Immigrants continue to play crucial role in U.S. economy

Raymond Keating
Raymond Keating

The United States economy continues to suffer. A pandemic struck in March and April 2020, with its effects lingering to this day. The economy took a nose dive and has struggled to recover. Amidst this struggle, entrepreneurs, businesses, investors and workers have been thrashed by raging inflation, a decline in real gross domestic product in the first quarter of 2022 and federal policies dangerously out of touch with economic reality.

At the same time, though, businesses of all types and sizes struggle to fill employment needs due to a tight labor market. Even if the U.S. economy sinks back into a recession, the need to expand the labor force will remain. That promises to become even clearer when we eventually get back on a track of solid economic growth.

As this scenario plays out, it’s worth looking at the data from the just-released U.S. Bureau of Labor Statistics report titled “Foreign-Born Workers: Labor Characteristics — 2021.” The latest edition of this report shows what previous editions have illustrated for years: foreign-born workers, or immigrants, have been the critical source of increases in the labor force and employment.

Consider the following key points from this look at 2021, as entrepreneurs, businesses, investors and workers tried to lead the U.S. back to economic growth.

From 2020 to 2021, the foreign-born labor force increased 671,000 while the native-born labor force was essentially unchanged.

From 2020 to 2021, overall employment increased by 4.8 million. Among the foreign born, employment increased 1.6 million, a gain of 6.5 percent. Employment also increased among the native born (3.2 million). In relative terms, though, that increase was about less than half as large at 2.6 percent.

Foreign-born men continued to participate in the labor force at a higher rate in 2021 (76.8 percent) than their native-born counterparts (65.8 percent). By contrast, 53.4 percent of foreign-born women were labor force participants, lower than the participation rate of 56.6 percent for native-born women.

Regarding labor force participation, it’s important to look at the key working age bracket of 25 to 54 years old. As reported by the BLS, the difference between foreign-born and native-born is striking: By age, the proportion of the foreign-born labor force made up of 25- to 54-year-olds (71.4 percent) was higher than for the native-born labor force (62.2 percent).

It’s also critical to keep in mind the economy is not a zero-sum game with only so many jobs to go around. Rather, the economy grows, jobs are created and that process is aided by immigrants who do complementary work to native-born workers, increasing productivity for all.

Finally, key economic challenges for the U.S. for the past decade-and-a-half have been reduced levels and rates of entrepreneurship. While this BLS report doesn’t address entrepreneurship, studies consistently show the rate of entrepreneurship among immigrants is twice that of the native born.

A National Bureau of Economic Research study of immigration and entrepreneurship in the U.S. found foreign-born business owners play a significant role in creating employment as opposed to the mistaken assumption immigrants take jobs from the native born. “The findings suggest that immigrants act more as job creators than job takers and that non-U.S. born founders play outsized roles in U.S. high-growth entrepreneurship,” the authors of the study wrote.

They concluded: “Using administrative data, a representative sample and Fortune 500 data, we present new findings on the size of firms these different founder populations create. Across all three data sets, we find that immigrants present a right shift in new venture formation, where immigrants start more firms of each size per member of their population. … Overall, the entrepreneurial lens suggests that immigrants appear to play a relatively strong role in expanding labor demand relative to labor supply compared to the native-born population.”

None of this is surprising when the often ugly politics of immigration are set aside in favor of actual data, trends and economics. Clearly, the U.S. economy would benefit from fixing the immigration system so immigrants who wish to work, start businesses and contribute to the nation are welcomed.

Throughout this nation’s history, the competitive advantages possessed by the U.S. in the global economy have been our entrepreneurial drive and willingness to welcome immigrants. Those two strengths remain very much interrelated.