Low Hanging Fruit

If we told our leaders that there was a magical way to stimulate the economy, generate new tax revenues, increase demand for housing, and boost wages for American workers, would they go for it? Not a chance.

The magic is through immigration. The San Francisco Fed recently published a study which showed increased immigration leads to higher wages for everyone. Over the long run a net inflow of immingrants equal to 1% of employment increases income per worker by around .7%.

Nobel laureate Gary Becker of the University of Chicago has a way for the U.S. Treasury to benefit immediately from increased immigration: charge immigrants a significant fee—say $50 thousand—for the privilege of coming to America. We’re known around the world for our open, opportunity-filled society, and we naturalize about a million immigrants per year. Why not allow immigrants to reduce the deficit by $50 billion?

But the San Fran Fed’s argument is economic, not political: they compared the economies of states with high immigration to states with low immigration. The effects were delayed, but significant. Increased immigration leads to more specialization, higher productivity, and higher wages. Over the period from 1990 to 2007, immigration may be responsible for perhaps 25% of the real wage gains workers enjoyed during this period.

No matter how convinced economists are that immigration creates jobs, though, most voters won’t buy it. It’s too easy to see the short-term issues—another job taken—and miss the long-run effects. But what is unseen is often of more import than what is seen.

Douglas R. Tengdin, CFA
Chief Investment Officer
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