Immigration can supplement declining fertility Immigration can supplement declining fertility December 6 2018

Immigration can supplement declining fertility

The U.S. needs immigrant workers to keep the economy humming.
Published July 13 2018
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Bottom Line To sustainably boost economic growth, we need to increase productivity and ensure we have enough workers to accept the new jobs we’re creating. The good news is that productivity is back on an upswing over the past 18 months. But the fertility rate is at a record low for the second consecutive year at 1.84 births per woman, well below the 1957 cycle peak at 3.6 and the replacement rate at 2.1. Americans are having fewer babies. While increasing the fertility rate will help us a generation from now, it doesn’t create the much-needed new workers our growing economy demands today, as June’s 4% unemployment rate is sitting just off a half-century low. We must take a serious look at our dysfunctional immigration policy.

There are currently 40 million foreign-born residents living in the U.S. While 11.7 million of them are undocumented, most are participating in the work force and paying taxes. The U.S. needs immigrant workers to keep the economy humming. We must develop an optimal immigration policy to offset our declining fertility rate, grow our economy and keep our country safe.

Kids or career? Since 1950, the labor force participation rate of women has increased from 34% to 56%. That helps to explain the declining fertility rate, as many working women are consciously choosing to delay or not have children, opting for education or to progress in careers. In fact, the only age group in which fertility is increasing is women aged 40 to 44. One possible reason is that compared with other countries, the U.S. does not guarantee paid maternity leave for working women. Maternity benefit programs vary by company.

It’s time to outsource While some place blame on undocumented immigrants for stealing native-born Americans’ jobs, they are actually working in many of the difficult jobs that most Americans don’t want, such as agriculture, food-processing plants, hospitality (restaurants and hotels), child- and elder-care, housekeeping, landscaping and construction. If these low-skilled jobs went unfilled, U.S. economic growth would be harmed.

Additionally, there’s an estimated 500,000 high-tech jobs open in the U.S. right now, because many native-born Americans suffer from a skills mismatch. Foreigners also are taking many of these high-skilled positions. To that point, three-quarters of the candidates for masters and doctorate degrees in STEM majors at U.S. universities are foreigners. Yet we usually deport them right after graduation, rather than encourage them to stay, take these open jobs and put down family roots. That’s a missed opportunity, in our view, as they could provide a great economic benefit to us. This is why we also need an intelligent review of the existing H1-B visa rules.

Art of the deal When he chose to enforce the existing “zero tolerance” policy at the border, it was, in our view, a classic Trump negotiating tactic: take an extreme and abhorrent position that sets everyone’s hair on fire, forcing Congress to negotiate a much more reasonable, comprehensive bipartisan compromise, which we believe would include five key pillars:

  • End family separation at the border Americans want secure borders, but not by ripping apart families. Because of the horrific backlash from liberals and conservatives alike, the Trump administration has re-established a “catch and release” system, while it attempts to reunify the young children with their parents. It’s not a permanent fix, but it’s imperative to find a solution that penalizes adults crossing illegally without hurting their children in the process.
  • Enhanced border security Even though two-thirds of undocumented immigrants have overstayed their visa, the risk at our border is still a legitimate concern. While Trump is insistent his border wall is the best solution, it would be an expensive feat that would also take a long time to complete. Without spending billions of dollars more on border patrol agents, we could look to expand our temporary worker programs. With a stronger economic incentive for individuals to cross legally through this program, illegal crossings will decrease and border patrol (perhaps with enhanced technology) can focus their efforts on stopping potential security threats and on prohibiting the flow of illegal drugs.
  • Citizenship for the Dreamers There are 800,000 DACA recipients still in limbo, and President Trump is hoping to provide a path to citizenship for them. Some 91% of them are employed or enrolled in school, and they will contribute an estimated $460 billion to U.S. GDP over the next decade. So it would be a huge mistake to deport them, as we need their skills and work-force participation.
  • Merit-based lottery We currently operate a “diversity lottery system” that makes 50,000 visas available annually to diversify the immigration pool by selecting applicants from countries with low numbers of immigrants. While it’s important to have a diverse group of backgrounds to join our melting pot, we should push toward a merit-based system that rewards hard workers with desirable skills, no matter their country of origin.
  • Cap on chain migration President Trump has made it clear that he wants to put an end to what he calls “chain migration,” referring to the visa program where immigrants already living here can sponsor family members and bring them to the U.S. The issue is that many take advantage of the system and bring into the U.S. very distant relatives. We need to more narrowly define what determines immediate family and institute more stringent background checks to avoid an overflow of undesirable individuals streaming unchecked into the country.

Research assistance provided by Federated summer intern Audrey Randazzo

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Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

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