The coronavirus
(COVID-19) pandemic has triggered dramatic, deteriorating economic conditions
across the country. At some point, however, the effects of the shock will
diminish. And the buffeted U.S. economy emerging from the health crisis will
face some familiar structural challenges that predated the virus—among them,
the slowing growth of its workforce.
Slowing labour force growth is the product of a
number of factors—the aging of the U.S. population, retiring baby boomers and
declining birth rates. But another element is immigration. Immigrants and
their children contributed more than one-half of workforce growth in the past
two decades.
This is of particular concern
because of a recent sharp drop-off in immigration from what had been typical
levels. Net international migration to the U.S. declined from more than 1
million people in 2016 to just fewer than 600,000 in 2019, a 43 percent drop,
according to Census Bureau estimates (Chart 1).
Less immigration and more foreign-born emigration
have driven the recent decline. Measures of inflows include temporary and
permanent immigrants, such as foreign workers and students and family members
of U.S. citizens. They exclude transitory visitors, such as tourists, commuters
and business travellers.
There have been previous periods of sharply
declining immigration but not during economic expansions, as occurred in recent
years. For example, net international migration fell by more than 40 percent
between 2001 and 2010, a period that spanned two recessions. The U.S. economy
expanded beginning in 2010, with growth picking up in the second half of the
decade and unemployment rates reaching 50-year lows. Immigration typically
accelerates when labour markets tighten, with employers turning increasingly to
foreign-born workers to fill vacancies for which domestic workers are in short
supply.
Data suggest that legal inflows of immigrants who
are likely to remain in the country permanently account for the largest
numerical declines since 2016. Specifically, from fiscal year 2016 (12 months
ended Sept. 30) to fiscal 2018, new arrivals of legal permanent residents fell
14 percent (89,351 people), and refugees declined 74 percent (62,584 people)
(Chart 2).
The number of refugees dropped sharply not because
there are fewer refugees in the world, but because the U.S.-government-set
refugee quota fell from 110,000 in fiscal 2017, to 45,000 in 2018, to 30,000 in
2019 and to 18,000 in 2020. The president, in consultation with Congress,
annually sets refugee quotas, which provide a ceiling on the number of refugees
resettled.
It is also possible that the desire to immigrate to the U.S. has
diminished. The number of visas issued in a given category is a function of
supply (visas available) and demand (applications for visas). The drop-off in
the demand for visas is apparent when looking at student (F-1) visas, for
example (Chart 3).
Student visa applications and issuances are both down 43 percent since
2015. However, this change cannot be readily attributed to any recent U.S.
policy, process or regulatory change. The drop-off began before 2016, and visa
refusal rates are actually down, not up, since that time. Other factors that affect
the demand for visas include schooling costs and home-country conditions.
Meanwhile, immigrants who roughly form 15 percent
of the U.S. population are
responsible for about a quarter of U.S. start-ups and patents each year, and
that percentage has been increasing for decades. Moreover, employment growth is faster for
businesses started by immigrant entrepreneurs as opposed to those launched by
the native-born over three- and six-year horizons.
America without its immigrants and their children —
many of whom are today on the front
lines of
the battle against this pandemic — would likely be in a much worse position
than it is now. The thought that America without immigrants would be on a
faster path to economic recovery is absurd and a very dangerous myth to
propagate.
References:
1. Without Immigration, U.S.
Economy Will Struggle to Grow, Pia Orrenius and Chloe Smith, April 9, 2020
2. Suspending Immigration Would
Only Hurt America’s Post-Coronavirus Recovery, Dany Bahar, April 22, 2020
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