Why Immigration is Good for the Economy

Congress is considering major immigration reform, in large part to enable employers to bring more immigrant workers into the country to fill critical positions. Rather than present the reasons why this is necessary, below is a perfectly articulated rendition of why immigration is good for the U.S. economy. Leon Sequeira is the current Assistant Secretary for Policy for the U.S. Department of Labor. He testified before the House of Representatives on May 3, 2007 about the impact of immigration on our economy, and said in part:

"While the number of immigrants as a percentage of the population might seem large, it is in fact far lower than other periods of heavy immigration in our history. Over the past ten years, 8.8 million immigrants added about 3.4 percent to the population. In contrast, throughout the 19th century, immigration added 6.2 percent to the population each decade, rising above 9 percent during the 1850s and 1880s, and immigration peaked at 10.4 percent of the population during the decade between 1901 and 1910. After 1910, immigration rates fell dramatically, merely adding 5.7 percent to the population during the 1911-1919 decade, further falling to 0.4 percent in the 1930s, and then slowly rising to a still low 2.0 percent in the 1970s. Immigration rates rose in the 1980s (3 percent) and 1990s (3.4 percent) and have since remained stable.

The growth of the foreign-born workforce has not produced significant adverse effects on native-born workers. During the last ten years, the unemployment rate for native-born workers fell from 5.4 percent to 4.7 percent. The unemployment rate for African-Americans has declined from 10.5 percent in 1996 to 8.3 percent today. While unemployment has gone down, wages have gone up. Over the last decade, as the foreign born workforce increased, average hourly earnings of production and non-supervisory workers increased 8.7 percent after adjustment for inflation. In 2006, the median usual weekly earnings of foreign-born full-time wage and salary workers were $532, compared with $698 for the native-born.

There are three fundamental reasons why immigrants are important to our economy. First, the U.S. workforce is aging. Second, continued immigration will allow us to maintain a higher ratio of workers to retirees than other major economies such as China, Japan and Germany. Third, immigrants contribute significantly to innovation and entrepreneurship in our economy.

Turning first to the aging of our labor force, there are 25.5 million persons in the labor force who are age 55 or older and who will be approaching retirement age in the next few years. This is up 59 percent from 10 years ago. And while the number of older Americans in the workforce is increasing, the number of young workers in the workforce has changed little. Those in the labor force who are 16-24 years old numbered 22.4 million in 2006, up just 5.7 percent from a decade earlier—less than one-tenth as fast as the growth among older workers. Clearly, the baby boomers are beginning to retire, and there is not a corresponding boom of native-born young workers entering the workforce to replace those retirees.

The challenge of finding qualified workers is likely to be much greater in the coming years. The U.S. population is projected to grow by 6.8 percent from 2007 to 2014, while the labor force is projected to grow 6.2 percent over that time, with immigration projected to be the main driver of population growth and hence labor force growth. Recent data shows that the immigrant labor force participation rate of 68.6 percent is higher than the 65.8 percent participation rate for native-born workers. The unemployment rate for foreign-born workers was 4.0 percent in 2006, lower than the average unemployment rate of 4.7 percent for native-born workers. Men make up a larger proportion of the foreign born labor force, 60 percent, than they do of the native-born labor force, 53 percent. Significantly, the proportion of 25- to 54-year olds is higher for foreign-born workers (76percent) than for the native-born labor force (67 percent).

Immigration also helps to maintain U.S. competitiveness with our trading partners. As I noted previously, the distribution of the foreign-born population is more highly concentrated in the working-age cohort than the native-born. The presence of our foreign-born population is a major reason the United States has relatively more workers per retirees than our major trading partners. While the ratio of working-age populations to the total populations of China, Japan, Germany and the U.S. are all projected to decline in the coming years, the U.S. population will remain more balanced than those of our trading partners due to the immigrant component of our workforce."

Contact your Congressional Representative to weigh in on whether we need immigration reform.