Here's Why Immigration Policy Matters So Much For The US Economy
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I'm Stephen Carroll, and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg. ♪

His claims for the mass deportations, to me, seem almost logistically impossible. So we'll see what he actually accomplishes. Obviously, getting rid of a lot of people will create a lot more chaos than economic chaos.

If the breaks go on in terms of inward immigration, the break-even employment growth that keeps unemployment unchanged is only 100,000. So add that to your list of uncertainties. And I think there's real concerns about being too strict on immigration policy and possibly seeing net out migration, which is something we haven't seen in my lifetime.

Immigrants have long been part of the economic success story of the United States. Many economists and business leaders credit immigration for filling vacancies across the economy. But Donald Trump and many of his allies accuse immigrants of lowering wages and taking jobs from native-born Americans. He's pledged to crack down on illegal immigration and carry out the biggest deportation plan in US history. What would that mean for growth, inflation and employment?

Here's why immigration policy matters so much for the U.S. economy. Our senior editor Derek Wolbank joins me now for more. Derek, first of all, what does the data tell us about the economic effect that immigration has had on the U.S. economy? Immigration has a profound effect on the United States economy. Just to put into context, about one in five U.S. workers is an immigrant.

And immigrants lead some of the biggest companies in the United States, right? If you think of Microsoft and Satya Nadella, if you think of NVIDIA and Jensen Huang, I mean, the most famous one, obviously, right? Elon Musk of Tesla and SpaceX and many other things.

So immigrants have a very, very profound effect on the economy. Generally speaking, economists see immigration as economically positive in the U.S. The Fed has cited immigration as part of the reason the U.S. economy has beat expectations. The Congressional Budget Office sees immigration as increasing federal revenue more than it increased costs, so it's a net benefit there. And if you're looking sort of on a

fully macro level. The late Singaporean leader Lee Kuan Yew used to say that immigration was one of the United States' secret weapons economically because it could attract the best from all over the world and instantly make them Americans and have them contribute to the American economy.

Of course, there's a distinction here, too, between legal immigration and some of those that you mentioned there who made their path to the U.S. via legal means and illegal immigration, which was talked about in a very different way during the election campaign. What do we know about the effects that illegal immigration has? It's a subject of, let's say, some considerable dispute. Let me back up a quick second and put illegal immigration into two camps.

The first one is those people who entered illegally, come through the southern border. Another way, though, is to come in on a fully legal and operational visa and then overstay the visa, simply just not go home. Both of those are present when we're talking there. It's a lot easier to stop the first than the second. It's hard to know about how many people were talking here. There was an

estimate, pegging at about 11 million individuals as of 2022. Of those, though, about 8 million are in the labor force and have a job of some kind. Now, that number may actually be low because it may have increased in the recent post-COVID spikes in terms of encounters at the U.S. southern border. You know, there's been a documented increase of people trying to come in over the last couple of years. So that number may actually be low.

If Donald Trump were to carry out his promise of mass deportation, what would that mean for growth or for inflation in the U.S.?

Well, look, I think a lot of that is down to how much there might actually be in terms of an action. If you were to try and take this at the most maximal level and you said, I'm going to try and deport all 11 million or more people in one swift action, you know, just do those numbers in reverse. Imagine 8 million or more people out of the labor force immediately, jobs lost.

Even if the argument is that removing illegal immigration is going to allow more Americans to take jobs that other people are taking, even if that's the argument, there's simply not quite a way to replace 8 million people or more in the labor force. So that's one part.

even though a smaller retraction in the job force would have meaningful effects. That having been said, though, we are hearing from a fair number of Trump-supporting Republicans who've suggested that anything would go in a certain amount of phases and that you would start off with most obvious candidates, people who have had criminal offenses.

So more limited action like that wouldn't have such a mass effect. And indeed, proponents would argue that deporting those individuals would have a benefit both economically and also societally. What do businesses want on this issue? Well, this is an interesting one. If you take a Chamber of Commerce view, Chambers of Commerce representing the largest businesses across the U.S.,

tend to want to have a full pool of immigrant labor from which to pick from. Indeed, many of them would like a lot more easing to be able to have more individuals. This is actually, though, playing out as a debate within Republican circles. So

Elon Musk is one who thinks that there are great benefit to having H-1B visas available in good abundant numbers. These are the ones that are used by highly educated, often tech workers, many from India, some from China.

At the same time, you have people who have been with Donald Trump for a very long time. Steve Bannon is one. Immigration hawks who think that this is a program that needs to be pulled down and that Musk's views on this are indeed dangerous. So there is a big split within Trump's own orbit. Trump right now is leaning a little bit towards

Musk on some of the skilled immigration stuff, even as he's talking about big deportation plans. On skilled immigration, he has talked about the need to attract the best and brightest and bemoaned the idea that there are a large number of international students to American universities who will get an American education and then not be able to stay. Trump would like to find ways to have them stay.

Immigration is a big political issue in many parts of the world. Is the same sort of debate playing out in other countries? You know, that's a great question. It is. And indeed, we see this playing out in pretty much every advanced economy that is a reception zone for immigration at scale. Famously, the United Kingdom and Brexit, what more needs to be said? Immigration was at the absolute heart of that.

Even here in Singapore, though, I mentioned it's become a flashpoint politically, a very well-educated city-state that had received a lot of immigrants coming in who had been working in Hong Kong when that city was having difficulties after COVID.

But Singapore is in a position where it doesn't feel like it could take in all of those. Even if you said the 500,000 or the million best people from Hong Kong economically would come to Singapore, Singapore is a city state of 6 million people, doesn't have enough space to house them, doesn't have enough schools to educate them. The transportation system wouldn't be able to handle the load, all of these sorts of things.

So I do think that anywhere that you go, you do find these questions about immigration that are percolating. And look, it is an issue in elections all over the world. It's going to be an issue in the upcoming Singaporean election. It's going to be an issue when Australian voters go to the polls. It'll be an issue in Canada when those voters go to the polls.

So the United States is very much not alone. The issues you're seeing in the U.S. around immigration are at play in every single major economy around the world. Okay. Derek Wallbank, our senior editor, thank you very much. For more explanations like this from our team of 2,900 journalists and analysts around the world, search for Quick Take on the Bloomberg website or Bloomberg Business app.

I'm Stephen Carroll. This is Here's Why. I'll be back next week with more. Thanks for listening. At Ritual, we know what goes into the holiday season.

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