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Friday, May 19, 2006

The Economics of Immigration

Larry Kudlow:

Why legislators fail to understand the economics of this problem is beyond me.

Wage differentials between Mexico and the U.S. are huge — largely because of Mexico’s failure to liberalize its economy. So, as long as American job opportunities and higher wages beckon, immigrants in search of a better life will stream northward into the U.S. — fence or no fence. This has always been the heart of the problem.

The anti-immigration crowd also gets it wrong when it points out that the Senate compromise bill would increase the number of immigrant workers in the U.S. by roughly 61 million over the next two decades. This Heritage Foundation analysis has the fear-mongerers predicting a Mexican takeover of the United States. But we need these workers.

Due to the demographic shift being caused by the baby boomers, the ratio of working-age persons in the U.S. to retirees aged 65 and over will drop like a stone from the current 4.7:1 ratio to 3.5:1 by 2030, and 2.6:1 by 2040. With the Social Security and Medicare trust funds going bankrupt, how will we manage with so few workers per retiree? Will we let our whole economy stagnate like France, Germany, Italy, or even Japan? All of these countries suffer from shrinking workforces and top-heavy government taxation.

Well, the U.S. could maintain a 4:1 ratio of workers to retirees by admitting an additional 57.5 million workers over the next nineteen years, according to analyst William Kucewicz. This would result in an average annual population increase of less than 1 percent and a total of only 16.4 percent more than the 350 million projected by the Census Bureau for 2025.

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