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The Importance of Immigration

We are hearing a lot of passionate rhetoric about illegal immigration during this campaign year. Such talk may prevent us from recognizing the importance of legal immigration to the continued vitality of the U.S. economy. Just take a look at the problems that Japan faces with a dwindling, aging population. China is on a path to suffer a similar fate.

An extremely low fertility rate in Japan is causing its population to decline rapidly, with projections of a one-third drop by 2060. At that time, close to 40% of the people will be 65 years of age or older. This demographic atrophy will likely lead to a lowering of the national income. A smaller, older population means less productive output.

In addition, with fewer young people and the older ones living longer, the cost of supporting the elderly increases -- there are less people working to pay for the cost of social services for those receiving government benefits. Young people's disposable income will be reduced accordingly as they shoulder the expense of caring for their elders.

The same issues are beginning to plague China. A recent article in The Atlantic claims that China faces a looming societal crisis, with the possibility that a rapidly aging population is already becoming a drag on growth. China has recently relaxed its one-child policy, but the fertility rate may not ratchet up to cover the gap. As a result, the ability of China to overtake the U.S. as the largest economy in the world is in doubt.

The United States may avoid this fate, even though its fertility rate is not sufficient to be at a replacement level. The reason is legal immigration. The demographic benefits from immigration provides this country with a young work force to keep its economy growing. Moreover, these workers are necessary to pay for the social services that an aging American population requires. Shutting our doors would be an expensive proposition for those who wish to keep Social Security and Medicare afloat.

Many people claim that immigration harms American workers. But a white paper put out by the Economic Policy Institute rebuts these arguments. Immigrants are not mostly poor. They are more likely to have a job than the rest of the population. Nearly half are engaged in white-collar jobs. Immigrants in the long-run don't take jobs away from American workers. Finally, "the most rigorous work on the effect of immigration on wages finds extremely modest effects for native-born workers, including those with low levels of education." As Diana Furchtgott-Roth, an economist with the Manhattan Institute, points out, immigrants take on both low-skilled jobs that are not being otherwise filled as well as help meet the demand for high-skilled jobs (e.g., engineers) for which there are not enough worker

Unless the fertility rate in our country begins to rise, immigration to the U.S. is necessary to prevent the economic decline that Japan suffers from and China faces. We have prospered as a country because of immigrants. As Ms. Furchtgott-Roth notes, immigrants have been a major force in our economic growth. Just consider the examples of Google, Intel, eBay, and PayPal -- all founded by immigrants.

Words of Wisdom

Never ask a man if he is from Yorkshire. If he is, he'll already have told you. If he isn't, why embarrass him. -- Roy Hattersley