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Post: Brett Arends’s ROI: Without more immigrants, Social Security (and America) is toast

We’re running out of Americans. Not exactly, but sort of. A new report from the Congressional Budget Office says that the U.S.-born population is going to start falling from around 2043. That’s when deaths will exceed births. After that, says the CBO, all population growth in America will come only from immigrants.

But the issue is already here. “Over the course of the next decade, immigration accounts for about three-quarters of the overall increase in the [projected] size of the population,” the CBO says. And after about 2032, the share of immigrants to new births rises even higher.

This matters for a number of reasons. Among them: The stability of Social Security and Medicare. These programs depend on America having plenty of working-age people. The more, frankly, the better. Yet instead, between now and 2052, the CBO predicts that on average the number of people over 65 will grow six times faster, per year, than the number of people of prime working age, between 25 and 54. Over the next 10 years the CBO thinks it will grow more than 20 times as fast, per year, because it expects the number of prime working age Americans to hardly grow at all.

The Social Security Administration is offering a slightly more optimistic central forecast, but not by much. (The CBO forecast broadly aligns with the Social Security trustees’ gloomy scenario.) And even the Social Security trustees see the numbers of senior citizens rocketing in relation to working age Americans, and—of course—predict that the trust fund will run out of cash in 2035.

As recently as 2005, say the trustees, there were five prime age workers (age 25 to 54) for every senior citizen over 65. By 2030 that ratio will be below three, and it will fall steadily from there on.

So much, and so gloomy. But what does this mean? And, maybe more important, what can we do about it?

It is not my intention to wade into the contentious political debate over illegal immigration. If you want to read about that, go to the cable channel that already agrees with you and get your pre-existing opinions stroked. I want to talk about something else. Something which is, or should be, much more important—and which is almost totally ignored.

I want to talk about skilled immigration. High-skilled immigration. I’m talking about science Ph.D.s from China and Taiwan and Germany and Ukraine and India.

How in the name of Albert Einstein or Alexander Graham Bell (both immigrants) are we not talking about helping our demographic problems by ramping up what used to be called “the brain drain.” We used to drain (or poach) other rich countries’ smartest people and most ambitious entrepreneurs, year after year.

And, in contrast to the issue on the southern border, I have yet to hear a single negative argument. You think we have too many German or Japanese engineers? Really? Where do you live? And have you seen our railroads recently?

The only downside to this would be borne by other countries: The countries from whom we poach the best people.

We have been here before. Extensive economic research has shown that the massive flood of immigration into America from 1850 to 1920 transformed the economy.

The effects can be shown even on a local level. Economics professors Sandra Sequeira of the London School of Economics, Nathan Nunn of the Harvard Business School, and Nancy Qian of Yale University, dug into this a few years ago. They looked at immigration levels and economic output across the U.S. by county.

Bottom line: An American county that got a typical or “median” amount of immigration during that period has, even today, average incomes 20% higher than counties that had no immigration. And that is after controlling for all other factors. “Counties with a greater share of immigrants from 1860 to 1920 have significantly higher average per capita income in 2000,” they write.

Oh, and this understates the impact of immigration, because they also found that immigrants during that period were more likely to end up in poorer areas that had, before they arrived, lower levels of economic growth.

Crucially, this wasn’t simply about importing cheap labor. It was also about importing skilled labor. More entrepreneurs and more inventors. A survey in 1900 found that immigrants were much less likely than native-born Americans to be farmers (the old mainstay of the economy). But they were more likely to be in skilled or semiskilled blue-collar jobs.

Immigrants ended up supplying a disproportionate share of leading Americans across all sectors. A study done in 1935 of people born since 1790, in other words since the founding of the republic, found that immigrants were 25% more likely to make it into the Dictionary of American Biography than those who had been born here.

And why should we be surprised? If you want to find people with “get up and go,” look for people who got up and went.

Recent studies have found this is still true. Immigrants, but especially skilled immigrants, are powerful drivers of innovation and growth that benefit everyone. A team of economists from Stockholm and Paris to Boston and Canada looked into this recently. They examined 130 years of U.S. data on economic dynamism and innovation and immigration, including issues like education levels and countries of origin. Their findings?

While immigration overall was positive for growth, “the effect of immigration on innovation and growth is also stronger for more educated migrants. While low education migrants…have no detectable impact on local innovation,” they found “the impact of high education migrants (top third) is an order of magnitude larger than for the average.”

From 1860 to 1920, America typically got the best impact from immigrants from comparatively richer countries. Those countries, after all, were more likely to have good schools, higher-skilled and more industrialized economies, and more sophisticated political systems. Economists Scott Fulford (at the CFPB in Washington), Ivan Petkov (Northeastern) and Fabio Schiantarelli looked at the same era of mass immigration, 1860 to 1920, and went down to the U.S. county level, but looked at where the immigrants came from.

Bottom line: “Our results show that when the share of people from high income or more [socially] trusting countries increases, county GDP per capita increases as well.” On a county by county basis, they found actual correlations between the GDP per capita of immigrants’ country of origin in 1870 and the county’s GDP per capita today. “Changing the composition of a county so that the country-of-origin GDP in 1870 of its residents is 1% higher increases the county’s current GDP-per-person by 0.31%.”

In the last few years we have been going in the wrong direction. Granted, these were temporary measures in response to the pandemic and the lockdowns. But in 2020 president Trump signed an executive order limiting H1-B skilled immigration visas, and last year President Biden lifted it only partially.

We haven’t gained from this. We’ve lost.

“Firms that were once highly reliant on the U.S. H-1B visa for their financial success have adapted quickly to the Trump administration immigration crackdown and taken their business elsewhere,” says Urbashee Paul, an economist who has specialized in the subject. She says recent research has shown that we have simply lost jobs and skilled workers to China, India and Canada. As a result, instead of the famous “brain drain” to America, many countries are enjoying what she calls a “brain gain,” simply “resulting from the influx of reverse-migrants who were denied H-1B visas.”

It is understandable that human beings have difficulty solving complex problems. But this one isn’t complex. It isn’t even that interesting. We are running short of people, the world is teeming with highly skilled people who would have to come here, and they would be making this country richer and better from day one.

So no, let’s not do that.

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