The Economic Benefits of Immigration

In the United States today, too many communities struggle to grow and ensure that their residents thrive. These places experience hardship along with the rest of the nation during difficult economic times but do not seem to benefit to the same degree when the economy rebounds. In common parlance, they have been “left behind.”

One of the major warning signs of economic stagnation is slow population growth or population decline. Such demographic trends mean a declining tax base, falling home prices, fewer workers and consumers, and so on. A major source of decline is net out-migration, or people choosing to move elsewhere without corresponding inflows. Most of those who move away are young, working-age people. Communities left with an aging population often lack sufficient people to fill the necessary jobs to sustain the local economy. According to the Economic Research Service at the U.S. Department of Agriculture, from 2010 to 2020, nonmetro counties experienced their first recorded decade of overall population decline, including a 5 percent decrease in the working-age population and a 6 percent decrease in the population of children.5 Even places with stable or growing populations sometimes face labor market challenges. Low rates of business formation, for example, may result from a lack of entrepreneurship or market opportunity. The skills of the local labor force may not align with the needs of local employers, and educational pipelines take many years to bear fruit.

One often overlooked solution to these problems lies beyond American shores: immigration. While national politics in the United States and around the world have turned sharply against immigration in recent years, its economic potential remains enormous. For individual communities, an infusion of immigrants can help address economic stagnation or decline. A study of two Detroit neighborhoods that saw large influxes of immigration over a thirty-year period found resultant population growth in those neighborhoods, compared to population loss citywide. Residents of the neighborhoods rated quality of life and neighborhood safety more highly; tax delinquencies and foreclosures fell; and the communities entered cycles of economic revitalization.6 Another study describes neighborhoods in Chicago and Dallas where immigrants from Mexico and other Latin American countries have, according to one historian, “saved the American city” and helped reverse the urban crises that plagued metro areas in the late twentieth century.7 Large cities like Detroit, Chicago, and Dallas are hardly alone. From St. James, Minnesota, to Franklin County, Alabama, communities that have welcomed immigrants have reaped economic rewards in the form of population growth, revitalized downtowns, new businesses, and the filling of empty jobs.8

Despite perennial fears that new arrivals will displace American workers and drive down their wages, research shows that immigrants typically complement native workers and, as a result, increase their wages.9 Economists Alessandro Caiumi and Giovanni Peri illustrate that, from 2000 to 2019, immigration led to a roughly 2 percent increase in the wages of noncollege-educated workers and had no effect on college-educated workers. Rising rates of immigrant employment, they found, contributed to small increases in nonimmigrant employment. Immigrants are also uniquely entrepreneurial. In 2019, immigrant entrepreneurs accounted for 22 percent of all business owners in the United States, even though they represented only about 14 percent of the overall population and 17 percent of the labor force.10

This report proposes designing CPVs to channel the benefits of immigration to those communities at risk of being left behind but that would stand to rebound economically through the infusion of a new population and new workers. As has been the case for centuries, immigrants to the United States tend to settle in places where other immigrants from the same country have already settled. Over half of the nation’s forty-six-million foreign-born people live in just four states: California, Texas, New York, and Florida.11 From 2017 to 2022, 37 percent of all H-1B recipients lived in just four cities: New York, San Jose, San Francisco, and Dallas.12 By authorizing communities to become special destinations for the immigrants they want and need, CPVs would create incentives for immigrants to move to less common destinations where their presence would introduce economic dynamism and growth.