Is Immigration the Answer to the Current Economic Crisis?

Steven Mosher
and by Colin Mason
Population Research Institute
13 October 2008
Vol. 10 / No. 43
Reproduced with Permission

Writing in the Wall Street Journal's opinion section, Lee E. Ohanian urges the U.S. to respond to the turmoil in the financial markets by opening the door to more immigrants. "We should encourage the immigration of prime-age individuals," he writes. "Increasing immigration would increase the demand for housing and raise home prices. And note that the benefit would be immediate. Home prices -- and the value of subprime obligations -- would rise in anticipation of a higher population base. . . . these workers not only would purchase homes, but would generate higher living standards for all Americans."

Ohanian's view of the economic benefit of new immigrants is overly rosy. Many of the immigrants who arrive on our shores possess neither marketable skills nor good educations. Essentially penniless, they are not going to be homebuyers for many, many years. Rather they are going to be looking for the kind of low-end jobs that are already in short supply in the current economic climate, while their children, who must be taught English, are taxing an educational system already facing straitened budgets.

Consider what is happening in New Zealand, where the country's immigration office has already hastily enacted policies to allow more immigrants into the country, ostensibly in order to help offset the current economic decline. The new policy has, predictably, come under heavy fire, according to an October piece in the New Zealand Herald. Many New Zealanders correctly fear that the arrival of a new wave of immigrants will give rise to both short-term costs and long-term societal problems. New Zealand's head of immigration, Andrew Annakin, dismisses these concerns, instead arguing that the "ongoing attacks on New Zealand's immigration service will restrict the country's already ailing economy by discouraging would-be migrants from applying." It sounds like he's taking matters a bit personally, if you ask us.

We applaud both Mr. Ohanian and Mr. Annakin for recognizing the value of people. Clearly population growth in both the U.S. and New Zealand would stimulate the economy, and encourage the recovery of the housing market. In both cases, however, it seems more reasonable to encourage greater fecundity among the existing population, rather than recklessly increase immigration during a financial crisis.

The problem is that childbearing has long since gone out of style with today's intelligentsia, and even the most level-headed of economists are often loath to discuss it. The result is a strange double-standard, where it is acceptable to discuss immigration as a response to the economic crisis, but not the encouragement of childbearing.

So we find Rick Green of the Hartford Courant announcing that the state "need(s) immigrants." He goes on to add that for Connecticut to "flourish" where we have good schools and people who pay taxes and businesses that actually make thingsĘ"we need, above all else, more people willing to work." He goes on to cite Peter Goia, an economist at the Connecticut Business and Industry Association, who agues: "We are dead without immigrants in this state. . . ."(T)he only growth we are going to get is from immigration. If the immigrants go negative, we are going to have a declining population."

But if population growth is good for the economy, why not admit that there are two ways to go about it? The first, obviously, is immigration. The second is an increase in the birth rate. The answer to a society that has voluntarily chosen infertility as a way of life is not to import people, it is to encourage fertility by giving generous tax credits to families who chose to bear and raise children.

Human reproduction produces valuable economic assets. Every baby comes equipped with a mind which, when educated, is capable of solving problems and learning valuable skills. And from the time of its arrival, it stimulates the economy, as parents go out and buy larger houses and larger cars to hold their burgeoning brood.

The current economic crisis was not caused by low birth rates, to be sure. But encouraging higher birth rates through the tax code could help us pull out of our current economic doldrums. Those who are going all out to try and stimulate the economy should not forget that the ultimate stimulus package to the family economy is the arrival of a little one.