cComprehensive immigration reform is a big step in boosting the country’s secular economic growth.
The nonpartisan Congressional Budget Office says immigration reform could boost the nation’s growth rate and be an important step toward solving the looming bankruptcy of the Social Security and Medicare trust funds. Immigration reform will increase the number of people working. More workers directly translates into higher long-term growth. In addition, more workers mean higher revenues for entitlement programs, including Social Security and Medicare. Immigration reform would improve the dependency ratio in the United States, which has too few workers to support a larger retired population. Demographics are destiny.
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The University of Pennsylvania’s Penn Wharton Budget Model makes it clear that immigration reform is good policy. GDP increased. Immigrants work harder to “save wealth for later consumption.” The model shows that an increase in labor supply lowers wage inflation. The capital return will be higher. So the savings are higher. A higher return on capital will also attract more foreign capital needed for new investment and to finance the structural budget deficit. As capital investment increases, productivity increases, which over time leads to higher wages for everyone. Of course, stronger economic growth created by more workers and higher productivity leads to higher tax revenues, especially tax revenues to fund Social Security and Medicare. Immigrants work – they don’t retire. Importantly, immigrants do not access welfare programs disproportionately. Immigration reform leads to smaller deficits and extends the fiscal stability of entitlement programs.
In addition to increasing the long-term rate of economic growth, addressing the structural budget deficit, improving the balance of the Social Security and Medicare trust funds, and lowering wage inflation, comprehensive immigration reform would help to address the critical shortage of medical doctors and health care. workers in rural geographies of the country. Hospitals are closing in rural America because there are no doctors and nurses. In rural America, people die needlessly.
In order to maintain the US comparative advantage in technology, especially advanced technology and in the production of high-value-added industrial goods, immigration reform is urgently needed. Between 40% and 70% of technology and advanced manufacturing workers are foreign-born. U.S. technology and manufacturing companies are asking for more visas for workers with advanced skills who want to immigrate to the U.S. Canada understands that high-tech skills are in short supply around the world. Canada is fast-tracking workers with science, technology, engineering, and math skills. The US should do the same. High human capital is necessary for an advanced rich economy.
Comprehensive immigration reform can accelerate the positive process of dynamic destruction. In a vibrant economy, dynamic change is necessary. Dynamic change is seeded by new business, which is the real engine of growth in the US New business, not small business, not big business, is an essential part of a thriving dynamic economy. Immigrants disproportionately establish new businesses, especially new businesses in emerging industries and technologies. Importantly, the data show that new businesses started by immigrants create more jobs. Immigrant businesses are “job creators, not job takers.”
Comprehensive immigration reform is good policy.
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James Rogan is a former US foreign service officer who later worked in finance and law for 30 years. He writes a daily note on finance and economics, politics, sociology, and criminal justice.
