The Economic Impact of Immigrants

The Economic Impact of Immigrants
Bronwyn Lance
World and I
May 2000

When Federal Reserve Chairman Alan Greenspan speaks, people listen. Indeed, the power of his words is such that world markets fluctuate at his merest utterance, and entire roomfuls of reporters will race for the telephone upon hearing a particularly oracular comment. Recently, when speaking on the topic of aggregate demand, Greenspan told Congress that the United States should be considering "expanding the number of people we allow in."

In an era of high immigration to America, the very notion of encouraging a steady-let alone increasing-number of immigrants has been met with vehement naysaying. Immigration foes range from Pat Buchanan-type isolationist Republicans, who want to fence America in to keep foreigners from corrupting our culture, to union Democrats who maintain that immigrants steal jobs from Americans. In 1996, anti-immigrant forces in Congress passed an omnibus bill, signed into law by President Clinton, that was harsh on almost every aspect of immigration.

Successful immigrants not a cliche.
One argument used by those favoring this legislation is that immigrants are a drain on our economy. This law forced anyone who wants to sponsor an immigrant family member to earn 125 percent of the poverty level, and the 1996 welfare-reform law kicked noncitizens off the welfare rolls. Still, immigrants do not need a handout; by most accounts, they are doing better than ever. Recent research and anecdotal evidence indicate that immigrants, both skilled and nonskilled, are having a very positive and visible effect on the U.S. economy.

The idea of immigrants coming to the United States with very little and ending up successful is not a worn-out cliché. A stroll through one of the many vibrant, ethnic neighborhoods that have taken root in our cities will reveal that foreign-born Americans, both past and present, have renovated countless blighted areas.

Long before the Vietnamese moved to northern Virginia and the Ethiopians and Central Americans revitalized the inner city of Washington, D.C., New York had a Little Italy, Chicago had its Polish neighborhood, and San Francisco had a Chinatown. In each of these places, immigrants of our great-grandparents' era heard the same epithets hurled at them: They would never assimilate, they would never learn English, and they were stealing jobs.

Far from being charity cases who drain the economy, these new immigrants are contributing to the current economic boom. The Hispanic video stores, Ethiopian restaurants, and Vietnamese jewelers do a brisk trade and employ both foreign- and native-born Americans. Yes, immigrants usually come to our shores with very little, but due to the choices they make, frequently scrimping and saving every penny, they often end up as home owners and business owners in a short time.
Take the example of Sedad Karic, a Bosnian refugee who came to Jacksonville, Florida, in 1996 with only his wife and small son, his father's watch, and a cat. Speaking almost no English, Karic began working within two weeks of his arrival as a garbage collector. Within two years, he and his wife had saved enough to put a down payment on a three bedroom house on the south side of Jacksonville. Today, Karic works as an employment specialist and his wife is employed at Merrill Lynch. "It's all about choices," Karic said. "My wife and I chose not to spend money foolishly, and we saved every penny to buy our house."

There are many, many other examples of individual immigrant success stories, from Andrew Grove, the founder of Intel and one of Time magazine's Man of the Year honorees, to Babiso Baramo, an Ethiopian in Arlington, Virginia, who works as both a parking garage attendant and a cab driver, owns his own home, supports his wife and children, and has never missed a mortgage payment. "Occasionally, Americans have called me 'greedy' for working so much,"relates Baramo, who works an average of 15 hours per day. "I usually only see my family on the weekends . . . . It is a sacrifice. I could see them more, but then I would be supporting them less. In this country, if you work hard, you make more money. It's that simple."

When asked about the charges that immigrants deprive others of work opportunities, Rida Ibrahim, another Ethiopian who manages a parking garage in Rosalyn, Virginia, dismisses them. "There is certainly no shortage of jobs. You see help wanted signs everywhere. It's all about what you are willing to do with your time."

Recent research bears out the economic impact that immigrants are having. In an attempt to quantify the contributions of immigrants to America's industrial cutting edge, the Alexis de Tocqueville Institution (AdTI) completed a 1996 study that used a well-known indicator of technological innovation-issuance of new patents-to measure immigrants' inventiveness and spirit of enterprise. Examining 250 recently issued U.S. patents chosen at random, AdTI found that over 19 percent of the patents in a random sample of 48 were issued to immigrants alone or to immigrants collaborating with U.S.- born coinventors.

This is over twice immigrants' proportion of the U.S. population. The immigrant inventors identified in the study included researchers, executives, entrepreneurs, and an MIT professor. Four started their own businesses, generating over 1,600 jobs. The findings also seemed to justify concerns long expressed by foreign governments about "brain drain"-the economic loss suffered when highly skilled citizens immigrate to the United States to pursue their careers.

Supporting Massachusetts
This is not just a Silicon Valley computer-engineer phenomenon, either. A recent study by the Massachusetts Institute for a New Commonwealth and Citizens Bank, entitled The Changing Workforce: Immigrants and the New Economy in Massachusetts, chronicles how foreign immigration to Massachusetts and New England at large is playing a major role in the changing demography, culture, and economy of the area; it shows immigrants to be hardworking and upwardly mobile.

Although Massachusetts has always been home to numerous immigrants, by 1970 its immigrant population was less than 500,000. Coincidentally, the state also began to experience a population loss due to domestic outmigration and a declining birthrate. In the 1980s, immigrants from across the globe began to settle in Massachusetts.

The new immigrants, who come from Asia, Latin America, and Puerto Rico and live both in central cities and suburban developments, helped to offset the regional population loss and contribute to the workforce. Immigrants make up only 12 percent of the state's population; yet, if it were not for foreign immigration, the population would actually be shrinking and would have shrunk every decade since the 1970s.

These immigrants have contributed substantially to the growth of the Massachusetts labor force. Foreign immigrants were responsible for 82 percent of the growth in the state's civilian labor force between the mid 1980s and 1997. Also, immigrant participation in the workforce is on par with that of native-born Americans. In fact, male immigrants are more likely to participate actively in the labor market than are native-born citizens. Those immigrants who seemingly face the highest hurdle to gaining employment-those with a high school diploma or less-are also more active in the workforce than their native-born counterparts.

This study estimates that if not for the influx of immigrants that has kept factories going strong, 200,000 fewer people would be working in New England now than in 1990. By the late 1990s, immigrants had come to hold dominant shares in many blue-collar niches within this workforce, particularly those critical to production and output in manufacturing. They were nearly twice as likely to be employed in skilled production crafts as native-born workers and three to five times as likely to be employed as fabricators, assemblers, and machine operators, the very occupations that keep factories running.

Immigrants also outperformed native-born Americans in the professional occupations. Immigrants are more than twice as likely as native-born professionals to be university and college teachers. Just over 2 percent of all foreign-born workers held these positions, as opposed to less than 1 percent of native-born professionals. The recent freeze on new H-1B employment visas has created difficulties for some colleges and universities in filling teaching posts.

Additionally, foreign-born professionals are more likely than the native-born to be employed as engineers, physical scientists, and computer scientists. Also, as opposed to rent-seeking occupations such as lawyers and lobbyists, immigrants, on average, are more likely than native-born workers to be employed in wealth-creating activities. The study also shows that immigrants become more upwardly mobile the longer they are in the United States, with only 15 percent of those who had migrated before 1980 living below the poverty line, as opposed to a higher rate for immigrants who had arrived in the 1980s.

Increase in property values
In another AdTI study released in January, myself and my colleague Margalit Edelman found that perhaps the biggest benefit immigrants have brought to the Washington, D.C., area is increased property values. We surveyed census tracts from 1980 to 1998 and found that spurts in immigration correlated heavily to increases in residential property values.

In D.C.'s largely Hispanic neighborhood of Adams Morgan, long an area in flux, a 78 percent increase in foreign-born population was accompanied by a 21 percent increase in property value. Other neighborhoods saw a similar rise in prices. In total, areas of high immigration saw property values increase 13.8 percent, far above the citywide average of 2.7 percent.

This rise was not confined to Washington. The same correlation between immigrants and rising property values also showed up in northern Virginia and suburban Maryland, where a 113 percent increase in foreigners was accompanied by a 37.5 percent increase in property values. Many of the immigrants in this area, particularly in northern Virginia, are Hispanic. Others are Vietnamese, many of them former boat people, who have renovated shops and strip malls and changed parking lots into thriving enterprises. Similarly, in suburban Maryland, Hispanics, Ethiopians, and Somalis have worked comparable magic.

Lamentably, our research showed that the reverse of this trend also holds. In neighborhoods where the numbers of foreign-born were minimal or nonexistent, property values dropped. The 10 tracts with the greatest decrease in immigrants, an average decline of 39 percent, saw property prices fall 7.6 percent. The most dramatic example occurred in one forlorn section of Washington, in the southeast neighborhood of Anacostia, which lost 76 percent of its immigrant population and experienced a drop in property values of 18 percent.

By the middle of the twentieth century, America had surpassed all other nations in living standards and output. This economic growth coincided with several periods of very heavy immigration. There is a growing consensus that immigration has had a positive economic impact during this century. Some, though, still have doubts.

Vernon Briggs, professor of labor economics at Cornell University, has argued that, unlike earlier times in U.S. history, immigrants arriving today will have adverse affects on the economy because our industrial and occupational patterns have changed dramatically. However, it is precisely due to these changing patterns, with a new emphasis on intellectual capital, that immigrants can find a place in America's future. Our current and unprecedented economic growth is fueled in large part by America's cutting-edge advantage in the high-tech sector, which stays that way due to the innovations that many of the world's best and brightest minds have made after coming to our shores.

But highly skilled immigrants, who also create jobs for Americans, are not the only ones contributing to our economic boom. Even the less-skilled immigrants contribute to our economy and our lives by working in jobs most Americans do not want, such as cleaning offices, cooking in restaurants, and ringing up purchases in the grocery store. They, in turn, contribute by buying homes, clothes, and groceries. The wonderful cultural diversity brought to the United States by immigrants has become secondary to their willingness to work hard and become part of today's America.

The Economic Impact of Immigrants
Bronwyn Lance
World and I
May 2000
When Federal Reserve Chairman Alan Greenspan speaks, people listen. Indeed, the power of his words is such that world markets fluctuate at his merest utterance, and entire roomfuls of reporters will race for the telephone upon hearing a particularly oracular comment. Recently, when speaking on the topic of aggregate demand, Greenspan told Congress that the United States should be considering "expanding the number of people we allow in." In an era of high immigration to America, the very notion of encouraging a steady-let alone increasing-number of immigrants has been met with vehement naysaying. Immigration foes range from Pat Buchanan-type isolationist Republicans, who want to fence America in to keep foreigners from corrupting our culture, to union Democrats who maintain that immigrants steal jobs from Americans. In 1996, anti-immigrant forces in Congress passed an omnibus bill, signed into law by President Clinton, that was harsh on almost every aspect of immigration. Successful immigrants not a cliche. One argument used by those favoring this legislation is that immigrants are a drain on our economy. This law forced anyone who wants to sponsor an immigrant family member to earn 125 percent of the poverty level, and the 1996 welfare-reform law kicked noncitizens off the welfare rolls. Still, immigrants do not need a handout; by most accounts, they are doing better than ever. Recent research and anecdotal evidence indicate that immigrants, both skilled and nonskilled, are having a very positive and visible effect on the U.S. economy. The idea of immigrants coming to the United States with very little and ending up successful is not a worn-out cliché. A stroll through one of the many vibrant, ethnic neighborhoods that have taken root in our cities will reveal that foreign-born Americans, both past and present, have renovated countless blighted areas. Long before the Vietnamese moved to northern Virginia and the Ethiopians and Central Americans revitalized the inner city of Washington, D.C., New York had a Little Italy, Chicago had its Polish neighborhood, and San Francisco had a Chinatown. In each of these places, immigrants of our great-grandparents' era heard the same epithets hurled at them: They would never assimilate, they would never learn English, and they were stealing jobs. Far from being charity cases who drain the economy, these new immigrants are contributing to the current economic boom. The Hispanic video stores, Ethiopian restaurants, and Vietnamese jewelers do a brisk trade and employ both foreign- and native-born Americans. Yes, immigrants usually come to our shores with very little, but due to the choices they make, frequently scrimping and saving every penny, they often end up as home owners and business owners in a short time. Take the example of Sedad Karic, a Bosnian refugee who came to Jacksonville, Florida, in 1996 with only his wife and small son, his father's watch, and a cat. Speaking almost no English, Karic began working within two weeks of his arrival as a garbage collector. Within two years, he and his wife had saved enough to put a down payment on a three bedroom house on the south side of Jacksonville. Today, Karic works as an employment specialist and his wife is employed at Merrill Lynch. "It's all about choices," Karic said. "My wife and I chose not to spend money foolishly, and we saved every penny to buy our house." There are many, many other examples of individual immigrant success stories, from Andrew Grove, the founder of Intel and one of Time magazine's Man of the Year honorees, to Babiso Baramo, an Ethiopian in Arlington, Virginia, who works as both a parking garage attendant and a cab driver, owns his own home, supports his wife and children, and has never missed a mortgage payment. "Occasionally, Americans have called me 'greedy' for working so much,"relates Baramo, who works an average of 15 hours per day. "I usually only see my family on the weekends . . . . It is a sacrifice. I could see them more, but then I would be supporting them less. In this country, if you work hard, you make more money. It's that simple." When asked about the charges that immigrants deprive others of work opportunities, Rida Ibrahim, another Ethiopian who manages a parking garage in Rosalyn, Virginia, dismisses them. "There is certainly no shortage of jobs. You see help wanted signs everywhere. It's all about what you are willing to do with your time." Recent research bears out the economic impact that immigrants are having. In an attempt to quantify the contributions of immigrants to America's industrial cutting edge, the Alexis de Tocqueville Institution (AdTI) completed a 1996 study that used a well-known indicator of technological innovation-issuance of new patents-to measure immigrants' inventiveness and spirit of enterprise. Examining 250 recently issued U.S. patents chosen at random, AdTI found that over 19 percent of the patents in a random sample of 48 were issued to immigrants alone or to immigrants collaborating with U.S.- born coinventors. This is over twice immigrants' proportion of the U.S. population. The immigrant inventors identified in the study included researchers, executives, entrepreneurs, and an MIT professor. Four started their own businesses, generating over 1,600 jobs. The findings also seemed to justify concerns long expressed by foreign governments about "brain drain"-the economic loss suffered when highly skilled citizens immigrate to the United States to pursue their careers. Supporting Massachusetts This is not just a Silicon Valley computer-engineer phenomenon, either. A recent study by the Massachusetts Institute for a New Commonwealth and Citizens Bank, entitled The Changing Workforce: Immigrants and the New Economy in Massachusetts, chronicles how foreign immigration to Massachusetts and New England at large is playing a major role in the changing demography, culture, and economy of the area; it shows immigrants to be hardworking and upwardly mobile. Although Massachusetts has always been home to numerous immigrants, by 1970 its immigrant population was less than 500,000. Coincidentally, the state also began to experience a population loss due to domestic outmigration and a declining birthrate. In the 1980s, immigrants from across the globe began to settle in Massachusetts. The new immigrants, who come from Asia, Latin America, and Puerto Rico and live both in central cities and suburban developments, helped to offset the regional population loss and contribute to the workforce. Immigrants make up only 12 percent of the state's population; yet, if it were not for foreign immigration, the population would actually be shrinking and would have shrunk every decade since the 1970s. These immigrants have contributed substantially to the growth of the Massachusetts labor force. Foreign immigrants were responsible for 82 percent of the growth in the state's civilian labor force between the mid 1980s and 1997. Also, immigrant participation in the workforce is on par with that of native-born Americans. In fact, male immigrants are more likely to participate actively in the labor market than are native-born citizens. Those immigrants who seemingly face the highest hurdle to gaining employment-those with a high school diploma or less-are also more active in the workforce than their native-born counterparts. This study estimates that if not for the influx of immigrants that has kept factories going strong, 200,000 fewer people would be working in New England now than in 1990. By the late 1990s, immigrants had come to hold dominant shares in many blue-collar niches within this workforce, particularly those critical to production and output in manufacturing. They were nearly twice as likely to be employed in skilled production crafts as native-born workers and three to five times as likely to be employed as fabricators, assemblers, and machine operators, the very occupations that keep factories running. Immigrants also outperformed native-born Americans in the professional occupations. Immigrants are more than twice as likely as native-born professionals to be university and college teachers. Just over 2 percent of all foreign-born workers held these positions, as opposed to less than 1 percent of native-born professionals. The recent freeze on new H-1B employment visas has created difficulties for some colleges and universities in filling teaching posts. Additionally, foreign-born professionals are more likely than the native-born to be employed as engineers, physical scientists, and computer scientists. Also, as opposed to rent-seeking occupations such as lawyers and lobbyists, immigrants, on average, are more likely than native-born workers to be employed in wealth-creating activities. The study also shows that immigrants become more upwardly mobile the longer they are in the United States, with only 15 percent of those who had migrated before 1980 living below the poverty line, as opposed to a higher rate for immigrants who had arrived in the 1980s. Increase in property values In another AdTI study released in January, myself and my colleague Margalit Edelman found that perhaps the biggest benefit immigrants have brought to the Washington, D.C., area is increased property values. We surveyed census tracts from 1980 to 1998 and found that spurts in immigration correlated heavily to increases in residential property values. In D.C.'s largely Hispanic neighborhood of Adams Morgan, long an area in flux, a 78 percent increase in foreign-born population was accompanied by a 21 percent increase in property value. Other neighborhoods saw a similar rise in prices. In total, areas of high immigration saw property values increase 13.8 percent, far above the citywide average of 2.7 percent. This rise was not confined to Washington. The same correlation between immigrants and rising property values also showed up in northern Virginia and suburban Maryland, where a 113 percent increase in foreigners was accompanied by a 37.5 percent increase in property values. Many of the immigrants in this area, particularly in northern Virginia, are Hispanic. Others are Vietnamese, many of them former boat people, who have renovated shops and strip malls and changed parking lots into thriving enterprises. Similarly, in suburban Maryland, Hispanics, Ethiopians, and Somalis have worked comparable magic. Lamentably, our research showed that the reverse of this trend also holds. In neighborhoods where the numbers of foreign-born were minimal or nonexistent, property values dropped. The 10 tracts with the greatest decrease in immigrants, an average decline of 39 percent, saw property prices fall 7.6 percent. The most dramatic example occurred in one forlorn section of Washington, in the southeast neighborhood of Anacostia, which lost 76 percent of its immigrant population and experienced a drop in property values of 18 percent. By the middle of the twentieth century, America had surpassed all other nations in living standards and output. This economic growth coincided with several periods of very heavy immigration. There is a growing consensus that immigration has had a positive economic impact during this century. Some, though, still have doubts. Vernon Briggs, professor of labor economics at Cornell University, has argued that, unlike earlier times in U.S. history, immigrants arriving today will have adverse affects on the economy because our industrial and occupational patterns have changed dramatically. However, it is precisely due to these changing patterns, with a new emphasis on intellectual capital, that immigrants can find a place in America's future. Our current and unprecedented economic growth is fueled in large part by America's cutting-edge advantage in the high-tech sector, which stays that way due to the innovations that many of the world's best and brightest minds have made after coming to our shores. But highly skilled immigrants, who also create jobs for Americans, are not the only ones contributing to our economic boom. Even the less-skilled immigrants contribute to our economy and our lives by working in jobs most Americans do not want, such as cleaning offices, cooking in restaurants, and ringing up purchases in the grocery store. They, in turn, contribute by buying homes, clothes, and groceries. The wonderful cultural diversity brought to the United States by immigrants has become secondary to their willingness to work hard and become part of today's America.