4 Facts Regarding Immigration and the American Economy Worthy of Your Consideration

This week President Trump’s administration ended the temporary protected status of more than 200,000 people living in the United States from El Salvador. These immigrants have been allowed to live in the US since the 2001 earthquake devastated parts of their homeland.

 immigration and american economy

 

See these prior End of History articles relating to immigration issues:

 

I have addressed the issues of immigration, President Trump, and media hype in former articles. While I won’t review all of those points here it is worth noting that President Trump did not make a new policy – he simply refused to renew a temporary policy that has been rubber stamped for more than a decade. At any point – today, tonight, or tomorrow – a functional and deliberate Congress could pass a law that allows these immigrants to become US citizens after having lived here for such a significant portion of their life.

 

Meanwhile, as the media fire storm has already kicked in regarding this week’s announcement, here are four facts (not opinions but data backed facts) worth our consideration regarding immigration and the American economy.

 

Americans Are Getting Older

 

In 2015 more people died in the US than any year since 2000. This was not due to a great national tragedy or crisis but the simple aging of America’s population. The Greatest Generation and the Baby Boomers are dying of old age, even while they have achieved living a longer life than any prior generation of Americans. In that same year we had the lowest population growth we have experienced since the Great Depression. Our parents and grandparents are living longer but when they pass away they are not being replaced with as many new births because the younger generation is not having as many children as our predecessors. While these results were recognized within the census report in 2016 the effects of this demographic shift was already plainly apparent in American life and shifting political winds.

immigration and american economy

For example, due to the longer life span of older Americans the weight of programs such as Medicare and Social Security are resting heavily upon the middle class. The poor do not pay taxes. The middle class is not being replaced or supplemented by as many younger workers because the birth rate has fallen in the US. As a result, members of the shrinking middle class are carrying a longer and heavier tax burden that is necessary to maintain the promises made to the older generations. Unsurprisingly this has caused a growing resentment among the middle class, not against the elderly but against a system which they are financing but whose promises they no longer seem to be benefit from. That resentment has taken the form of various political shifts on the national scene, not least of which was the election of Donald Trump to the presidency.

 

Immigration and the Tax Burden

 

In prior generations when America or other nations (we aren’t the first to experience this demographic phenomenon) have encountered this conflict between a lowering birth rate and fewer taxable workers available to support the promises made to citizens retired from the work workforce, there was another option – immigration. At several points in American history young immigrants have entered the country and relieved the burden upon the middle class. They worked jobs, paid taxes and the problem was resolved.

immigration and american economy

This potential within relaxing immigration limits is not something frequently discussed or analyzed by America’s leaders and policy makers. Immigrants, like the poor, are frequently seen as yet another burden to be paid for and supported by the shrinking middle class. There is some truth to this. While there is a popular narrative regarding the immigrant entrepreneur who finds the American dream, the reality is that most immigrants fill the labor roles that America’s middle class and service oriented economy have left behind. As a result of this immigrants at the lower end of the income spectrum are highly vulnerable to fluctuations and downward trends in the economy. In 2011 19.9% of immigrants lived in poverty, up from 16.5% the year before, and 6% higher than native born citizens living in poverty. Higher poverty rates mean more government entitlements and safety net programs being financed by the middle class.

 

While this number is large it overlooks the larger selection of immigrants who are working alongside America’s middle class, paying taxes and helping to finance the system. Even undocumented immigrants pay taxes. In 2014 there were 8 million unauthorized immigrants making up 5% of the American workforce. An estimated 3.4 million of these paid Social Security taxes in that same year. They and their employers paid more than $13 billion in payroll taxes in 2010. On a side note, because these are undocumented immigrants they are paying into a Social Security system they will never be allowed to benefit from. They also contribute $12 billion a year to state and local taxes.

 

Immigrants Who Won’t Be Returning

 

Of course legal immigrants contribute an even higher proportion of their earned income to the tax burden than do illegal immigrants. If and when they can accumulate enough wealth and income they are able to ascend to the middle class and pay income taxes in addition to payroll taxes. A question we should consider is what effect will an announcement such as that regarding the Salvadorans temporary protected status have upon the legal immigrants’ contribution to the US tax system? It is unlikely that all 200,000 of these immigrants will return to El Salvador. More likely is that many of these will transition to illegal immigrant status. This guarantees a limitation on how much of their income they will contribute to the tax system thus foregoing the shared burden they might have supported with the shrinking American middle class. Incidentally, it also means higher budget expenditures (tax dollar beings strained again) for the Department of Homeland Security as they seek out these illegal immigrants.

immigration and american economy

For many Americans this is fine because I have so far overlooked one single important factor. Higher levels of immigrants mean less jobs for native born American workers! It all more than balances out in the favor of the American economy and the middle class when immigrants are removed and immigration is reduced.

 

Infrastructure Jobs

 

One of the key agenda items in 2018 for President Trump is rebuilding America’s sagging infrastructure. On the surface this seems like a no brainer. When the infrastructure improves the economy improves. Better roads, bridges and railroads mean better and more efficient transfer of goods, lower prices, and more long-term income in American pockets. That is only the long-term effect though. In the short-term it means millions of new jobs. This scenario has been played out before in American history. From the transcontinental railroad to the New Deal initiatives during the Great Depression, building American infrastructure has always resulted in a huge upside to the American economy especially when it comes to providing jobs for hard working Americans.

immigration and american economy

This is the downside though. America has an enormous skills gap. This is a not frequently discussed but enormous obstacle that stands in the way of American infrastructure being rebuilt and upgraded. Even while current unemployment numbers are very low there are 5.6 million jobs that cannot be filled. They cannot be filled because America lacks the trained workforce to fill them. Too many of our young people went to college rather than trade school or they have pursued no advanced education at all. We have too many people with degrees in theater and not enough who know how to weld. As author Ed Gordon explains:

 

“People don’t have the liberal arts and thinking skills and specific career training they need in today’s technologically advancing world. We need the skills to keep this very complex technology working. This includes medical technology, aerospace, automotive, etc. We need people to build airplanes, keep the lights on at the Super Bowl, fix high-tech cars and plumbing systems, and teach kids writing skills.”

 

This dilemma poses as an incredible win-win opportunity for Americans and the immigration system. Why could immigrants seeking a better life not be trained to fill the holes in America’s skills gap? Recognizing that a large portion of income earned by immigrants goes towards remittances sent back to their families in their native countries, why couldn’t the financing for this training be done in partnership between America and nations like El Salvador.

 

If we do not train and utilize immigrant labor for rebuilding American infrastructure we have only two options. We can forego an infrastructure rebuild and let America’s roads, railroads and bridges continue to decay or we will have to outsource these jobs to other nations around the world and thus lose much of the tax benefits to the American economy.

 

We Are Not Without Solutions

 

The issues of immigration and America’s shifting demographics are not impossible to resolve and often the solutions can be found in the most surprising of places. Unfortunately, a lack of solutions is not what is driving the current political environment. We are being driven by polarized rhetoric and sound bytes that may please the next hour’s news audience but does nothing to address the real life dilemmas moving toward this generation and the next at a faster and faster rate.

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