A nation of immigrants in need of immigrants

The U.S. doesn’t have an immigration crisis. Illegal immigration slowed a decade ago, and overall anti-immigration sentiment is down. But some immigration opponents question why the U.S. needs so much legal immigration in the first place. Presidential strategist Steve Bannon, for instance, said in an interview last year that legal immigration is “the real problem”:

“We’ve looked the other way on this legal immigration that’s kinda overwhelmed the country … 61 million, 20 percent of the country, is immigrants — is that not a massive problem?”

Bannon’s numbers are slightly wrong — the foreign-born population is just under 15 percent. But more importantly, the idea that immigrants constitute a “massive problem” is completely misguided.

High immigration levels are the historical norm in the U.S. Recent immigration levels are about the same as those of the late 19th and early 20th centuries.

Data on the foreign-born percent of the U.S. population go back only to 1850. But data on new arrivals go back even further. As economist Lyman Stone has documented, the early 19th century saw enormous influxes of German and Irish immigrants that, in percentage terms, dwarf anything that has come since.

These immigrants, the ancestors of tens of millions of Americans, built the U.S. Without them, the U.S. would now be a sparsely populated country like Australia, with a population of less than 25 million. The nation probably wouldn’t be the home of world-beating technology industries. The industrial might that allowed the U.S. to triumph in World War II and the Cold War would never have existed, and the Soviet Union would have dominated the globe in the second half of the 20th century.

That was then. What about now? The big reason that the U.S. needs to keep immigration going is to combat the aging of the population. Like almost all other rich countries, the U.S. doesn’t produce enough children to replenish the population. About 2.1 children per woman are needed to keep a country from shrinking, but the U.S. only has about 1.9.

Without immigration, the U.S. would look a lot more like Japan — a shrinking, graying society, with young people crushed under the economic burden of providing for the elderly. Social Security and Medicare would become impossibly expensive, as the tax burden for a larger and larger number of benefit recipients fell on a shrinking base of young taxpayers.

Immigrants — young, hardworking newcomers who help provide for the elderly native-born — are the only thing saving the U.S. from that fate. During the 1950s, when fertility was very high, low immigration levels weren’t a problem. But now, with the baby boom heading toward retirement and even the modest fertility rise of the 1990s and early 2000s fading, immigration is the only option for keeping the economy vibrant.

But that’s not the only reason the U.S. needs immigrants. Newcomers also start lots of businesses — far more, per person, than the native-born. As economists Sari Kerr and William Kerr show, 27.1 percent of entrepreneurs are immigrants, and 37.1 percent of new companies have at least one immigrant founder.

Why is this true? Native-born Americans often have to take over family businesses, leaving less opportunity for them to start new ones. Also, the people who immigrate to the U.S. tend to be risk-takers — after all, moving to a new country is itself a huge risk. That means that immigrant entrepreneurs are key to fighting the malaise of reduced dynamism that has afflicted the economy since the turn of the century.

There’s a third reason the U.S. economy needs immigrants — market size. Companies naturally want to locate their offices, factories and research centers near the places where they sell their products. That’s why so many multinational companies have been investing in China, despite rising labor costs there. The U.S. can’t hope to match Asia as a population center — the number of people in China alone is four times larger. But because the U.S. is richer and more productive, it’s still a crucial market for multinational companies. That’s why so many companies build offices and factories in the U.S., providing jobs for native-born American workers.

But as the world’s economic center of gravity shifts toward Asia, the U.S. will have to work harder to maintain its advantage. A stagnant or declining population will make it much harder to convince the world’s companies that the U.S. is a place they need to be. Immigrants, especially the high-skilled, keep the U.S. indispensable for companies.

So there are many reasons why the U.S. depends crucially on continued immigration. Far from being a problem, as Bannon asserts, immigrants are a pillar propping up U.S. economic dominance. Knock out that pillar, and the edifice could very well crumble.