Immigration and Our Prosperity
With so much heated rhetoric about building a wall at our Southern border and the cruel separation of families who seek asylum, it is easy to overlook what is perhaps the fundamental question in the immigration debate. That is whether immigration has a positive or negative effect on our collective prosperity. Are we are better off with more immigration or less?
No foreign national has a right to enter the United States. The law and policy in effect at the time determine who will be permitted to enter for visits and who will be permitted to immigrate. That law and policy has changed over the years, but always in line with what is regarded as the national interest at the time. Now the Trump Administration proposes to scale back immigration in a dramatic way. If the overall effect of immigration on our economy at current levels is negative, then there may be merit to Trump’s immigration policy, if not his inhumane implementation of it. If the effect is positive then more immigration is the answer.
There are several categories of lawful entry into the U.S., for example visitors who seek to immigrate, temporary non-immigrant visitors, and asylum seekers. Temporary non-immigrant visitors are people like tourists, business visitors, students, and temporary workers. One category of non-immigrant is called H-1B and is used for highly skilled technical or professional workers frequently in short supply. Part of the admission process for all non-immigrants is that they declare their intention to depart the U.S. at the end of their temporary stay.
Visitors who intend to immigrate are subject to a much more rigorous evaluation than non-immigrants. Some seek immigrant status, signified by the “green card,” on the basis of a relationship to a close family member already here. This has recently been referred to as “chain migration.” Roughly 850,000 people enter lawfully each year in this category. Others apply based on a sponsorship by a U.S. employer that can demonstrate a need for the person’s skills and an inability to find that skill in the U.S. labor market. Roughly 140,000 people enter each year in this category. Most of these are highly trained scientists, technicians or professionals.
Unlawful, or “undocumented,” foreigners are mostly people who come here as non-immigrant visitors and who simply fail to leave when their temporary stay runs out. But most of the publicity about illegal immigration centers on those who cross the border without papers and melt into our society. People who are unlawfully in the U.S. are not entitled to work but frequently do. It is unlawful for a U.S. employer to hire a foreigner who is not authorized to work, but this rule is largely ignored in many industries, such as landscaping and restaurants.
The Trump Administration is determined to reduce the number of immigrants coming to the U.S. under any circumstances, lawful or unlawful. Last year Trump announced his support for legislation to reduce legal immigration by half over ten years. The reductions would come from migrants entering on the basis of family connection. The number entering on the basis of job skills would remain the same. The legislation would institute a merit-based system to determine who is admitted to the country similar to those in effect in Canada and Australia. President Trump also plans to admit no more than 45,000 refugees from around the world in fiscal year 2018, a significant drop from the cap of 110,000 set for 2017 by President Obama.
What is the rationale for these policies? In his original immigration plan, Trump declared that the influx of foreign workers “holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans – including immigrants themselves and their children – to earn a middle class wage.” But as we have seen over the last two years, this country is at close to full employment. Our unemployment rates are at historic lows. Some industries, like the Maryland seafood industry on the Eastern Shore, can’t operate for lack of workers, native or immigrant. The level of employment in this country seems to rise and fall in response to larger forces than the relatively small number of immigrants coming to the country.
But what about the effect of immigration on employment opportunities and wage rates for native Americans? Here the answer is mixed and there is some evidence that immigrants do create a negative effect on some segments of the economy. In 2016, the National Academy of Sciences published a 300,000 word report on the economic consequences of immigration. It found that unskilled immigrants (both lawful and unlawful) compete with those most similar to themselves in the U.S. economy – immigrants who arrived just before them and unskilled, undereducated natives. Immigrants may reduce employment opportunities and slightly lower wage rates for these groups. But the report says “When measured over a period of 10 years or more, the impact of immigration on the overall native wage may be small and close to zero.”
Foreigners who lawfully enter the U.S. pay taxes. Lawful permanent residents — those who hold a green card and intend to stay here permanently — are subject to Social Security/Medicare taxes and income taxes just as U.S. citizens. Lawful temporary non-immigrants who are authorized to work here for temporary periods also pay these taxes, although there are some exceptions. But there are costs of providing public services to immigrants and the NAS report concluded that in the first generation or two after immigration the costs for immigrants are somewhat higher than the taxes they pay. This negative effect is reversed in the longer term when the children of immigrants become productive citizens. Immigration then becomes a net positive for the American economy.
But the NAS report also showed that the negative effects of immigration are not present with respect to highly educated immigrants. Those with a college degree who emigrate to the U.S. at age 25 pay $500,000 more in taxes than they collect in benefits over a lifetime. Those with a graduate degree create a surplus of over $1,000,000.
The net positive long-term effect of immigration is likely to become more pronounced. The working age population of the U.S. is declining, reflecting the retirement of the baby-boomer generation. As there will be fewer workers in the future to support the Social Security benefits of retirees, the solvency of the Social Security system is in jeopardy. In 1960, there were five workers for every person receiving Social Security benefits. Now the worker-to-beneficiary ratio is 2.8 and projected to fall even lower. Increased immigration is clearly called for on this basis alone. Lawful immigrants to the U.S. tend to be younger than their U.S. counterparts and are more inclined to participate in the labor force.
The Wall Street Journal recently published an opinion piece by Sol Trujillo, President of the Latino Donor Collective, in which he enumerated the contributions of Latino immigrants to the economy. He noted that
Latinos are the new face of the U.S. workforce, making up 70% of the recent growth in the labor market, and accounting for a whopping $2.13 trillion in gross domestic product as of the end of 2015. Today, this single demographic cohort would be the eighth-largest economy in the world—larger than Brazil, Italy or Canada.
There is also considerable anecdotal evidence that immigration is beneficial for prosperity in the U.S. Individuals who are prepared to leave their home countries and their family support systems for better opportunities are very likely to take advantage of those opportunities. Inc. Magazine called immigrants “the most entrepreneurial group in America.” It said that “from 1996 to 2011, the business startup rate of immigrants increased by more than 50 percent, while the native-born startup rate declined by 10 percent, to a 30-year low.” Despite accounting for only about 13 percent of the population, immigrants now start more than a quarter of new businesses in this country.
Those of us in West Virginia and other states with rural populations must have noticed the very substantial number of foreign-born physicians who are happy to staff rural hospitals and clinics. Take, for example, the staff at Grant Memorial Hospital in Petersburg, West Virginia here in the Eastern Panhandle. When we assess the effects of immigration on our prosperity, these immigrants cannot be overlooked.
The Washington Post just reported that for the third time in four years the U.S. has won the International Math Olympiad. The Math Olympiad is the hardest and most prestigious math competition for high school students in the world. Many on the U.S. team were second or third generation Americans. Their surnames were Lin, Gu, Huang, Ren, Singhal and Ardeishar. Immigrants are often high achievers in challenging fields, such as mathematics, physics and computer science.
If we can put aside the nativist impulses that fuel President Trump’s “base” and much of his immigration policy, the picture becomes clearer. Overall higher rates of immigration are healthy for our country on many levels. But higher overall immigration should consist of increases in skilled workers and decreases in unskilled workers. To that extent, reducing family-based immigration where low skills are involved is appropriate. Furthermore, the number of unlawful low-skilled workers who come here seeking employment should be reduced, not by building an expensive and ineffective wall, but by actually enforcing or strengthening the law now on the books that prohibits hiring them. As Francis Fukuyama recently wrote in the journal Foreign Affairs
What is needed is a better system of sanctioning companies and people who hire illegal immigrants, which would require a national identification system that could help employers figure out who can legally work for them. Such a system has not been established because too many employers benefit from the cheap labor that illegal immigrants provide.
American businesses were recently handed a $1.5 trillion tax break thanks to President Trump’s Tax Cuts and Jobs Act. But handing business lots of cash with no strings attached is not smart policy. Making it easier for them to find and employ talented workers is. So the number of H-1B and other temporary work visas should be at least doubled. Ensuring that U.S. workers are not displaced is already a part of the application process for these visas. And a method should be found to admit increased numbers of seasonal agricultural workers in situations where no U.S. workers can be found and the wage rates can be kept high enough not to undermine the larger labor market.
In the final analysis, immigration can be a tremendous boon to our prosperity. In his Wall Street Journal opinion piece, Sol Trujillo proposed a basic IQ test for America. We flunk if we do not recognize that radically limiting immigration would be like shooting ourselves in the foot.
