow of immigrants per 1,000 population is actually lower than the average rate since 1820. Foreign-born residents account for 13 percent of the U.S. population, compared to 20 percent in Canada and 27 percent in Australia.

If the Trump administration wants to boost U.S. growth, innovation and job creation, it should reject all proposals to reduce legal immigration and instead embrace the admission of even more of the highly skilled, hard-working, innovative foreign-born workers our economy needs.