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Mulvaney: US desperate for immigrants<!–END ARTICLE TITLE–>
</h3><h4><i>by <a href=”http://discuss.ilw.com/articles/articles/393205-march-10-mulvaney-us-desperate-for-immigrants#bio”>
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Steven Kopits
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The
<a
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Washington Post
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reports that, at a private event in England on Wednesday night, acting
White House Chief of Staff Mick Mulvaney said the U.S. economy needs more
immigrants to keep growing. He told the crowd that the United States is
“desperate — desperate — for more people. We are running out of people to
fuel the economic growth that we’ve had in our nation over the last four
years. We need more immigrants.” He stressed that they must come in a
“legal fashion.”
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Let’s put some numbers around these claims.
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GDP growth is a function of growth of the labor force and the growth of
labor productivity. We can grow the economy by either adding more
workers or by each worker producing more per year. Labor productivity
growth
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has averaged
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1.1% per year since 2015, 1.4% per year during the Trump administration
and over the last fifteen years overall. The CBO uses 1.4% in its
projections to 2030 as well. Notwithstanding,
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labor productivity in Japan
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, which is ahead of us on the demographic curve, is essentially
unchanged in the last seven years. Consequently, US labor productivity
growth may fall short of expectations. Productivity growth of 1.4% is
about as much as we can reasonably anticipate, with the risk to the
downside.
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To productivity can be added the growth in the labor supply. Since 2011,
the US has added approximately 2.4 million jobs annually. In 2019, this
pace fell to just over 2.0 million incremental jobs, in part because the
potential labor pool is largely exhausted.
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Looking forward, the CBO expects the potential labor pool to expand on
average by only 680,000 annually to 2030, and only 580,000 per year
after 2025, contributing a mere 0.4% to GDP growth. This may prove
pessimistic as labor reserves could be larger. The core 25-64 working
age group is increasing by only 350,000 / year on average in the 2020s,
so the CBO and Census Bureau are already assuming 300,000 of the gains
in the potential workforce are coming from increased labor force
participation either within or without the core working age group. For
example, labor force participation in the 65+ age group is rising
steadily. Japan has managed to stave off a decline in its workforce
through such adaptations, most notably increased workforce
participation by women. Thus, US domestic reserves of labor may be
modestly — but not vastly — greater than the CBO expects.
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Caveats notwithstanding, the productivity and population trends above
lead the CBO to project GDP growth of only 1.7% on average in the
2020s, not the 2.9% presented in the
<a
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February 2020 report of the Council of Economic Advisors
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(p. 299).
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Immigration can increase the pace of economic growth. The
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Bureau of Labor Statistics
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reports approximately 160 million persons employed in the United
States. Increasing the GDP growth rate by 0.1% would therefore require
an additional 160,000 workers. To average 2.5% GDP growth, immigration
would have to rise by 1.3 million additional migrant workers annually,
plus their dependents, perhaps 1.8 million persons / year in total in
today’s visa regime (but only 1.5 million or so in an MBV program).
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The current GDP forecasts of both the CBO and CEA already assume 1.0
million net international migration into the US. Thus, those hoping to
maintain a 2.5% GDP growth rate have to reckon with increasing the pace
of immigration by 180% or so.
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Meanwhile, demand should be robust. Nearly 20 million Americans will
turn 65 in the coming decade, and studies suggest that their
consumption falls by only 15% at retirement. Consequently, there will
be plenty of demand for labor even as our worker shortage continues to
unfold.
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And this brings us full circle to Mick Mulvaney’s speech at the Oxford
Union. The Federal budget deficit is
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wildly out of control
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, even as the retirement of the Baby Boomers portends further rises in
government spending. Historically, we have grown our way out of
deficits, but if GDP growth is only 1.7%, then this avenue is all but
blocked. And Mulvaney knows that. Hence his desperation for more
immigrants, necessary to both keep the economy growing and provide
services for an aging US population.
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The numbers make it clear: The calls for increased immigration are only
getting started.
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<p>Reprinted with permission.</p>
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About The Author<br/>
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<p>
<b>Steven Kopits</b> For most of his career, Mr. Kopits served as a strategic management consultant and investment banker in Hungary and the United States. His work has focused primarily on the private sector, with some sector consulting for the governments of Hungary, Norway, the United Kingdom and the United States. He developed expertise in the management of black market issues working in Hungary after the fall of communism there.
While in Hungary, Mr. Kopits served, among others, as a Director of Financial Advisory Services at Deloitte & Touche, and later as Managing Director of T-Venture Hungary, Deutsche Telekom’s corporate venture arm. He also served on the boards of several companies, both public and private.
In the US, Mr. Kopits served as an investment banker at Dahlman Rose & Co., and then as Managing Director for Douglas Westwood Ltd., a UK-based consultancy specializing in the energy sector.
He holds an undergraduate degree from Haverford College, an MBA in Finance and Accounting, and a Masters specializing in International Economics from the School of International and Public Affairs at Columbia University.
He writes frequently on policy topics for a variety of publications, including Foreign Policy and The National Interest, and is a regular contributor to CNBC and The Hill, for whom he writes principally on topics related to illegal immigration.
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