IMF Study Adds to Evidence Base That More Immigration Improves Macroeconomic Growth

Something that has boggled me for a number of years is the increased opposition of the U.S. Right to more immigration. Gallup polling on immigration shows us a perplexity: half of Republicans view immigration as a good thing, but only 10 percent of Republicans want immigration to the United States increased. I was reading an article from Niskanen Center Senior Fellow Neil Gross entitled "The Conservative Case for Immigration." Gross argues that immigrants are more likely to be religious, which would help placate those on the U.S. Right that are worried about declining religiosity in the United States. Furthermore, the political right in the U.S. has placed emphasis on economic prosperity, whether in the form of lower taxes, less government spending, or fewer government regulations. 

Gross highlights some of the research on the economic effects of migration. I want to point out one particular study that Gross mentions, which is a Cato Institute study on the fiscal impact of immigration (Nowrasteh, 2023). While government outlays for first-generation immigrants (including welfare benefits) averages to $11,360 per person per annum, it is also true that the same study shows that those same immigrants make an economic contribution of $16,200. In other words, immigrants pay more in taxes than they take out in benefits. That addresses the myth that immigrants are a drain on welfare services. 

This debate on immigration is more than welfare benefits. The question is whether greater immigration provides a net benefit to the macroeconomy. According to a study from the International Monetary Fund (IMF) released last week (Engler et al., 2023), the answer to that question is a resounding "Yes!" Per the IMF research paper's abstract:

In OECD, large immigration waves raise domestic output and productivity in both the short and medium term, pointing to significant dynamic gains for the host economy. We find no negative evidence of negative effects on aggregate employment of the native-born population. 

Not only does immigration show no negative impact on native-born labor markets. Whether we are talking GDP, employment, total factor productivity (TFP), or labor productivity, immigration is a net boon for the economy (see below). 

As the U.S. Chamber of Commerce brought up this week, the United States is missing 1.7 million Americans from the workforce compared to February 2020 before the lockdowns. Even if every single one of the 6.5 million unemployed Americans found a job today, there would still be 3 million open jobs. As I illustrated in January, immigration would be a great solution to solving that problem (here's a Niskanen Center report about how it would help the care work industry specifically). Whether it is high-skilled immigrants or low-skilled immigrants, allowing for increased immigration would help solve the United States' labor shortage while improving the country's economic growth.