To Be Great Again, America Needs Immigrants
What makes America great?
The standard answers point to qualities that the United States is said to have in greater abundance than its peers in Europe and Japan. There are the innovations that pour out of Silicon Valley companies and elite universities, the flexibility of a work force relatively unconstrained by union rules, the dynamism of entrepreneurs less hamstrung by an oversize welfare state and of a more mobile population willing to move to where the cutting-edge jobs are mushrooming.
In short, the standard innovation theory of American exceptionalism is all about qualities that make each worker more productive. Today, nearly all the economic discussion about how to make America great again focuses on ways — like cutting red tape and taxes — to revive flagging productivity growth.
Though this discussion remains critically important, it plays down a big shift in the story. The underlying growth potential of any economy is shaped not only by productivity, or output per worker, but also by the number of workers entering the labor force. The growth of the labor force is in turn determined mainly by the number of native-born and immigrant working-age people. Over the last two decades, the United States’ advantage in productivity growth has narrowed sharply, while its population advantages, compared with both Europe and Japan, have essentially held steady.
What makes America great is, therefore, less about productivity than about population, less about Google and Stanford than about babies and immigrants.
The growing importance of the population race will be very hard for any political leader to fully digest. Every nation prefers to think of itself as productive in the sense of hard-working and smart, not just fertile. But population is where the real action is.
Comparing six of the leading developed countries — the United States, Germany, Japan, Canada, Australia and Britain — I found that not only has productivity growth been slowing across the board in recent decades, but also that the gaps in productivity growth among these rich nations are narrowing sharply. For example, in the 1990s and 2000s, productivity was growing much faster in the United States than in Germany or Japan, but that advantage has largely disappeared in this decade.
The reasons for this convergence are complex, possibly having to do with the way production technology now spreads quickly across borders. But this trend spans the developed world, and it basically holds regardless of which two countries you compare, which should raise doubts about how any one country, including the United States, can regain a distinct economic advantage by focusing only on reviving productivity.
Which brings us back to babies and immigrants. Like productivity, population growth has been slowing worldwide in recent decades, the big difference being that the gaps among the rich nations are increasingly significant. In the 1960s the United States population growth rate averaged 1.2 percent, or 50 percent higher than Europe’s and about the same as Japan’s. By the late 1960s, population growth peaked worldwide because of the spread of birth control and other cultural shifts, but it has slowed much more gradually in the United States than in its rivals.