Latest Posts





Can increased immigration boost per capita incomes?

I wrote last Friday about Minnesota’s alleged labor shortage. If this drives up wages it could be a good thing for workers. But some see it as a “crisis” which will cripple economic growth.

What matters for Minnesotans is per person economic growth. If the number of Minnesotans increases by 50% and state GDP also increases by 50%, then the average person is no better off. There are three sources of per capita GDP growth.

Can we increase the participation rate?

The first is growth of the participation rate. This refers to the number of people who are either employed or are actively looking for work. GDP per capita is defined as total GDP divided by the number of people in the country (state, in this case). If more of those people are working then there is more GDP to divide among them.

But it is unclear how much scope there is for this in Minnesota. Unemployment rates are low, hence this discussion. Encouraging seniors to remain in the workforce can help to some degree, but the jobs they do are likely to be those with low productivity.

Is immigration the answer?

At this point people often mention immigration as a solution. But increasing the number of workers is different to increasing their participation rate.

Remember that

1) GDP per capita = 2) Total GDP / 3) Population

A rise in the participation rate increases 2 and, as a result, 1.

A rise in immigration, however, increases both 3 and 2.

Does immigration also increase 1? That depends on how productive the immigrants are relative to the population average. Immigrants with above average skills will increase 2 proportionately more than they increase 3. This will increase 1. By contrast, immigrants with below average skills will increase 3 proportionately more than they increase 2. This will decrease 1.

A letter from 1,500 economists

In April, 1,470 of the nation’s top economists signed an open letter to the Trump administration

…to express our broad consensus that immigration is one of America’s significant competitive advantages in the global economy. With the proper and necessary safeguards in place, immigration represents an opportunity rather than a threat to our economy and to American workers.

The economists went on to outline four chief benefits from immigration

Immigration brings entrepreneurs who start new businesses that hire American workers.

Immigration brings young workers who help offset the large-scale retirement of baby boomers.

Immigration brings diverse skill sets that keep our workforce flexible, help companies grow, and increase the productivity of American workers.

Immigrants are far more likely to work in innovative, job-creating fields such as science, technology, engineering, and math that create life-improving products and drive economic growth.

Three of these points (the first, third, and fourth) support the conclusion that skilled immigrants are good for the economy. This isn’t seriously doubted. Policies which keep them out, such as requiring foreign graduates of US colleges to leave on graduation, are harmful in most cases.

Of course, there are other arguments for increasing immigration. But if policymakers want to use immigration as a tool to boost per capita GDP, they should focus on skilled immigrants. This is true both nationally, and in Minnesota.

John Phelan is an economist at Center of the American Experiment and recent immigrant to the United States.




Upcoming Events

  • 2019 Annual Dinner Featuring Candace Owens

    Location: Hilton Minneapolis 1001 South Marquette Avenue Minneapolis, MN 55403

    From Brexit to Blexit… Britain’s exit from the European Union has not been smooth sailing. Since the leave date has been pushed back to October, Nigel Farage is now running for a seat in the European Parliament. That election date is May 23 which has forced him to cancel all American speaking engagements, including our Annual Dinner. Center of the American Experiment is pleased to announce that Candace Owens, the founder of the Blexit movement and host of The Candace Owens Show, will now be presenting the keynote address at our 2019 Annual Dinner on May 18. We are excited…

    Register Now
  • The Diversity Delusion

    Location: Hilton Minneapolis 1001 South Marquette Avenue Minneapolis, MN 55403

    Please join Center of the American Experiment on Wednesday, April 24th at the Hilton Hotel for a lunch forum with Heather Mac Donald as she discusses her new book, The Diversity Delusion: How Race and Gender Pandering Corrupt the University and Undermine Our Culture.  Heather Mac Donald is the Thomas W. Smith Fellow at the Manhattan Institute, a contributing editor of City Journal, and a New York Times bestselling author. She is a recipient of the 2005 Bradley Prize. Mac Donald’s work at City Journal has covered a range of topics, including higher education, immigration, policing, homelessness and homeless advocacy, criminal-justice reform, and race…

    Register Now