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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By | 2014-09-05T20:14:43+00:00 August 30th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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