Economic Studies Agree: Immigrants Help Our Economic Boom

By: Margaret A. Catillaz

Ms. Catillaz, a partner in the Rochester (NY) law firm of Harter, Secrest & Emery LLP, is the President of the American Immigration Lawyers Association.

Four recent Federal Reserve studies demonstrate that immigrants are the key to our continuing unprecedented economic expansion. They also affirm that restricting immigration could stifle business expansion plans, hurt the profitability of American businesses, and call to a halt our nation’s continuing economic growth.

The Federal Reserve Bank of Dallas recently examined the economic and policy implications of immigration. Its study, published in the May-June issue of Southwest Economy, finds that, “Immigrant labor has been an integral part of the current economic boom,” and that new Americans “change the skill mix of workers and feeds further [our] economic expansion.”

The study specifically finds that immigrants accounted for at least one-quarter of the nation’s labor force growth over the past 20 years. The study also notes that the more different immigrants are, regardless of whether they have lower or higher skills than natives, the bigger the economic gains to our nation.

According to the Dallas Fed, immigrants are helping to keep the Social Security and Medicare systems solvent. Immigrants are relatively young, and the influx of younger people into the labor force slows the ongoing decline in the ratio of workers to retirees, thereby maintaining the solvency of pay-as-you-go benefit programs, such as Social Security and Medicare. The study also documents that American consumers and urban areas benefit directly from immigration. Consumers benefit because they buy or use goods and services produced by immigrants. Urban areas benefit because immigrants have revived inner-city neighborhoods nationwide.

Interestingly, the study also reinforces the American Immigration Lawyers Association’s long-held position that the employment-based immigration system is broken and needs to be fixed.  The Dallas Fed noted that, “Improving the immigration laws would alleviate labor shortages.” The study examined possible reforms of employment-based immigration, including raising the number of employment-based visas and simplifying the rules for obtaining and keeping those visas, as well as abolishing the labor certification process, and changing the specialty worker requirements that exclude a majority of professions. In words that could have come from an AILA policy recommendation, the study says, “A better [overall] approach might be to let the market determine which workers come here and let foreign-born workers switch employers to ensure competitive wages.”

The report also addresses the H-1B visa program that is much in the news as measures to increase the cap on those visas work their way through Congress. It finds that the current H-1B cap is insufficient to meet the demands of high-tech firms and other employers, including universities and research institutions. As a result of the increased need for workers with specific skills for projects, temporary visa programs will be needed for the foreseeable future, regardless of any changes in the employment-based immigration system.

 The second Federal Reserve study, published in the same issue of Southwest Economy, finds that immigration not only improves the lot of American workers, but also has sustained the current economic growth without causing inflation. Specifically, the report, written by a Fed Vice President, says that immigrants filled many service-sector jobs during the 1990, thereby adding to the labor supply and the aggregate demand for goods and services in the overall economy. In fact, the study finds that, because Americans take medium- and high-skilled jobs, immigration may have helped generate service-sector jobs by providing people to fill those positions.

A third Federal Reserve study, published this spring by the Federal Reserve Bank of Atlanta, demonstrates that immigration has helped the economies of Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee. The report concludes that “immigrants provide additional skills and workers and, as consumers, greater purchasing power to the U.S. economy, particularly in the Southeast.”

The Atlanta Fed study also puts the lie to many of the arguments put forth by those who would restrict immigration. Specifically, the study finds that immigrants have education levels equal to or higher than Americans; immigrants fill both high skill jobs and low-skill employment vacancies in industries that are “crucial” to the region’s economy; and slightly more immigrants open their own businesses than do natives. As the report concludes, “many negative generalizations about immigration appear unfounded.”

Finally, the latest Survey of Economic Conditions (known as the “Beige Book” because of its cover) bolsters the preceding studies. The Beige Book released June 14 finds severe worker shortages across the economy, and reports that these worker shortages “would be ever more severe in the absence of inflows of immigrants.”  

In the Beige Book, the Fed finds that worker shortages are beginning to hit home and hurt our economy. For example, about half the companies surveyed in the Boston area say their revenue growth may be constrained this year because of worker shortages. Louisiana oil companies say they are having trouble expanding due to a lack of people. Manufacturing firms in St. Louis are restricting output due to the worker shortages. Stores in Minnesota cannot open because they can’t find enough qualified workers.

These reports dramatically demonstrate why Federal Reserve Chairman Alan Greenspan has testified before Congress that the labor shortage is “the greatest threat” to America’s continued economic expansion, and why he repeatedly has said that immigration has mitigated this threat, and will continue to do so as long as the U.S. immigration door remains open. They also explain why Chairman Greenspan has called for uncapping immigration.

This country’s laws need to reflect that immigration benefits all Americans and that immigrants who come to this country to join their families, as well as those sponsored by employers, are central to our continued economic growth. The four recent Federal Reserve reports make that point abundantly clear, as they do that our current immigration system needs retooling lest it thwart the longest boom in American history.