The Concord Coalition and the Global Aging Institute (GAI) today jointly released a new paper entitled, The Vital Role of Immigration in an Aging America. The paper, which is part of a quarterly issue brief series called The Shape of Things to Come, explains that, even as immigration to the United States has been declining, its importance to the nation’s demographic and economic growth has been increasing.
“America’s story can in large part be told as a story of immigrants. Yet as important as immigration has always been in shaping America’s character and culture, it has never been as critical to growth and prosperity as it will be in the coming decades. Several developed countries have made immigration the lynchpin of their long-term strategy for confronting population aging. Meanwhile, the United States continues to lurch from near-term crisis to near-term crisis,” said Richard Jackson, President of the Global Aging Institute and author of the paper.
“In the past, when we had replacement-level fertility, immigrants were what kept the workforce growing. In the future, they will be all that keeps it from shrinking,” Jackson said.
“Immigration has been such a hot button political issue for so many years that it is nearly impossible to get beyond the partisan rhetoric and concentrate on the facts that should be informing policy decisions, said Robert Bixby, Executive Director of The Concord Coalition.
“There is considerable room for principled disagreement on matters of immigration policy. What is not in question is that an aging America would benefit from increased immigration,” Bixby said.
Key conclusions from the issue brief include:
• Growth in the working-age population, and hence employment, has always been an important driver, and sometimes the most important driver, of economic growth in the United States. But as the smaller cohorts born since the end of the postwar Baby Boom have climbed the age ladder, growth in the working-age population has been decelerating, from 1.7 percent per year in the 1970s to 0.8 percent per year since 2000.
• Over the next three decades, according to the Congressional Budget Office’s (CBO) latest March 2021 long-term projections, the working-age population in the United States will be growing at an average rate of just 0.2 percent per year. All of this growth, moreover, will be attributable to net immigration, which the CBO assumes will climb back from its 2021 level of about 500,000 to roughly one million per year, slightly above its average since the Great Recession. Without net immigration, the working-age population would actually shrink.
• Immigration to the United States has been on a significant downward trend since 2015, most accentuated by the pandemic when immigration rates plunged due to factors such as closed borders and restricted travel in 2020.
• Increasing immigration cannot reverse the aging of the population or solve all of the challenges that it poses. Where immigration can have a large impact is in increasing the growth rate in the working-age population, and hence the growth rate in employment and GDP.
• If immigration matches the CBO projections, the United States can expect to see an increase in the working age population of roughly 11 percent over the next 50 years. Without immigration, the working age population can be expected to decline by nearly 16 percent over that same period.
• To look at the numbers another way, by 2075 the working-age population would be one-third larger with immigration than without it. All other things being equal, GDP would also be one-third larger—and a larger GDP in turn makes all things more affordable, including paying for the cost of our aging society.
• Even with the substantial level of net immigration that the CBO projects, real GDP growth will sink to just 1.5 percent per year in the 2030s and 2040s, barely one-half of its postwar average. If net immigration fails to rise back to the level that the CBO projects, the economic outlook would be even worse. On the other hand, if net immigration exceeds the level that the CBO projects, the economic outlook could be considerably better.
• GDP growth of course has two components: employment growth and productivity growth. Immigration obviously increases the first, not just because immigrants add to the total population, but also because they are more likely to be of working age than the native-born population. Although the dynamics are more complicated, most economists believe that immigration also increases productivity growth.
• The potential economic advantages of immigration are widely recognized by economists. Nonetheless, a number of common but largely misplaced concerns about the costs and benefits of immigration continue to distort the policy debate. Perhaps the most frequently heard is that immigrants take jobs from native-born workers. This is of course possible at the firm level, and may even be possible at the industry level. But at the economywide level virtually all economists agree that the notion that there is a zero-sum competition between different groups for the jobs that the economy creates is groundless.
• The truth is that jobs for immigrant workers do not deny jobs to native-born workers any more than jobs for women deny jobs to men or jobs for the old deny jobs to the young. In fact, just the opposite is true. The jobs that immigrants take generate additional income, resulting in additional demand for goods and services that in turn translates into additional jobs. At the economywide level, immigration is a positive-sum proposition.
As we look to the future, it is incumbent upon federal policy makers to take a proactive, strategic approach on immigration policy to strengthen long-term economic prosperity. By taking this step – as other countries have – the United States can ensure a stable working age population even as the overall population grows older.