America Benefits From Immigrants--But It's Complicated

Thanks to Justin Stoler for pointing me to an op-ed in the NYTimes by Ruchir Sharma promoting the idea that immigrants are good for the American economy and will be the answer to "making America great again."

The underlying growth potential of any economy is shaped not only by productivity, or output per worker, but also by the number of workers entering the labor force. The growth of the labor force is in turn determined mainly by the number of native-born and immigrant working-age people. Over the last two decades, the United States’ advantage in productivity growth has narrowed sharply, while its population advantages, compared with both Europe and Japan, have essentially held steady.

What makes America great is, therefore, less about productivity than about population, less about Google and Stanford than about babies and immigrants.

The growing importance of the population race will be very hard for any political leader to fully digest. Every nation prefers to think of itself as productive in the sense of hard-working and smart, not just fertile. But population is where the real action is.

The complication here is that the discourse about immigration in this country routinely ignores the fact that as much we may not want undocumented immigrants, the economy is more dependent on exploiting this pool of "enslaved labor" than we would like to think. The most recent example is Case Farms in Ohio which uses undocumented Central American immigrants to "process" its chickens for sale to the public. As an article in The New Yorker points out "the law makes it hard to penalize employers, and easy for employers to retaliate against workers." So, who benefits disproportionately from undocumented immigrants? It is not hard to believe that the answer is the rich--thus contributing to the growing unfairness in the country's distribution of income and wealth.

The work done by the millions of exploited undocumented immigrants keeps prices lower than would otherwise be the case, thus effectively raising the standard of living for everyone else (not just the rich). Exploiting labor is also why Walmart got rich by selling stuff made in China and elsewhere in Asia where the "inconvenient" costs of reasonably paid labor and environmental controls do not have to be built into the cost of making things. 

At the same time, those who want to deport undocumented immigrants (without understanding the cost to the economy of doing that) point to the long line of people waiting to get into the country legally. The problem there is that a very high fraction of those people are family members of current legal immigrants who may or may not be potential workers and, even if they are, may not have the skills that the economy needs. They are invited in for reasons of family reunification (humanitarian reasons) rather than any reasons having to do with economic need or benefit to the country. 

So, it is way too simple to suggest that more immigrants will make America great again (whatever that really means!). Yes, the entire history of the country has been built around immigration, but we need to be willing to reform our immigration policies in large and important ways, and I have not seen anyone in politics willing to tackle this.

UPDATE: More people or more government spending (i.e., no tax cuts!) on infrastructure and education? Read this piece by John Mauldin and see what you think.