How to Gain $45 Trillion
Just by opening a door
In a world increasingly questioning migration and immigration, it’s almost blasphemy to suggest that we ought to crack our doors open a bit further. But the data are clear. Migration is a vast and largely untapped source of economic growth and development. To increase human capability, economic potential, and innovative capacity, border controls should be loosened.
What About Our Jobs?
The most common refrain to expanded immigration/migration is the false notion that “immigrants take our jobs,” therefore immigration should be restricted to protect local employment and wages. This is a position shared by extremists on both ends of the political spectrum, from Donald Trump to Bernie Sanders.
While some anti-immigration advocates might actually believe this to be true, many use the “jobs replacement” excuse as cover to disguise what is actually deep-seated xenophobia.
But the notion that immigration results in fewer jobs, opportunity, and wages, is nonsensical and false. This notion, when disputed by economist David Frederick Schloss in the late 19th century, became known as the Lump of Labor Fallacy. The fallacy holds that there is a fixed amount of work to be done that is distributed to workers. Therefore, if immigrants come into a country, they are taking jobs that otherwise would have gone to the “native” population.
In reality, as confirmed in data, an influx of immigrants increases both the supply of labor, as well as the demand for labor. Immigrants need homes, cars, and consume too, they attend school, they go on vacations, just as the “native” born population does.
This phenomena is perhaps best illustrated in research done on the Mariel Boatlift. The Mariel Boatlift was an event that saw the mass emigration of Cubans to Miami, Florida in 1980. The event increased the Miami labor supply by some 7 percent in a short period of time.
Despite a rapid increase in the labor force, there was no discernible impact on wages or unemployment in Miami. Research indicated that the labor market was able to quickly absorb and adapt to the influx of immigrants, as the surge of labor was accompanied by a surge in demand for that labor.
It’s worth noting that this event occurred against the backdrop of an economic recession in the United States and still didn’t move the needle on unemployment or wages. This suggests that efforts by the Trump administration to restrict immigration to “protect American jobs” during the Covid-19 recession, are foolish at best, and harmful or hateful at worst.
But if you don’t believe the research, use your common sense. The United States has been welcoming immigrants for centuries. If immigration made the country poorer, the United States would be the poorest country on the planet!
Anti-immigration crusaders stand counter to research data, historical evidence, common sense. The very fact that they single out immigrants is telling. If fewer workers meant more growth, better wages, and more opportunity, why aren’t they also encouraging fewer native-born children? After all, by their logic, fewer children today means better wages tomorrow.
The answer is that, for many, there is no logic, just thinly veiled xenophobia.
We have established that immigration doesn’t increase unemployment or reduce wages, but what about the economy as a whole? On that front, immigration is unquestionably a net positive.
Immigration has been one of the key ingredients that has kept the US economy growing while other would-be “superpowers” floundered. Japan was once the world’s second-largest economy, and outpaced US economic growth from the 1950s through the 1980s. Many predicted that Japan would overtake the US in the 90s. Yet that never happened.
In fact, Japan’s economy has not grown at all since 1990. Why? One reason is Japan’s restrictive immigration policies held it back. Japan’s age dependency ratio skyrocketed as too few workers entered the workforce relative to those who retired, driven by low local birth rates and little inward immigration. With this rising age-dependency ratio, Japan’s economic productivity and its ability to innovate waned.
In the US, a staggering 45% of Fortune 500 companies were founded by immigrants or their children. Together, these companies brought in $6.1 trillion of revenue in 2018 alone. Immigrants overall have founded 20% of all American businesses.
In STEM fields (Science, Technology, Engineering, and Mathematics), non-Americans account for an astonishing 54% of master’s degrees and 44% of doctorate degrees issued by American universities. Many of these degree recipients choose to stay in the US after they graduate and work for American tech companies like Google, Microsoft, or Tesla.
The data are clear, for America at least, immigration has been a key driver of economic growth and technological innovation. But what about the world as a whole?
Open Doors, Increase Growth
Models suggest that if every country were to eliminate migration barriers, global economic growth would accelerate. Not a little, a lot. Untethering people and allowing them to move freely about the planet could unlock anywhere from 50 to 150 percent of new GDP globally. That’s approximately adding $45 to $135 trillion in new global economic activity.
This economic activity means higher wages, more opportunity, and more rapid technological innovation. It means more children going to school. It means better healthcare. It means more prosperity to more people than ever before.
We don’t need to completely erase borders to get a huge economic boost, however. Even partial easing of migration barriers can increase global GDP by tens of trillions of dollars.
The world has long since comes to terms with the reality that free movement of goods and services is best for the economy and human opportunity. But the concept of the free movement of labor lags far behind. While perhaps completely open borders is impractical, countries that overly restrict migration do so at their own peril. For a better and more prosperous world, humanity needs to start opening more doors. Opening doors for “them” also opens doors for “us.”