More Immigration Would Do Wonders for Economic Growth

The pandemic gave us a great deal of ruckus: a supply chain crisis, inflation caused by fiscal and monetary policy, labor shortages. Because of the tumult, we are looking at a higher-than-normal likelihood of a recession within the next year. After everything we have been through economically in the past three years, it would be dandy to have a period of robust economic growth. 

However, according to a recent report from the Congressional Budget Office, it does not look like the economic growth will be as good. Even with inflationary pressures declining and tight financial conditions easing, what we will have in the upcoming years for economic growth will be relatively modest. 

How does one raise the gross domestic product (GDP)? As the American Action Forum describes it, "mechanically, GDP growth is the sum of the growth in the number of workers and growth in GDP per worker, also known as productivity. Looking back, the labor force grew at an average annual rate of 1.2 percent from 1948 to 2022, but CBO is assuming that it will only grow 0.4 percent annual over the next decade." Population aging and retirement are major culprits in the labor market shrinking because fewer workers in the labor market means a stagnant GDP. One clear-cut way to improve the GDP is to increase workers: more immigration.

Migrants crossing the U.S.-Mexican border remaining near record highs. On top of that, there are 73 percent of Americans who do not want immigration to increase. A political feasibility argument is more difficult to make. Let me make an economic one, much like I have done since 2013. The National Foundation for American Prosperity released findings on the theme of immigration and economic growth. The author was Madeline Zavodny, who is a professor at the University of Northern Florida and formerly worked for the Federal Reserve Banks of Atlanta and Dallas. Her executive summary reported the following:

Immigrants boost economic growth, employment growth, and economic dynamism through their contributions to the workforce, entrepreneurial activities and purchases of goods and services. Metro areas with a higher share of immigrants have more dynamic economies and experience faster growth in the number of jobs created and new business establishments. 

Across 248 metro areas, a 1 percentage point higher share of the population composed of the working-age foreign born in 2010 is associated with a 0.58 percentage point higher growth rate in the number of establishments during 2010-2019. Foreign born workers accounted for up to three-quarters of the growth in business establishments in 248 U.S. metro areas between 2010 and 2019. 

This is hardly the first study to illustrate that more immigration is better for the economy. Immigrant increases employment for native workers. The high-skilled immigrant visas, the H-1B visa, have been shown to generate a net increase in employment, greater productivity growth, more patents, and more tax revenue. Economic benefits are similarly observed when admitting low-skilled immigrants to the economy. 

Time and time again, immigrants have been shown to be productive members of society that contribute to economic well-being of their new country. The countries that can best foster greater immigration will be the ones that can prosper. The United States has had its ups and downs in terms of letting immigrants into the country. The United States has fared better when it allows more immigrants in than fewer. If the American people want a dynamic economy, the majority of Americans will need to get over whatever qualms they have with increased immigration. Otherwise, the U.S. economy will suffer in a similar way we are already seeing in China and Japan.