Sep 5, 2017 - Economy

The U.S. economy must prepare for a low-immigration future

U.S. Border Patrol (Eric Gay/AP)

President Trump and his allies in Congress are pushing to limit both legal and illegal immigration to the U.S., but more important than politics are powerful demographic and economic factors that will shrink future low-skill immigration to the U.S. in coming years, according to new research from economists at the University of California.

Bottom line: Between 2007 and 2014, the population of undocumented immigrants fell by 160,000 persons annually, and the authors argue that this is only partly the result of the Great Recession. Other factors driving the decline include:

  • The end of the Latin American baby boom — the average fertility rate in Latin American countries has fallen from more than 5 children per woman in 1970 to just more than 2 today.
  • Many Latin American economies have made significant gains in per capita income relative to the U.S., decreasing the economic benefit of emigrating.
"The policy dilemma facing the United States is thus not so much how to arrest massive increases in the supply of foreign labor, but rather how to prepare for a lower-immigration future," economists Gordon Hanson, Chen Liu, Craig McIntosh write in a white paper published Monday.

What it means for the U.S. economy: Economic research remains divided over the question of whether low-skilled immigration reduces wages for native low-skill U.S. workers. While restricting immigration would increase demand for native workers, it also may lead to less overall economic growth, which would in turn suppress wages at the bottom of the income scale. Meanwhile:

  • The continued slowdown in low-skill immigration, the authors argue, will lead to increased investment in automation technology, as businesses react to a tighter market for labor.
  • A decline in undocumented immigration will put pressure on U.S. entitlement programs, as these workers pay into Social Security and Medicare, but are not eligible for benefits.
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