April 16, 2013


The Immigration Windfall : A new study shows the potential economic benefits of reform. (WSJ, 4/16/13)

[T]he more important rebuttal is contained in a new study be Douglas Holtz-Eakin, former director of the Congressional Budget Office and now president of the American Action Forum, who finds substantial and "underappreciated" fiscal and economic benefits from more immigration. After surveying the economic literature and Census Bureau data, he sees a multitrillion-dollar gain in long-term U.S. economic output, higher per capita income growth, and lower budget deficits.

Mr. Holtz-Eakin, a free-market-leaning economist, argues that immigrants should be viewed as long-term investments. In the short term, the newcomers may cost more than they contribute, but as their job and language skills improve and their earnings rise over time, the net lifetime impact of most immigrants is positive.

"A benchmark immigration reform"--by which he means more visas to productive workers--"would raise the pace of economic growth by nearly a percentage point over the near term [and] raise GDP per capita by over $1,500," he says. As middle-class Americans who have seen their real incomes decline in the last four years know, that's a huge number.

One reason for this immigration windfall is that young immigrants will compensate for the low U.S. birthrate. The average birth rate in the U.S. has fallen to 1.93 children per couple. The replacement fertility rate is 2.1. America risks following Europe and Japan into the trap of a falling population combined with the spiraling entitlement costs of a graying society. A "population-enhancing" immigration policy is the ideal policy response, Mr. Holtz-Eakin concludes.

Immigrants are also generally productive, entrepreneurial and highly motivated. They have a higher labor-participation rate than native-born Americans, and they also create new businesses at a higher rate. Some have specific technical skills the U.S. needs, while even workers with lesser education or lower skills bring a strong work ethic and a willingness to fill low-wage jobs.

Mr. Holtz-Eakin believes the combination of more immigrants with a tilt in immigration visas away from extended-family unification and in favor of those with greater skills or education would spur faster growth. Some 74% of permanent U.S. immigrants in 2010 were for family unification, "greater by far than any" other developed economy, he says. A major goal of the Senate reform is to reduce family-chain immigration in favor of merit-based economic visas.

Faster economic growth would in turn drive down the budget deficit over the next 10 years by at least $2.5 trillion. 

Posted by at April 16, 2013 9:03 PM

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