May 23, 2023

In Brief: What Happened When Immigration Fell?

Less-skilled Americans got a raise.

The popular consensus among politicians on both sides of the aisle is that high levels of immigration, both legal and illegal, are necessary for growing the U.S. economy. The question that National Review’s Steven A. Camarota asks is, “Is it really true?”

Camarota first observes recent immigration data:

The period between 2016 and 2019 represents a good test of this argument because both legal and illegal immigration fell substantially. If immigration enthusiasts were right, the economy should have sputtered, but that’s not what happened. In fact, GDP grew, inflation remained low, and — perhaps most significantly — wages for less educated American workers not only grew but grew at a faster rate than for high-skill workers.

Indeed, as migration numbers fell under Donald Trump’s presidency, the opposite of the political consensus on immigration happened.

So what, if any, impact did the decline in immigration have? First, total GDP growth in these three years was actually higher than in the preceding three years — 7.5 versus 6.7 percent. The inflation rate, which is now such a concern, was about the same in the first three years of the Trump presidency as it had been in the years before.

And wages got better for working-class Americans.

Importantly, real (inflation-adjusted) weekly earnings for full-time U.S.-born workers without a bachelor’s degree grew 3.2 percent between the fourth quarters of 2016 and 2019, whereas it had actually declined slightly from 2012 to 2016. In addition to an increase in earnings, the labor-force-participation rate — the share of working-age adults either employed or actively looking for work — also increased for the less educated U.S.-born. In contrast, there was little improvement in labor-force participation in the years before 2016, after the rate bottomed out in 2013 as a result of the Great Recession.

Camarota concludes that strictly limited immigration helped the U.S. economy thanks to an old basic economic principle:

Well-known economist Paul Samuelson observed six decades ago: “After World War I, laws were passed severely limiting immigration. Only a trickle of immigrants has been admitted since then… . By keeping labor supply down, immigration policy tends to keep wages high.” The short-lived immigration slowdown a few years ago seems to confirm this truth. It turns out that the basic laws of supply and demand apply to immigration, after all.

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