The Immigration Effect

7/19/2017 - Professor of Economics Giovanni Peri at ProPublica.

President Trump has promised to increase U.S. economic growth – in fact, he’s banking on it. The budget he proposed to Congress in May assumes a 3 percent growth rate, and the White House website promises a return to 4 percent annual economic growth. Both predictions are far higher than the roughly 2 percent growth rate assumed by the Congressional Budget Office or the Federal Reserve.

In fact, most economists doubt that a 3 to 4 percent growth rate is possible at all without some fundamental policy shift. Sustained periods of such high growth haven’t occurred since the tech boom of the 1990’s and, before that, the baby boomers entering the workforce in the 1960’s. But according to a new analysis, there is a quick route to high growth: a massive increase in immigration.

At some points in U.S. history, notably the 1990’s, the country did see a period of high economic growth that did not depend on immigration. “The 90’s were a special decade,” said Giovanni Peri, a labor economist at The University of California, Davis. The 4 percent growth at that time had more to do with increased productivity because of technological advances, innovation, and tax policy. Immigration did contribute to the growth, according to Peri, but only a portion. Fast forward to today, where conditions are very different, and immigration becomes our only option to repeat such high growth.

Read the full story at ProPublica.