A Strong United States Economy Needs More Immigrants

On December 12th the Census Bureau said America’s projected population would rise 27% to 400m by 2050. That is 9% less than it projected for that year back in 2008. Those 65 and over will grow to 22% of the population by 2060 from 14% now, while the working-age population slips to 57% from 63%.

The new projections, based on the 2010 census, are based on recent trends in fertility and immigration. The number of babies born per 1,000 women of childbearing age (also called the “general” fertility rate) fell to 63 in the 12 months that ended in June of this year, the lowest since at least 1920, and well below the recent high of 69 recorded in 2007. That is partly because the average age of women of childbearing age has increased. The “total” fertility rate adjusts for the age of the population and extrapolates how many children each woman will have over her lifetime. This, too, has fallen, and at 1.9 it is below the replacement rate of 2.1. America’s fertility rate is still higher than the average for the OECD, but has fallen sharply since 2007.

Policymakers have yet to panic; the Social Security Commission, which manages America’s public pension system, reckons fertility and immigration will bounce back in the next few years.

NBF – If fertility and immigration do not bounce back and instead get worse then the United States will rapidly start to look like the demographically weak countries like Japan and in Europe.

Beyond the huge importance of immigrants to the U.S. economy today, three forces are making immigration reform more urgent: growing crackdowns on undocumented workers at the state level, which are already hurting farming and are likely to spread to other sectors, including construction; the aging of populations in the U.S. and Europe; and increasing opportunities in the developing world, which are luring home skilled immigrants the U.S. needs most.

High-tech industries probably have the most to gain from action on immigration. Carl Lin of Rutgers University looked at the impact on tech stock prices of a doubling of H-1B visas for skilled foreign workers in the U.S., thanks to the 1998 American Competitiveness and Workforce Improvement Act. High-tech industries absorb around 80 percent of H-1B visa applicants. Lin estimates that in the month after the act passed, companies in those industries enjoyed 15 percent and higher cumulative excess returns—a measure of the impact of news on stock prices.

Despite the growing importance of migrants to the U.S. economy, Vivek Wadhawa reports in a recent update to his Kaufmann study, called “The Immigrant Exodus,” that an unprecedented number of Indian and Chinese students being educated in the U.S. intend to go home rather than try to stay in the U.S. to work. The proportion of high-tech startups founded by Chinese and Indian immigrants in Silicon Valley dropped from 52 percent in 2005 to 44 percent this year. Even the size of the illegal immigrant population has been declining since 2007, by about 200,000 a year, according to the Pew Hispanic Center.

NBF – Other sources have discussed that many wealthy people in China are leaving China (or at least getting citizenship in other countries (US, Canada, Europe, Australia). The dynamic seems to be get an education in the West, then return to China to work hard and get rich, and then retire or at least set up a second residence for yourself and your family outside of China. Most of the productive or wealth building stage of life is done in China (or other developing countries).

SOURCES – Economist Magazine, Business Week

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