Immigration: An Economic Necessity

As part of his primary strategy for the 2016 election, Donald Trump inflamed anti-immigrant sentiments to win the nomination and secure his victory (Pierce and Selee 2017). Ostensibly, this was due to claims of “economic anxiety” over immigrants “taking jobs” or some similar sentiment. However, there is substantial evidence that immigration is good for economies, both generally, and especially in the context of our current economic environment.

The strongest economic argument against immigration is the wage depression argument. It presumes, generally, that because immigrants are substitutes for current U.S. workers, higher immigration will necessarily increase the labor pool and therefore reduce wages for all workers. George Borjas, the researcher most often cited by anti-immigration proponents, argues that for every 10% increase in immigration for a skill area, wages will decline 3-4% in that area (de Brauw 2017). However, there are numerous critiques of Borjas’s model and method that partially invalidate his claims. For instance, differences between immigrant and native U.S. workers, such as language ability, mean that even if immigrants have similar skills, they are not perfect substitutes for native workers (de Brauw 2017). Additionally, adding data from 2000-2010 to his 1960-2000 model results in the wage loss changing from 3-4% to only 2%, showing that Borjas’s model was distorted by looking at a time period with a low amount of foreign workers (de Brauw 2017). While there may still be a drop in wages from immigration, this 2% figure is in line with most pro-immigration proponents’ figures, delegitimizing the hardline immigration stance that Borjas concludes with (de Brauw 2017). Therefore, the argument Borjas makes that the costs of immigration outweigh the benefits is not nearly as strong as he would argue.

While immigrants may slightly decrease the wages of native U.S. workers, they are still overall beneficial for the U.S. economy. Most importantly, U.S. native birth rates are shrinking, and the population is aging. Immigrant laborers put in necessary tax revenue for the U.S. social security system while simultaneously having large families that also add to the tax paying labor pool (Mehta 2019). With a social security system running out of money by 2035, only an increase in immigrant labor will be able to prevent the system from having to reduce its payout to 80% of the original payout, hurting some of the poorest Americans who rely on social security as they get older (Mehta 2019).

Low-skilled immigration is also necessary to build up the U.S. labor pool, especially in rural areas (Narea 2021). Construction companies have high rates of vacancy, in addition to vacancies in job markets such as plumbing, roofing, and general handymanning, all essential for housing construction (Leonard and Russell 2021). Evidence suggests that this is a labor pool, rather than a wages issue: the U.S. unemployment rate rests at a low 3.5%, suggesting that most people who want to work are working (Leonard and Russell 2021). With such a small unemployment rate and such a high vacancy rate in these jobs, falling wages would not be a likely outcome of increasing immigration to fill those labor pools. If we want to revitalize these rural areas, increasing, not decreasing immigration will be key. Immigration, even with small wage effects, is a net boon and necessity for the American economy to function and grow.

Outside of being key for the economy to function on a base level, immigrants are also essential for the growth of the economy and business. In 2019, immigrants constituted 14% of the U.S. population, but founded a quarter of new businesses (Mehta 2019). Research from 2018 showed that immigrants had founded (or cofounded) 55% of billion-dollar companies in the U.S., serving as an important backbone to American economic growth (Vandor 2021). In 2016, immigrants added two trillion dollars to the U.S. GDP, and paid $458.7 billion in taxes to local, state, and federal governments (National Academies of Science, Engineering, and Medicine 2017). Some opponents of immigration will point out that immigrants have a net negative fiscal impact on local and state governments because of their higher use of services like education and comparatively lesser payment of taxes through methods that local and state governments traditionally receive money from (National Academies of Science, Engineering, and Medicine 2017). However, this trend has been slowly lessening over time as immigrants with higher education have been moving to the U.S., lessening the fiscal impact on state and local governments (National Academies of Science, Engineering, and Medicine 2017). Given the great benefits for the economy from having highly educated immigrants come to the U.S., having a small negative impact on fiscal budgets is more than worth any negatives.

Fundamentally, however, the immigration debate is not an economic one. On the big stage where Donald Trump stood, immigration was a fundamentally racial and ethnic argument, a battle against making the U.S. browner. Anti-immigrant sentiment from 1992 to 2017 was most associated with ethnocentrism, and barely at all with economic anxiety (Miller 2020). The Brookings Institute found that “half of white [baby] boomers” believed that immigration was a “threat to traditional American customs and values,” (Reeves 2016). Of course immigrants will change America, but that should not be feared. Change is inevitable, the economy requires new perspectives and people, and demanding we hold on to our past ensures we will fail to solve the problems of our future.