Higher immigration means fewer jobs for Americans, or does it?

Last Tuesday, the House narrowly voted to award $70 billion to Federal agencies responsible for immigration enforcement. That was the second multi-billion-dollar infusion of cash to the Department of Homeland Security in a year. Will that money be well spent?

Over the years, I can’t count the number of times I have heard the phrase “immigrants take jobs from U.S.-born people.” The assumption behind this belief is that jobs are scarce and immigrants will take whatever employment is available at lower wages. This idea has been around since at least the 1880s. The Institute for Policy Research at Northwestern University, among other economic research centers, begs to differ.

Recently, in a research paper entitled “U.S. Immigration: Rhetoric and Reality,” academia attempted to address this idea as it stands today. The authors studied immigrants as both employees and entrepreneurs over a five-year period from 2005 to 2010. Their conclusion was that immigrants are far more likely to start companies, and they create more jobs than they take. Their work found that immigrants improved the economic outcomes for native-born workers!

Over the years, various studies have found that many immigrants are likely to start their own businesses. Today, on a national basis, immigrants make up 23.6% of all entrepreneurs. They make up 18% of business owners with employees, according to GovFacts, a non-partisan company that gathers government information.

More than 40% of Fortune 500 companies—including Google, Tesla, and Pfizer—were founded by first or second-generation immigrants. Jensen Huang, the co-founder of America’s most important company, Nvidia, was born in Taiwan and moved to America at age nine. Today, that would not be possible.

The truth is that immigrants play a larger role in driving American innovation than many Americans care to admit. Immigrants represent 16% of all U.S.-based inventors and are responsible for 23% of all patents filed in the nation. Do yourself a favor and read Huang’s background.

Hopefully, the information above might help to dispel the notion that this decline in immigration simply means finding a nanny or housekeeper is more difficult than it was in the past. The hit to American productivity from this immigration slowdown is much deeper than that, and its impact could stretch far longer than a single administration.

Another research organization, The Yale Budget Lab, found in a study entitled “Lower Immigration Means Lower Productivity Growth” that “even a temporary immigration slowdown would leave as many as 4.6 million fewer working-age people than it would otherwise have had by 2033.” They believe that the gap will persist for decades.

By 2052, economy-wide productivity could be lower by between 0.25% and 0.44% (currently at a 0.8% annual rate) due to a decline in new business creation. It could even be lower depending on how long Americans insist on the current immigration policies.

I ask myself how many AI breakthroughs will occur in other countries by those who have been denied entrance into the U.S.? Who will replace a generation of Baby Boomers like me with the skills and experience that we represent? The country is already feeling the gap caused by our retirement. The melting pot is practically empty, readers, and there are fewer and fewer people to fill it.

Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires.  Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc.  None of his commentary is or should be considered investment advice.  Direct your inquiries to his website at www.schmicksretiredinvestor.com. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.