Eric Ruark's picture


  by  Eric Ruark

Janet Yellen said on Tuesday during testimony before the Senate Banking Committee that “slowing the pace of immigration probably would slow the growth rate of the economy.” One does not have to be Chair of the Federal Reserve to grasp the concept that adding more people to the U.S population through immigration will result in a larger U.S. economy, and that slowing the pace of population growth may result in a slower pace of economic growth. That’s an axiomatic assertion.

What Yellen does not seem to grasp, or isn’t concerned about, is that quantitative economic growth is subordinate to qualitative economic considerations; or, put another way, how much we grow is much less important than measures of widespread economic prosperity – and this is disturbing coming from someone who is the Chair of the Federal Reserve.

Here is Yellen’s statement on immigration in a broader context:

Labor force growth has been slowing in the United States. It’s one of several reasons along with slow productivity growth for the fact that our economy has been growing at a slow pace. Immigration has been an important source of labor force growth. So slowing the pace of immigration probably would slow the growth rate of the economy.

By labor force, Yellen refers to the number of people available to work in the United States, which includes the employed and unemployed (those receiving underemployment benefits and ostensibly looking for work) populations , with growth in the number of employed persons obviously preferable to those unemployed. But Yellen fails to acknowledge, and this is nothing new, that there is more at play than just growth of the labor force.

As we have previously pointed out, another simple concept to grasp is that the growth rate of the labor force is irrelevant unless it is measured against the growth rate of the working-age population. And the working-age population has been growing at a far faster rate over the last 30 years than the labor force. The problem isn’t that the labor force isn’t growing at a rate suitable to the Fed’s liking. It’s that the labor force isn’t growing fast enough relative to the increase in those who want and need jobs.

U.S. population growth is driven by immigration so, if not enough jobs are being created to keep up with population growth, might not a solution be to decrease immigration flows, not increase them? That is, if the goal of the Fed is to increase overall employment and decrease income inequality.

The argument made by corporations, most recently by the tech industry, which favors cheaper foreign guest workers over qualified Americans, is that immigration drives job growth, yet this argument ignores that unprecedented immigration levels over the last thirty years have corresponded with increases in income inequality, systematic unemployment, and skyrocketing numbers of Americans between the ages of 18 and 64 dropping out of the labor force.

Would U.S. economic growth slow if the pace of immigration was slowed? Probably. Would this be a good trade-off for a more prosperous America. Undoubtedly.

ERIC RUARK is the Director of Research for NumbersUSA


Updated: Wed, Feb 15th 2017 @ 4:12pm EST

NumbersUSA's blogs are copyrighted and may be republished or reposted only if they are copied in their entirety, including this paragraph, and provide proper credit to NumbersUSA. NumbersUSA bears no responsibility for where our blogs may be republished or reposted. The views expressed in blogs do not necessarily reflect the official position of NumbersUSA.