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America needs more immigration

Apr 28,2024 - Last updated at Apr 28,2024

WASHINGTON, DC — With an unprecedented number of migrants and asylum seekers trying to enter the United States through its southern border, immigration is at the top of American voters’ minds ahead of November’s presidential election. Paradoxically, this debate has gained momentum just as the US economy outperforms other developed economies, partly owing to immigration-fueled population growth.

The Japanese economy should serve as a cautionary tale about the perils of opposing immigration. After growing rapidly following the end of World War II, Japan’s population peaked at 128.1 million in 2010. It had dropped to 124 million by early 2024 and is expected to decline further, falling below 100 million by 2055.

Japan’s economic stagnation since the 1990s can be partly attributed to its demographic challenges, as its working-age population declined from 86.8 million in 1993 to 81.5 million in 2010. While initially opposed to immigration, Japan eventually introduced various incentives to encourage it. But these measures have yielded only modest results, and the country’s population continues to shrink.

Japan is not alone. Numerous developed and developing countries, including China, are also grappling with shrinking populations. In South Korea, the speaker of the National Assembly recently described the country’s low birth rate as a “national crisis”. The European Union’s working-age population is projected to decline by 20per cent by 2050. Even in Africa, the only continent expected to experience strong population growth this century, the rate of increase is expected to slow.

Meanwhile, according to the US Census Bureau’s “main immigration” projection, America’s working-age population will only be 2 per cent larger by 2035. By contrast, in a “zero immigration” scenario, the American workforce would decrease by 5 per cent, with the US population shrinking by 32 per cent by 2100.

A shrinking population and labor force can impede economic growth by redirecting investment from new capital goods, which boost worker productivity, towards replacing workers. Moreover, the average educational attainments of new entrants to the labour force exceed those of retirees, implying that retirees tend to be less educated and trained than those entering the workforce. When there are fewer new labour-market entrants than retirees, productivity can be adversely affected. In such a scenario, demand for healthcare and pensions grows faster than the overall population.

While the number of native-born American workers has dropped since 2019, the overall labour force has grown by 2 per cent, thanks to immigration. The Congressional Budget Office estimates that high immigration rates could add 0.2 percentage points to average annual GDP growth over the coming decade.

Regrettably, immigration is becoming increasingly unpopular just as its economic effects are becoming greater. Immigrants, who often arrive at a young age, bring essential intermediate skills necessary for industries like health care, construction and hospitality. But nurses and construction workers are not just crucial for replacing retiring seniors; they also enhance the productivity of highly skilled professionals, including doctors, engineers and educators. Thus, welcoming more immigrants could boost US output growth.

Amid historically low unemployment and persistent labour shortages, it is ludicrous to claim that migrants are “taking away” American jobs. Similarly, there is little evidence supporting the far-right populist claim that immigrants are more likely to commit crimes. On the contrary, studies have repeatedly shown that immigrants tend to be more law-abiding than native-born Americans.

Despite potential short-term disruptions, immigration is economically beneficial to host countries over the long term. Rather than engaging in unproductive debates about immigration’s adverse effects, US public-policy debates should be focused on determining its optimal rate, ensuring legality, fostering seamless integration, and boosting productivity. Additionally, policymakers ought to explore ways to promote economic growth and raise income levels in the countries from which migrants and asylum seekers originate.

Even current immigration levels may not be enough to offset America’s population decline, given that the US fertility rate fell from 2.1 lifetime births per woman in 2007 to 1.64 in 2020. To maintain the current size of the US workforce, the US would have to accept 1.6 million immigrants, equivalent to 0.5 per cent of its population, annually. Without immigration, the population and labour force would shrink by roughly 0.5 per cent per year.

As more countries recognise the urgent need to augment their dwindling native-born workforces, the competition to attract immigrants is bound to intensify. To avoid a Japan-style period of economic stagnation, the political debate across the developed world must shift toward facilitating legal entry and adopting more effective immigration policies.

Anne O. Krueger, a former World Bank chief economist and former first deputy managing director of the International Monetary Fund, is senior research professor of International Economics at the Johns Hopkins University School of Advanced International Studies and senior fellow at the Centre for International Development at Stanford University. Copyright: Project Syndicate, 2024.

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