An Open Door to Immigrants Is An Open Door to Wealth
Some supporters of the immigration bill endorsed by President Trump claim the legislation would move the United States toward an immigration system more like Canada’s. As a Canadian, let me offer two pieces of advice: 1. It would do no such thing. 2. In Canada, there is growing support for allowing more immigrants, not fewer. In fact, economic growth demands it.
The immigration bill introduced by Senators Tom Cotton and David Perdue would slash legal immigration to the United States by 50 percent – from a million to 500,000 – in 10 years. Conversely, Canada already allows 300,000 immigrants per year. Considering that the U.S. economy and population are 10 times as large, Canada is now permitting six times as many immigrants in relative terms as the Cotton-Perdue bill would allow in 10 years. But Canada is not likely to freeze immigration levels. The Canadian Government’s Advisory Council on Economic Growth has recommended increasing immigration levels by 50 percent over five years. In fact, the Council believes that even that level isn’t high enough, saying that for immigration to fully offset the impact of Canada’s demographic squeeze annual immigration would need to double.
Proposed cuts to immigration levels is based on one of the most fallacious but persistent economic myths, the notion that more people lead to higher unemployment and reduced wages. The lump of labor fallacy holds there is a fixed amount of work – a lump of labor – to be done within an economy. But the number of jobs in an economy is not fixed. It can go up or down for many reasons. Immigration, for example, can increase the size of the economy, thus spawning more jobs. New workers can bring capabilities that are not available in the native workforce, such as in information technology. It can create new jobs by expanding the economy, as when immigrants create new businesses. Moreover, far from restraining growth, an expanding population is crucial to it, by growing the workforce and increasing productivity. This is especially important for societies – like both the United States and Canada – that are seeing a decline in the relative size of the working age cohorts of the overall population.
The declining relative size of the Canadian workforce is one of the principal reasons that Canada’s Advisory Council on Economic Growth is recommending a significant increase in legal immigration. A recent Conference Board of Canada report noted that Canada’s working age population is shrinking, while the share of the population over the age of 64 is expected to rise from 16 percent in 2015 to 23 percent by 2030. Attracting more young foreign talent will help to partially offset the fiscal impact of these demographic trends, spreading the cost of elderly benefits and healthcare across a larger base of working-age residents
That is just one of the reasons immigration is vital to a dynamic economy. It facilitates the flow of talent, drives forward entrepreneurship, diversifies sources of growth, draws critical skills, and increases bilateral trade with source countries and regions. It encourages the creation of new small businesses, including high-growth businesses, and helps small companies scale into large ones. If you want to get a sense of how important immigration is to the success of a modern economy, just visit Silicon Valley some time. Or look at the highest-growth companies listed with NASDAQ and consider how many of them were founded by immigrants.
Those who think cutting back on immigration will reduce unemployment and increase wages for the semi-skilled should think again. The decline in relative working age population will spawn more pressure for increased productivity, driving the introduction and dissemination of new technologies at an even faster clip. This will eliminate more jobs, driving up unemployment and driving down wages for those who do not have the most up-to-date skills. Anyone who wants to see higher wages and lower unemployment would be best advised to focus on education and skills training. Immigration rules do not offer a magic solution.
Those looking to Canada for guidance would be well-advised to embrace increased immigration, not cut it back. But if Americans do opt for the latter, please do your northern neighbors a favor: Refer those you deny the opportunity to help you grow to the nearest Canadian consulate for information on how to re-locate in Canada. We’re not closing the door to wealth here.