Our southern border has been in the news ever since Donald Trump was elected President.
In the early and middle days of his administration the southern border was said to be under siege. We were being invaded by an “army” of criminals and other undesirables who will increase our crime rates, put stress on our social services, and take our jobs. Even though we are a nation of immigrants, xenophobia, an intense or irrational dislike or fear of people from other countries has always been an American trait.
Everyone whose ever taken an economics class learned that resources can be classified as land, labor, capital, and entrepreneurial ability. So one way to overcome this fear of the foreigner would be to explain why immigrants are an economic resource, and how their presence contributes to a growing economy.
America’s rapid economic growth in the nineteenth century can be largely attributed to agricultural mechanization that provided the labor needed to fuel America’s industrial revolution. Today one of the explanations of China’s rapid economic growth is its vast supply of rural labor that are available as foreign trade allows the Chinese to become the world’s manufacturer.
We should not let our recent Real GDP growth of 5.7 percent in 2021, in contrast to a decrease of 3.4 percent in 2020, be taken as evidence that we are in no need of any increases in our labor force. All economies surge as they move from the recession stage of the business cycle to the recovery stage of the cycle. Between 1955 and 2007, the average annual growth rate was 3.3 percent, but experts at the Fed are predicting that over the next decade GDP growth will decline toward a 2.0 percent average.
One explanation for this predicted decline in GDP growth is that the US is experiencing a decline in labor force participation of both males and females. Aging will also play a role, as the share of the population between ages 25 and 54 will experience a larger than an expected decline.
Once an economy has reached full-employment, economic growth is determined by population growth and the growth in labor productivity (output per person per hour). In economically advanced nations, the statistical replacement rate (the birth rate that maintains a stable population) is 2.1 births per female. In 1958, the US fertility rate was 3.5 births per female, by 1972 the fertility rate had fallen below replacement levels. In 2020 the nation’s fertility rate had declined to 1.6 births per female, absent immigration the US population would be shrinking, and along with it our GDP.
On December 31 of 2021, the Bureau of Labor Statistics (BLS) reported the number of job openings was 10.9 million. In January 2022, the BLS reported the number of unemployment workers was 6.5 million, the number of marginally attached and discouraged workers was 1.9 million, thus the total number of jobless workers in January was 8.4 million. Maximizing output and growth requires filling all job openings, even if we could match all currently unemployed workers with job openings there would still be 2.5 million unfilled job openings.
Beyond filling job openings, immigrants provide the nation with other benefits. Data from the University of Michigan Retirement Research Center found that Hispanics who immigrate to the US are more than twice as likely as native-born Americans to provide financial assistance to family members. Saving rates for immigrants from Mexico are 12 percent, immigrants from China save 20 percent, immigrants from India save 16 percent, and from the Philippines 13 percent. For US born families the savings rate is 7.6 percent. The importance of savings can’t be understated, savings is the basis for investment which is essential for economic growth.
According to the St. Louis Federal Reserve Bank, immigrants have higher labor force participation rates and lower unemployment rates when compared to native-born individuals. In addition, research on immigrant earning from the Social Security Administration found that the earnings of immigrants from developing nations tend to start well below those of native-born Americans with comparable education levels and experience, but rise more rapidly than their US counterparts.
The ultimate irony of those who claim that immigration is a threat and not resource to be used is that we’re a nation of immigrants. Each successive wave of immigration has brought forth our xenophobic fears, only to be disproved as we grew and prospered as a nation because of them. Today’s fears are no different from the fears we experienced decades ago, except for the fact that this time they’re being fanned for partisan political reasons, and there in lies the real damage to economy not to mention our culture.