Market Insider

This is what immigration means to the US economy in two charts

New American citizens take the Oath of Allegiance during a naturalization ceremony in Newark, New Jersey, March 1, 2017.
Mike Segar | Reuters

Immigrants are responsible for nearly half the population growth of the United States, and by extension that also means they are a sizable part of the growth in the U.S. labor force.

Statistics provided by the U.S. Census Bureau on assumptions about population growth and immigration are rolled into economists' forecasts for GDP.

The economy is expected to grow at about 2 percent, and "what's behind that projection is the assumption of labor force growth and productivity growth ... that is a combination of assumptions about the participation rate and the growth of the population. Our assumptions of the population come from the Census Bureau," said Joel Prakken, senior managing director and co-founder of Macroeconomic Advisers.

Prakken said immigrants are probably a bigger portion of the growth in the labor force, since the U.S. population is aging, immigrants are generally younger and many come to the U.S. specifically to work.

"Most people are totally shocked when they actually process the fact that immigrants are already almost half of the population growth, assumed in our 2 percent GDP projection and by the time you get to 2045, 80 percent of it is," he said.

Prakken said the natural increase in the population, meaning those that are born in the U.S., is expected to come down due to aging of the population and fertility rates.

Prakken said a proposed bill in the Senate would limit immigration, reducing it to roughly half the 1.1 million immigrants who arrived in 2015. He said over time, that could dent the secular growth rate of 2 percent by about a quarter point.

"The effect gets bigger over time because the Census assumptions for immigration keep growing and and growing and growing, and the bill would not allow any growth," he said.

In its forecast in future years, the Census Bureau shows immigration growth well above the current 1.1 million annual immigrants allowed entry for the past several years. Prakken shows in red the estimated difference between the current amount of immigrants allowed into the U.S. and the Census Bureau estimates.

"It's already a million a year and it gets bigger as it goes out," he said of the legal entrants.

"Implicit in the Census projections is either more illegal immigration, or somehow immigration reform allows an increase in the legal immigrants. This issue is not going to go away. It is a big deal," he said.