The Economic—and Demographic—Case for Immigration Reform

The challenges of the aging population will be greatly mitigated by an expanding, young, immigrant workforce.
Thursday, February 21, 2013

Since the November election, there has been much talk in Washington and on the pundit circuit about America's changing demographics, especially the "Latino vote" and the new realities of political campaigning. There has also been considerable wrangling over immigration and what it means for a country that is a nation of immigrants but is more crowded than it once was.

The immigration debate is significant to America's politics and culture, but it is also crucial to the country's economics, a subject that receives too little attention. Let's be blunt: The future wealth and well-being of the American people—the country's economic security, national security, business innovation, GDP growth and status in the global marketplace—require a comprehensive solution to the chronic problems caused by a broken immigration policy. In particular, the status of 11 million unauthorized Latino immigrants now living here must be resolved.

The economics are simple: Latinos spur demand. Seventy percent of the nation's gross domestic product is fueled by consumer spending. That means the Latino population—large, growing and increasingly prosperous—will play a key role in America's economic future.

Latinos are now by far the country's biggest minority-market segment. Including unauthorized residents, the Latino population now exceeds 54 million (not counting nearly four million in Puerto Rico). Blacks, in second place, number 39 million. The Latino population has increased by more than 52% since 2000. In the same period, the non-Latino white population grew less than 2% and blacks by 14%.

According to U.S. Census forecasts, the Latino population in America will reach 133 million by 2050. Those 133 million American Latinos will outnumber the populations of Japan and Russia, whose numbers are already in decline.

With growing numbers comes more spending: Latino purchasing power now exceeds $1.2 trillion and, according to the University of Georgia's Selig Center, will top $1.5 trillion by 2015. From a global perspective, that means America's Latino market would be the 11th-largest economy in the world—just below France, Italy and Mexico, and above South Korea, Spain and Indonesia. At $20,400 per capita, Latino America's purchasing power already exceeds the GDP per capita of all four BRIC countries—Brazil, Russia, India and China.

But Latinos' beneficial economic effect is hardly restricted to the demand side. A vital element of supply-side health is labor—workers, from the most talented who invent new products or start a business, to those just beginning to climb the ladder of self-improvement, whether through formal education or on-the-job training.

Nearly one in six American workers (16%) is Latino, with nearly 23 million Latinos in the U.S. holding jobs. You might not know it from media coverage of immigration issues, but Latinos have the highest labor-force participation rate (nearly 67%) of any American demographic group.

Slightly more than a quarter of children in the U.S. under age 18 are Latino. Based on existing trends, at least 1.1 million Latino youths will turn 18 each year for the next 20 years. Politicians may see 1.1 million new voters a year, but business owners see 1.1 million new workers with a strong work ethic. Given the aging of the country's baby boom generation—retiring at the rate of 10,000 a day for the next 18 years—the strength of the economy is increasingly linked to the promise of these younger workers.

Dire demographics threaten the economies in many developed nations, and the U.S. is not immune to the challenges posed by an aging population. But the problem will be considerably mitigated by immigrants who revitalize the workforce. The average later-life American, whose life expectancy nearly doubled during the 20th century, is already asking: Who is going to pay for the Social Security and Medicare promises of the federal government?

The answer: America's expanding, youthful immigrant population—another reason why ensuring educational opportunities at every level for all residents is in the national interest.

Getting the U.S. economy moving again requires action on many fronts: tax and regulatory reform, new approaches to energy, education and health care. But nothing is more important than immigration reform. Despite the impression left by much of the rhetoric in Washington, immigration reform is not just about politics. It's about jobs, growth and competitiveness—economic security, which in turn means national security.

To achieve these benefits, immigration policies and practices must be attuned to welcoming hardworking immigrants and to dealing fairly and smartly with those who are already in the U.S. regardless of their legal status. Legal immigration, including a guest-worker program that will bolster American business productivity, should be expanded in an intelligent way that is pro-investment and pro-growth. U.S. borders need to be secured against further illegal immigration.

Washington must send a clear signal—to the American people and to every level of government—that a coherent and enforceable immigration policy is in place and here to stay.


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