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The Economics of Us Immigration

Immigration has a huge effect on the country, which might be why it's such a polemic topic. Whatever your stance on immigration may be, you have to admit that immigration plays a major role in shaping the nation that we are. While there is a huge emotional factor to the immigration debate, one of the central arguments for immigration lies in a very pragmatic area.

The Economy.

Immigration's effect on the American economy is bigger than most people think, and those looking to limit immigration should think twice about the ripple effects of such a drastic move.

Immigration and the Economy

Every year, economists make forecasts about the country's potential economic growth and GDP. Those forecasts are based on several factors, one of which is an assumption about the population growth as provided by the U.S. Census Bureau. In order for the economy to grow, we need a labor force, and in order to know what our labor force will look like in the coming years, we need to know about our population.

Currently, America's population is growing older. The Millennial generation is having fewer children, meaning more Americans are aging out of the labor force than going into it. This leaves one to wonder, where is all of the labor force in the US coming from?

Immigration Economics

Immigrants are responsible for nearly half of the population growth in the United States, according to the US Census Bureau. As immigrants are generally younger and immigrating with the intention to work, they are currently a more sizable part of the growth in the US labor force than American-born citizens.

Does that mean that immigrants are stealing jobs from American-born citizens?

Not even close. Immigrants are actually providing the man power needed to keep our economy growing at a rate that economists currently predict.

Reports show that approximately 25 million immigrants are currently in the US labor force (although that figure does not distinguish between temporary and permanent residents), and that they often congregate to similar industries such as buildings and grounds maintenance, construction, computer, math or science occupations, or jobs in food preparation or service, while American-born workers are more likely to be employed in sales, business and financial operations, office support or social service jobs.

If legal immigration took the cuts that Trump is hoping to make - reducing it to roughly half the 1.1 million immigrants who arrived in 2015 - we would have many fewer immigrants in the workforce. According to Joel Prakken, senior managing director and co-founder of Macroeconomic Advisers, that could dent the American economy's current growth rate of 2% by about a quarter point and more.

"What's behind that projection is the assumption of labor force growth and productivity growth ... that is a combination of assumptions about the participation rate and the growth of the population" said Prakken in an interview with CNBC.

Immigration economics are a vital part of the health of the US economy. They're not stealing jobs, but rather filling urgent needs in labor shortages across all skill levels. According to a CNNMoney article from this January, “A Federal Reserve survey found labor shortages all over the country." These labor shortages could hurt the economic growth in the long term, and would only worsen if legal immigration was cut in half.

The "stealing jobs" argument comes from a specific, high-profile case in which the Disney Corporation was accused of using H-1B visa workers - aka "highly-skilled workers" to replace American employees with cheaper, foreign-born skilled workers. It turned out the accusations were false, but the scandal was left burning in the mind of anti-immigration lobbyists as a reason to cut visa programs for immigrant workers.

More frequently, immigrants are actually creating new jobs for themselves or others. According to economist Magnus Lofstrom, “Immigrants account for more than 90 percent of the growth in self-employment since 2000.” Immigrants are also more likely than native-born Americans to become entrepreneurs - nearly twice as likely, in fact, says the Ewing Marion Kauffman Foundation in an interview with Forbes.

According to a report by Bloomberg, "the continued inflow of immigrants is needed to support the growing ranks of U.S. retirees, and the entrepreneurial dynamism of immigrants is needed to fight the decrease in new-business formation."

The report goes further to point out that the huge increase in the population during the "Baby Boom" didn't cause wages to falter, but in fact caused businesses and the American economy to flourish. By all logic, an increase in population due to immigration would do the same.

The most convincing studies, which use random influxes of immigrants -- such as the mass emigration of Cubans in 1980 -- show no detectable negative influence of low-skilled immigration on native-born wages, even for the working class; while The Academy of Sciences finds that skilled immigrants have a positive effect on both educated and uneducated American workers, finding that immigrant workers complement the skills of native-born workers.

So if immigration is keeping the economy growing, causes wages to rise and is creating an economy where innovation and growth thrive, what are people arguing against?