Economic activity in cities is the life blood of an economy. The U.S. conference of Mayors estimates that cities generated almost 91 percent of aggregate U.S. gross domestic product and about 88 percent of total employment in 2024. Prosperous cities increase national output and employment, raising the U.S. standard of living.
While the President claims his economic policies will invigorate the economy, his immigration policies hit urban areas hard. This stifles economic activity in these areas which hurts the U.S. economy.
The President’s approach to immigration has focused on arresting and deporting undocumented immigrants. For legal immigrants, the Administration is ending the Temporary Protection Status program and the refugee resettlement program. They are cancelling visas of some foreign students, especially for those individuals who spoke out in support of the Palestinians in Gaza. Country travel bans along with longer wait times for visas will also reduce immigration. These actions, in the future, deter both skilled and unskilled individuals from migrating to the U.S. This will slow the future formation of new businesses, innovation, and foreign investment into the U.S., especially in cities.
Immigrants tend to settle in large metro areas. This tendency is observed in population data. If we look at the ten largest cities measured by population, immigrants make up almost a quarter of the area’s population. In 2023, the highest share of 42.7 percent was in the Miami metro area. The lowest was 12.0 percent in Philadelphia.
There are a number of reasons for this outcome. A large existing immigration population in the city provides a network that new arrivals can use in finding a job. The concentration of people creates an environment where new ideas can easily be transferred between individuals. These knowledge spillovers are a key driver of economic growth. Immigrants are often the source of these new ideas. Cities with a large number of job opportunities and high wages are also places immigrants choose to locate.
Immigrants are very entrepreneurial. There are a number of reasons for this behavior. A decision to leave their home country and settle in a new country like the U.S. is a risky choice. This suggests immigrants are individuals who have a high tolerance for risk. This tolerance for risk is a characteristic associated with people who start new businesses. Other reasons why immigrants start new businesses are language limitations and job market discrimination.
While immigrants make up approximately 14 percent of the U.S. population, they start about 25 percent of new businesses. Immigrants or their children founded almost half of all Fortune 500 companies in 2024. Increasingly, today’s immigrants are more educated. Immigrants represent 16 percent of inventors but generate 25 percent of inventor output.
While most of the President’s immigration policies target undocumented immigrants or those with criminal records, the policies set a tone. Immigrants are no longer welcome in the U.S. Little or no effort is directed at establishing a pathway to citizenship for undocumented immigrants who have worked in the U.S. for years. They have raised a family and may be married to a U.S. citizen. These types of disruptions are making the U.S. an unattractive destination for people who want to work and prosper.
The President claims he wants to increase the amount of foreign investment in the U.S. He misses the fact that the presence of immigrants increases foreign investment into the U.S. Much of this investment ends up establishing and expanding businesses in urban areas.
Recent research supports this claim. Konrad Burchardi and his coauthors find that a doubling of residents from a particular country in a U.S. County increases the chances for foreign investment from that country by four percent. Investing abroad faces a number of challenges. They include language, complicated laws, and regulatory differences that take time to understand. Having people from their country living in the U.S., who are familiar with these complexities, makes understanding this environment easier. The President’s policies ignore this channel that promotes foreign investment in the U.S.
The President’s policy of deporting foreign-born individuals, many of which have no criminal record, does not make Americans better off. Instead, the economies of urban areas throughout the country will be harmed. As a result, these policies will inflict long-term damage on the U.S. economy. It will not make our cities and America great again.
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