American Edge: Immigration

As it has experienced unprecedented growth over recent decades, China is expected to overtake the United States economy in overall size within the next decade. It is unclear when this will occur or whether it will occur at all, as Chinese economic growth has slowed significantly since the end of the pandemic, and foreign direct investment there declined for the first time last year. Nevertheless, this ongoing economic competition has become of increased prevalence in the sphere of both domestic and geopolitics, as the competition has most certainly evolved into the beginnings of a new cold war. Unlike the previous Cold War, a competition with China seems far more formidable. With a developed private sector, a rapidly growing economy that can sustainably support a massive defense industrial base, and a massive population, Chinese preeminence can almost appear eventually inevitable. Yet, the United States can assume confidence in its outlook on both China and the broader world with its most unique quality: the ability to attract huge influxes of immigrants that can both support its labor force and provide the talent and ideas necessary for innovation. 

As cited by the Wall Street Journal, an International Monetary Fund study found that “for advanced economies, a 1 percentage point rise in immigration relative to total employment tends to boost total output by almost 1% five years later.” Moreover, the study found that immigration actually increases the income of natives due to productivity boosts and the contribution of different skill sets. Unlike economies in East Asia, there has been a large influx of immigrants into the labor force that has allowed the US to recover so strongly from the pandemic and could bolster prospects for public finances and growth expectations as the economy ages. In fact, according to the same article, the Congressional Budget Office projects that GDP will be 2% higher in 2034 than it would have been without the recent immigration surge. 

Hopefully now it becomes apparent how critical immigration will be to the twenty-first century. The countries that can leverage an effective immigration system into maintaining a stable labor force, a growing population, manageable government debt, and increased potential growth will have the upper hand. The United States currently holds the unique position of being the golden destination for immigrants around the world, especially skilled immigrants, which it can use to its advantage so long as it approaches immigration policy from the proper standpoint of economic growth. Until then, China and East Asia will forever be playing catch up.