Immigration on the Decline?

August 24, 2012

Earlier this month, upon the release of GDP data for the 2nd quarter of this year, I observed that in spite of the decline in GDP, per capita GDP actually rose, thanks to a slowing rate of population growth.  We know that the fertility rate has fallen to its lowest level in 25 years.  But I was curious to see whether immigration may be slowing as well.

Unfortunately, immigration data (at least the data available to the public) is only current through 2011.  Nevertheless, I thought it a good time for an immigration update, the first I’ve done since publishing Five Short Blasts in 2007.  So here’s a chart of the number of persons granted permanent legal resident status, by year, dating back to 1820:

LPR by year

As you can see, today’s annual rate of immigration rivals that of immigration’s heyday in the early 1900s.  Since the end of World War II, immigration has risen rapidly from 38,000 in 1945 to over one million in 2011.  In 1991, it hit a record of over 1.8 million, thanks to the amnesty program that granted millions of illegal immigrants “legal permanent resident” status.  Following that peak, immigration declined dramatically through the 1990s, only to spike again beginning in 2000.  Immigration has remained fairly flat during the Obama administration, slightly below the most recent peak reached in 2006. 

This data paints a picture that is in stark contrast to ideas we may hold about which party is tougher on immigration.  Republicans are typically perceived to be tough on immigration while Democrats are viewed as being soft and sympathetic to potential immigrants.  What we see here is that immigration soared to its very worst levels under president George H.W. Bush in the early ’90s.  It then moderated dramatically during the Clinton administration.  It shot up again under George W. Bush, and has once again moderated slightly under Obama.  Not what you’d expect.  It’s not what I expected.

But the United States’ population has grown dramatically since 1920.  Perhaps it’d be a more meaningful analysis to express the rate of immigration as a percentage of the population.  Here’s a chart:  LPR by year as % of population.

Now the data looks dramatically different.  The history of U.S. immigration can now be clearly divided into three distinct phases:  pre-depression, depression/WWII and post-WWII.  During the first phase, immigration ramped up rapidly from 1820 to 1854, rising from less than 0.1% of the population per year to over 1.6% of the population.  From that point, it swung regularly and wildly in cycles that lasted 20-25 years.

During the second phase, with the onset of the Great Depression, the rate of immigration was cut by 90%, falling from 335,000 in 1927 to only 23,000 in 1933.  Clearly, with unemployment soaring to over 30%, President Roosevelt had the good sense to stop importing more labor, unlike President Obama.  It remained at this extremely low level through 1945. 

There’s a couple of very important points that need to be made here.  Today, we’re often told by business and political leaders that we must import workers because of a shortage of this skill or that skill.  And we’re told that an unemployment rate of 4-5% represents “full employment” – that it’s not possible to drive unemployment lower.  Yet, as the U.S. cranked up the war effort, the military actually pulled men out of the labor force at the same time that factory output had to be dramatically increased.  It did this without importing any additional labor.  Young girls and housewives – “Rosie the Riveter” – stepped in to fill the void.  None of them had any experience welding, riveting and working as mechanics and machinists.  They were trained, and quickly.  And unemployment fell from its depression level of greater than 30% to less than 1%.  It just goes to show that the rationalizations we hear today for our high rate of immigration are a bunch of B.S.  There is no shortage of labor in the U.S.  What we lack are business leaders with a little initiative needed to train workers and political leaders acting in the best interest of the American people.

The third phase began immediately after WWII – a very steady ramping up of immigration.  This is just speculation on my part, but this phase began at the same time that the Global Agreement on Tariffs and Trade was signed.  Perhaps it’s another indication that a new breed of economists had taken over,  hell-bent in their commitment to driving macroeconomic growth through free trade and by stoking it with population growth. 

Not counting the three year period of amnesty for illegal aliens from 1989 to 1991, immigration as a percentage of the population reached its peak in 2006 at 0.42% of the populaton.  It has fallen since then, to only 0.34% of the population in 2010 and 2011. 

But perhaps the most meaningful measure of immigration is how much it contributes to overall population growth.  Check out this chart:  LPR by year as % of population growth

As you can see, during that first phase of immigration from 1820 until the Great Depression, there were actually a number of years when immigration contributed well over 100% of America’s population growth.  It happened 19 times.  In other words, the U.S. population would actually have declined in those years were it not for immigration.  It happened for the last time in 1914.  This period truly was the heyday of U.S. immigration. 

In 1931, immigration’s contribution to population growth fell below 10% and didn’t rise above 10% again until 1947.  In 1933 it fell below 2%. 

Since the start of “phase 3,” immigration’s contribution to U.S. population growth rose again steadily to 25% in 1988, then spiked to 72% in 1991 during the amnesty period.  After that, it fell steadily to 24% in 1999, rose again to 42% by 2006, and has then fallen again to 34% in 2010 and 2011.  Thus, it appears that immigration’s contribution to population growth has plateaued and that a decline may now be underway. 

Many people – perhaps most – believe that high rates of immigration are our legacy – that we somehow owe it to the world to keep open the golden door.  From this data we can see that there is precedent for making dramatic cuts to immigration – on the order that I proposed in Five Short Blasts – when it’s in the best interests of the U.S. economy and the American people.  All it takes is the kind of common sense and backbone displayed by FDR – something sorely lacking in more recent presidents.

The only thing we have to fear …

January 20, 2009
… is ignorance. Franklin D. Roosevelt may have believed that fear itself was the enemy, but he was wrong. What he really faced was ignorance of the forces that led to the Great Depression – the ignorance that allowed the forces of greed – corporate tycoons, buttressed by their well-meaning economists, armed with their primitive, 18th century theories about free trade and comparative advantage, to convince our nation’s leaders that an abandonment of successful trade policy would send exports soaring along with their self-interests. Only ignorance could have allowed that generation to believe that a $0.67 billion decline in trade volume could cause a $33 billion decline in their GDP, and that a tweaking of tariffs that had been so successful for over 150 years could have collapsed the global economy.

It’s the same ignorance we face today – an ignorance that settles for superficial explanations for the latest economic collapse – a housing bubble and sub-prime mortgage crisis – without ever questioning why we had to resort to the concept of sub-prime mortgages to make housing seem affordable in the first place. It’s the same ignorance that plagues our economists today, still adamant in their refusal to give consideration to how population growth may impact the macro-economy. It’s the same ignorance that fails to recognize the relationship between population density and per capita consumption, and what happens when nations grossly disparate in in these characteristics attempt to trade freely with each other.

It’s only ignorance that allows economists to believe that a global economy which is utterly dependent on the draining of resources of its wealthiest state can be sustained indefinitely. It’s ignorance that leads us to believe that that same state, now collapsing under the weight of its debt, can only be saved by force-feeding it more debt. It’s only ignorance that allows economists to believe that never-ending population growth is the only path to a healthy economy, or that it’s even possible.  It’s ignorance that places total trust in the World Trade Organization, loudly critical of protectionist forces in the United States while very quietly enforcing protectionism in favor of two thirds of its member countries – but not the U.S., of course.

Will Barack Obama carry on this tradition of ignorance by settling upon policy spoon-fed him by his staff and advisers, as his predecessors have done for decades? If policy is crafted by the most capable of ignorant advisers, is it any less ignorant? Or is Mr. Obama wise enough to recognize when policies recommended by his advisers are the same that have been tried before and ultimately led to where we stand now? Will he be courageous enough to trust his own instincts and reach far enough back in history to find policy -especially trade policy – that was a time-tested and proven success? For now, all we can do is hope.