Immigrants Are the Key to Prosperity

ellisisland Immigrants Are the Key to ProsperityA study released today by the Federal Reserve Bank of San Francisco has found the key to America’s economic recovery. There is a certain type of person who can provide our nation with a boost to employment, efficiency and investment. There’s just one catch. That type of person wasn’t born here. 

The San Francisco Fed compared states with different numbers of immigrants and found that, far from draining resources away from those born in the U.S.A., newcomers to our country boost job prospects. “[T]he economy absorbs immigrants by expanding job opportunities rather than by displacing workers born in the United States,” the report says.

Over the long run … a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.

How is this possible? The economists say that, as one might expect, immigrants and U.S.-born people have different skill sets. Less-educated Americans become miners or manufacturers, whereas their immigrant brethren work on farms or “personal services.” Those with more education split along different lines: U.S.-born nerds go into teaching, management and nursing; immigrants go into engineering, science and medicine. And, as would please Robert Torrens, specialization and comparative advantage do the rest.

If anyone were to take this piece of research seriously from a policy perspective, the U.S. economy’s prospects might improve dramatically. But we’re not holding our breath for that.