The Inevitable Need: Why Immigrants Are a Key to Economic Stability

Whatever the politicians say during the presidential campaign, the United States will continue to need a significant number of immigrants and Latin America will need to continue exporting part of its population to this country.

The native U.S. workforce is shrinking, a trend that will increase in the next few years. In the short run, only two things can reverse the negative effect of this labor shortage on the economy: a major increase in productivity and an influx of foreign workers. A third factor, of course, could reverse the trend, i.e., a massive boost in the birth rate, but the effect would only be felt in the long run in the unlikely event that Americans decided to have lots of babies.

The first possibility, the rise in productivity, runs contrary to what has been happening in recent decades. The third possibility, as explained, is excluded due to social trends that have been noticeable for quite some time. This leaves only one solution—immigrants.

According to the U.S. Bureau of Labor Statistics, since 2019, that is, since the year before the pandemic, the native workforce has shrunk by 208,000 people, while the foreign-born workforce has increased by 3.86 million. According to projections by the Pew Research Center, if no foreigners were to join the workforce, by 2035 it will have shrunk by 7 million people compared to 2015. By contrast, if newcomers to the U.S. are factored in, the workforce will grow to 183 million, ten million more than in 2015.

The U.S. economy, therefore, desperately needs those undesirable Latin Americans (and others) to keep coming. Now let’s look at the other side of the equation—the source countries. They, too, need to allow population outflows for economic reasons.

It used to be the case that most Latin American immigrants came from Mexico and Central America, but the trend started to change a few years ago. In 2023, for the first time, South Americans slightly outnumbered Mexicans, Salvadorans, Guatemalans, and Hondurans. That does not mean that workers from the latter countries are not as interested as they used to be in migrating to the north of the continent. It simply means that other countries have joined the trend. In some cases (Venezuela, for instance), politics has as much to do with the desire to emigrate as the economy, but the deterioration of the political climate has had devastating economic effects on the population.

Latin emigrants, as is well known, send back home billions of dollars on which millions of families have become quite dependent. According to the major multilateral bodies, foreign remittances reached US$152 billion last year. For the first time since the beginning of the century, foreign remittances surpassed foreign direct investment in Latin America (a pattern also seen in other regions).

It is unlikely that in the next few years Latin America will find major sources of additional foreign exchange. About forty percent of its foreign direct investment comes from the U.S., whose economy is not doing great, and about one fifth comes from Europe, where growth has averaged less than 0.5 percent in recent years. These realities will also affect foreign trade, which is unlikely to be replaced by intraregional commerce since it amounts to barely 7 percent of gross domestic product, a level similar to that of Sub-Saharan Africa.

All of these lead us to one simple conclusion: both the source countries and the destination countries need and will continue to produce migratory flows going in a south-to-north direction. It is about time American politicians started to face this truth and get creative, setting in place flexible ample guest-worker programs and other arrangements that consider the market’s powerful dynamics. Otherwise, illegal immigration, border crises and political polarization will only get much worse.

This piece originally was published by the Independent Institute.