The economic benefits of immigration and the lies of populist propaganda

Immigration is the number one political concern for Americans for the third month in a row, wrote Rana Foroohar on 8 July in the Financial Times. 

Something similar is happening in the UK, in our native country, Cyprus, and in Europe generally. Immigration has become the source of escalating political friction.

Despite all that, and contrary to the prevailing feeling, immigration “is greasing the wheels of the US economy”, according to Rana Foroohar, who is “global business columnist and associate editor at the Financial Times, based in New York”.

What American voters across the board do not seem to realise, says the FT columnist, is that migrants are a key reason inflation in the US has not risen further and faster.

She analyses the social and political circumstances that led to immigration being thought of as “the number one political concern for Americans” and goes on to comment “the hypocrisy of this whole debate”. According to the FT columnist:

• “Economically speaking, immigration is far from being America’s worst problem”.
• “In fact, it’s the quickest way to address pressing labour shortages and inflation”.
• “Apollo’s Torsten Slok recently produced an eye-catching graph showing the rise in the foreign-born labour force, which has increased 11 per cent since February 2020 while the native-born labour force has remained flat”.
• “That means the entire growth in the US labour force is coming from immigration”.
• In fact, “migrants are a key reason that inflation in the US hasn’t risen further and faster”.

In recent years, America has had “both robust growth and lower inflation” than any other wealthy country while net immigration was at its highest level in two decades, especially in lower wage sectors like agriculture, construction, childcare, and hospitality.

That was “one of the biggest puzzles of the last year”. Immigration was the answer to that puzzle, as noted by none other than Goldman Sachs, the American multinational investment bank and financial services company.

According to the FT columnist’s analysis, while policymakers have mostly been focused on getting higher skilled immigrants, more immigration of lower-skilled workers is good as well.

High growth and low inflation are not the only benefits of immigration. There are “studies showing that it can boost the wages of native born workers as well”.

Despite the rhetoric of immigrants “taking” the native born workers’ jobs (an argument cynically and incorrectly employed by populist propaganda), “there is complementarity between the two groups”. Some examples are caregivers, cleaners, gardeners for working families or immigrants working in hotels or restaurants.

A second Trump administration could have a dramatic effect of the USA economy. A shortage of skilled staff is already an obstacle to investment in the USA. Older staff retire but there is little interest in joining among younger people.

The picture is similar in Europe. Anti-migrant sentiment has been an obstacle to growth for some time. 

In the UK it seems that the new Labour government prefers job retraining for native-born citizens in order to address labour issues.

In Japan growth had been limited for a long time by the absence of women and migrants in the workforce but now they are trying to encourage migrant labour.