Anti-Immigration is Simply Bad Economics

When Donald Trump rode down his Trump Tower escalator and announced his presidency, he capitalized on many Americans’ fears of immigration and job displacement. His statements regarding Mexican immigrants — being rapists, criminals, and “not you” — sought to delegitimize these immigrants’ claims to work and resources that many of Trump’s supporters believe they should have priority. This mindset gave way to the immigration legislation and policies we see in this current administration, like the RAISE Act and the travel ban. While the Trump Administration and Congressional Republicans market these policies as a benefit to American workers through reducing competition for work, they may do just the opposite.

America’s entrepreneurial spirit is in decline, with less and less Americans starting their own businesses. Less entrepreneurs and new businesses means less innovation and effective allocation of economic resources. For those more interested in entrepreneurship and the economy, The Role of Entrepreneurship in the US Job Creation and Economic Dynanism details both the relationship between an agile economy and the creation of new businesses. For everyone else, here are the main takeaways:

  1. For any group of startups, jobs lost due to the high failure rate of young firms are usually offset by the growth of the surviving firms.
  2. The arrival of new firms and exit of unsuccessful ones reallocate resources and jobs to more efficient ones, allowing for the economy to make better use of its labor.
  3. Startups and young firms often contribute disproportionately to growth and productivity of the economy.

Despite their contribution to innovation and job creation, the proportion of young firms’ total employment across varying sectors has declined since the early 1980s. The study found this trend across all 50 states, suggesting that factors outside of state-specific business climate contribute to the overall decline. This decline in entrepreneurship means that the American economy may no longer allocate its labor resources towards more successful companies and products as efficiently as it used to, potentially missing out on important technological breakthroughs and innovations.

This trend is noteworthy and relevant to the RAISE Act, an immigration bill put forward by Senators Cotton and Purdue. This bill curbs the number of immigrants admitted to the US as well as switches to a merit-based point system of visa allocation rather than family-based allocation. As it turns out, immigration and entrepreneurship are connected. Based upon a study done by the Harvard Business Review, immigrants make up 15% of the American workforce but constitute 25% of entrepreneurs. Moreover, immigrants also account for a quarter of US patent filings, meaning that they invent at a rate higher than the rest of the population.

Immigrants’ trend toward entrepreneurship has grown over the past decade as well. As shown by the figure, entrepreneurs who are immigrants increased by about 10.5% from 1995 to 2008. Coupled with the general decrease in entrepreneurship during this time period, it becomes uncertain whether this increase stems primarily from the decrease in the number of non-immigrant entrepreneurs or an increase in the number of immigrant entrepreneurs. Regardless of the reason, immigrants are doing more than their share of innovating in the American economy.

If you remain unconvinced regarding the benefit of immigration on the economy, here is a list of immigrants who have contributed significantly to the American economy and culture. These immigrants range from Albert Einstein to Levi Strauss (inventor of jeans) to Sergey Brin (co-founder of Google) and demonstrate how much that our success, competitive edge, and culture stems from the contribution of immigrants.

The RAISE act touts strengthening the economy, but, in reality, it does just the opposite. Earlier this year, almost 1,500 economists wrote a letter to the President and leaders of Congress arguing for the benefits of immigration on the economy, with the argument above being just one of the many. While some fear that an immigrant may take their job, an immigrant may very well create their next one.