The Economic Future of the U.S. Depends on This

This article is from our latest edition of The Rising Tide, a weekly online publication for business people and economic developers. To read the entire edition, subscribe?here.

The population of the United States grew just 0.1 percent in 2021, the slowest rate since the nation was founded in the 18th century, according to data from the U.S. Census Bureau.

The new estimates show that population growth declined from the previous year in 31 of 50 states as well as Washington, D.C., with 18 states sustaining absolute population losses. It is in?large part due to an aging U.S population, which has led to more deaths and fewer births.?

The size, age, and skills of the population will largely determine the U.S.’ ability to stay competitive with other countries, support Social Security, and grow an economy that creates jobs. The coming decades will see a continued older America, with the ratio of seniors to working-age adults increasing.

It means more seniors will draw on Social Security more quickly than working-age people will be able to support them. It also means more resources will have to be devoted to supporting the aging population than to growing the economy through new investments and innovation. That is not a good scenario.

But There Is a Solution

If the U.S. was to allow more than 2 million new, legal immigrants to come into the country each year, it would reverse our demographic downward spiral and increase U.S. gross domestic product (GDP) to $47 trillion in today’s dollars by 2050, according to recent research by FWD.us?

More immigration would not only grow the economy, but it would increase the working-age population as well, leading to a more productive and prosperous economy. Higher GDP per capita means a higher standard of living for all Americans.

During the second half of the 20th century, annualized economic growth in the U.S. has averaged about 3.5 percent, slowing to 1.8 percent in the past two decades. The decline is largely due to three megatrends that have all coincided with one another. Baby Boomers have been retiring in increased numbers, the U.S. birth rate has slowed to an all-time low, and immigration has fallen to 0.4 percent per year in the past decade. Those combined forces have resulted in flat growth of the working-age population.

According to the Census Bureau, the growth rate of the working-age population this decade is likely to be only 0.2 percent annually. The Pew Research Center has forecast that the working-age population between 2015 and 2035 would increase by only 10 million people and that it would come entirely from new immigrants and offspring from existing immigrants.

The truth is that the pace of future U.S. economic growth will increasingly depend on the pool of immigrants coming into the country. If that pool stagnates, U.S. growth would resemble that of Japan where real GDP growth has averaged about 1 percent per year.

It should be noted that immigrants have historically made outsize contributions to the U.S. economy and innovation. Since 2000, immigrants have been awarded 40 of the 104 Nobel Prizes won by Americans in chemistry, medicine, and physics. A fifth of current Fortune 500 companies have been founded by immigrants. Highly skilled foreign-born workers continue to create more job opportunities for Americans.

The U.S.'s?dysfunctional?immigration system was only made worse when the?Trump administration called for cutting the number of legal immigrants by up to 44 percent, or half a million people annually. It marked the largest policy-driven cut in legal migration since the 1920s. Not surprisingly, a precipitous decline in foreign tourism, enrollment by foreign nationals in U.S. colleges and universities, and plummeting foreign direct investment followed.

Buffalo's ‘Refugee Renaissance’

For the first time in 70 years, the city of Buffalo had grown. The city's modest 6 percent growth was trumpeted by officials as a pivotal triumph. Hollowed out first by suburban flight and then the loss of manufacturing jobs, the onetime steel and iron powerhouse had hemorrhaged more than 50% of its population in the half-century since 1950.

Buffalo has now become a haven for new Americans from countries such as Myanmar (Burma), Somalia and Iraq. Over the past two decades, more than a quarter of the refugees who came to the state of New York arrived in Buffalo’s Erie County, even as native Buffalonians continued to leave. Since 2002, more than 16,000 refugees have resettled in Buffalo.

The percentage of new Americans in Buffalo has more than doubled since 2000, and now represents about 10 percent of the city's population. In the process, the city has shored up a decades-long economic slide. A 2017 study by nonprofit New American Economy argued that immigrants were a net boon to the local economy, starting businesses at a higher rate than other residents and adding more than $900 million to Buffalo’s housing values between 2000 and 2014.

Dean Barber is the principal of BBA, a Dallas-based advisory firm, and publisher of?the weekly newsletter?The Rising Tide. Need a speaker for an upcoming event? Go to barberadvisors.com

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