South China Morning Post: “The evidence is clear: anti-immigration is bad for economic growth”

by Joseph McKeown

Immigration is key to economic growth, argues Jason Furman, professor of the practice of economic policy at the Harvard Kennedy School and former chairman of the Council of Economic Advisers for the Obama administration, in a recently published opinion piece. In the piece, Furman says that the rise of populist nationalism (and anti-immigrant sentiment) in societies around the world will ultimately cause their economies to suffer. In response to recent slow economic growth—advanced economics have averaged 1.2 percent growth over the past decade, down from an average of 3.1 percent during the previous twenty-five years—some societies have turned to nationalism and become “less generous, less tolerant and less inclusive.” As it did in certain decades of the 20th century, Furman writes, this has led to increased opposition to immigration and, to some extent, free trade. All this, Furman argues, “will exacerbate the economic slowdown that fueled its emergence.”  

It’s a vicious cycle, but a helpful way out is to embrace immigration, he argues, because of the many economic benefits it provides. Immigration is more important than ever because aging populations and retirements combined with lower birth rates will likely lead to worker shortages. In the European Union, immigrants made up seventy percent of the labor-force growth between 2000 and 2010. In the US, immigration helps the workforce grow, since relying only on native-born workers would shrink the workforce substantially. Importantly, taxes paid by immigrants supports pensioners and retirees.

Immigrants also increase per capita gross domestic product by increasing productivity, mainly through being entrepreneurs and starting businesses. Foreign nationals started forty-four percent of new businesses in Germany in 2015. In France, the Organization for Economic Cooperation and Development estimated that immigrants participate in twenty-nine percent more of the entrepreneurial activity than native-born workers. In the US, immigrants take out patents at two to three times the rate that native-born workers do. 

While many who oppose immigration believe that immigrants take away job opportunities and reduce wages for native-born workers, evidence has shown that immigrants are likely to increase wages. A recent study in France shows that each one percent increase in immigrants’ participation in a specific job department raises the native-born workers wages by 0.5 percent. Furthermore, immigrants not only contribute to the size and productivity of the workforce, but they often complement the skills of native-born workers, which ultimately helps everyone earn more. 

Furman writes: “All countries face a choice when it comes to immigration. They can pay an economic price to follow a more exclusionary course, or they can reap the economic benefits from greater openness.”