How immigration affects economic growth in the US

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Effects of immigration on the US economy

Effects of immigration on the US economy

How immigration affects economic growth in the US

The United States (US) is known as the land of opportunity for immigrants. Economic opportunity was the initial draw for people wanting to settle in the country. The untapped economic resources of this vast continent have triggered emigration from different parts of the globe. The latest advancement in communication and technology has made the US even more enticing for the outside world.

Indians are no exception when it comes to responding to the promises of a better future abroad. Many of them settle in the US to enhance their earning power. However, there are responsibilities back home even when they shift to a foreign shore. They send money to India to support their loved ones. 

The US remains a leading destination for immigrants from India and around the world. Some 4.46 million non-resident Indians (NRIs) and persons of Indian origin (PIOs) were living in the US in December 2018. In 2016, Chinese, Indian, and South Korean students represented over 50% of the international student population in the US. Cities like San Jose, San Francisco, New York, and Los Angeles are known to be immigrant-friendly.

Many choose to focus on the negative impacts of immigrant communities. It’s true that immigrants remit money to their home countries. For instance, Indians in the US regularly transfer money to India. But immigrants have also been good for the US economy. They contributed USD 1.6 trillion to the country’s gross domestic product (GDP) in 2013. 

Let’s take a closer look at how immigrants affect the US economy.

Entrepreneurial ambitions

Immigrants are more likely to start their own businesses than US-born natives. Among the companies that went public in the 2006–2012 period, one-third had an immigrant founder. How do Indians factor in here? Among 87 US companies valued at more than USD 1 billion, 14 had an Indian founder. Plus, many leading companies in the US have Indian-origin people running the show. Satya Nadella of Microsoft, Sundar Pichai of Google, and Indra Nooyi, the former PepsiCo CEO, are some examples.

Job generation

Businesses owned and run by immigrants give rise to millions of jobs for US citizens. They make a substantial contribution to the US government’s tax revenues. The rise in employment rates boosts the purchase of goods and services. So, these immigrant-run businesses contribute to the growth of the US economy. Some studies suggest that immigration also pushes up wage levels in the US.

Growth of innovation

A large number of immigrant workers take up jobs relating to science, technology, engineering, and mathematics. In fact, the percentage of foreign-born workers in these fields in the US has more than doubled since 1990. Immigrant workers increase productivity in these sectors. They also spur innovation within the US. Foreign-born inventors are associated with nearly three-fourths of all patents granted to the top 10 patent-producing universities in the US.

Counteract falling birth rates

The drop in birth rates could be a serious problem for the US in future. In 2017, the total fertility rate in the US—the number of births per woman—stood at 1.76. In 2018, it fell lower still, to 1.72. The optimum level, according to demographers, is 2.1. This is the number required to replace the current population. The fall in birth rates could signal a shrinking labour force. This could affect economic growth and social security. Immigrants could offset the effects of this falling birth rate.

Indian workers in the US

Today, the US is home to some four million white-collar workers from India. Many of them maintain a close connect with their dear ones back home. What about those with financial obligations in India? Digital remittance solutions like Axis RemitMoney help them send money to India from USA in no time at all. 

Bottom-line

It’s clear that immigrants are beneficial for the American economy. By creating jobs and spurring innovation,  immigrants spur economic growth in the US. The good thing is that their remittances back home support the economies of their native countries as well. It’s a win-win situation for all.

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