Earlier this month, Cleveland Federal Reserve President Loretta Mester made a speech to the Cato Institute in Washington regarding the future of the U.S. economy. Her outlook was not positive. One of her issues was that a restrictive immigration policy will adversely impact the economy. Mester said the current administration needs to generate “policies that increase immigration, not reduce it.”
Her remarks on immigration pinpointed the policies of the current administration. The White House has been devising policies to curtail the number of foreign nationals coming into the country, including legal, highly educated professionals. In response to these policies, Mester remarked:
“Policies that increase the growth and productivity of the workforce would address not only fiscal imbalances but the downward pressure on longer-run growth from demographics or other sources. Policies that increase immigration, not reduce it, that support continuing education, that encourage R&D and innovation, and that provide incentives, so people work longer should receive attention.”
A study by the National Bureau of Economic Research found that a 1 percent increase in immigrant employment per state leads to .5 percent increase in income per worker. According to a report by the Small Business Administration, immigrants generated $67 million of the $577 billion in U.S. business income as estimated from the 2000 U.S. Census data.
Immigrants are entrepreneurs and innovators. 40 percent of Fortune 500 companies were founded by immigrants or the children of immigrants. And more than half of U.S. startups valued at $1 billion or more – known colloquially as “unicorns” – were started by immigrants.
A 2016 study of 87 startups worth $1 billion or more, it was found that 44 were founded or co-founded by immigrants. The group of 44 was valued at $168 billion and employed an average of 760 people per company.
As to date, no sweeping changes have been made, but the public has been bracing for new policies and their implications since Francis Cissna was named director of USCIS in October. Ben Johnson, the executive director of the American Immigration Lawyers Association has said that, “The goal of the administration seems to be to grind the process to a halt or slow it down so much that they achieve a reduction in legal immigration through implementation rather than legislation.”
Trump backed legislation like the RAISE act which calls for a 50% reduction in legal immigration over the next 10 years and replacing the lottery with incentive-based immigration, make clear that the goal is to drastically reduce the number of legal immigrants entering and working in this country.
Loretta Mester cautions against an exclusionary stance on immigration. She remarked, “Depending on how such policies are implemented, they could ultimately hurt the economy’s longer-run growth prospects, leaving the fiscal outlook even worse.”
It’s clear that immigrants have a profound impact on the U.S. economy. To support a thriving economy, policy makers must devise policies that that support the reasonable integration of high and low skilled foreign nationals into our workforce.