Immigrant Swan Song

• Author: Giovanni Peri
• Position: Professor of economics and director of the Global Migration Center at the University of California, Davis.
• Pages: 28-31

26 FINANCE & DEVELOPMENT | March 2020

The immigration debate often focuses on

culture, identity, and the economy. In

countries such as the Aust ralia, Canada,

and the United States where many immi-

grants—e specially those who have moved for eco-

nomic reasons—assimilate into the labor force

quickly, the case for more immigration is bui lt on

its potential economic benef‌its. Researc h shows that

immigration does not reduce the c apital intensity of

the economy, but rather it allows f‌irms to expand

and investments to adjust, and it also promotes

innovation and growth— especially when highly

skilled immigrants are admitte d. ere is also

little evidence that im migration displaces jobs or

depresses wages in t he receiving countries (see,

for example, Lewis a nd Peri 2015 and Peri 2016).

Yet the discussion over immigration often pays

insuf‌f‌icient attention to the Achilles’ heel of the

global North: its demographics. Fer tility in these

countries currently sta nds at 1.7 and fell below

replacement—that is, the level at which a popu-

lation exactly replaces itself from one generation

to the next—around 1980. Consequently, the

dif‌ference in births a nd deaths would produce pop-

ulation declines and substa ntial increases in average

ages in the North, both of which could disrupt

labor markets, thre aten the f‌iscal sustainabil ity of

pension systems, and slow down economic growt h,

unless total net im migration of‌fsets such declines.

e persistent historical trends mentioned have

inescapable consequences in terms of population.

Between 1950 and 2010, the populations of the

rich regions of the North increased through net

immigration, and since 1990 immigration has been

the North’s primary source of population growth.

In Europe, immigration accounted for 80 percent

of the population growth between 2000 and 2018,

while in North America, it constituted 32 percent

in that same period.

e bottom line is that only net immig ration

can ensure population stability or growth in the

aging advanced ec onomies of the North—and this

will happen only if we promote forward-looking

immigration policies that a llow larger numbers of

immigrants a nd consider their long-run impact,

rather than focusi ng only on the short-term cal-

culations of their (mostly political) costs.

Immigrants replacing natives?

While these broad trends su ggest an importa nt

role for international migration in reducing demo-

graphic di sparities, one cou ld ask whether the y act

systematical ly to slow population declines in the

North. In other words, are immig rants replacing

the declining number of natives a cross countries?

A closer look suggests that t hey are not.

For international migration to respond to popula

-

tion pressures and act as an automatic demographic

stabilizer, people would need to move from young

countries with fast-growing populations to aging

countries with slow-growing populations. Chart 1

shows the correlation between the fertility rate in

2000 and subsequent net immigration rates from

2000 to 2019 (net inf‌low of foreign born divided by

population in 2000) across 191 countries for which

data are available. e size of a country's bubble is

proportional to its population in 2000. For migration

to act as a demographic stabilizer across countries,

there would have to be a negative correlation between

these two variables across countries.

e chart instead shows no correlation at all,

implying that countries w ith low fertility rates

Immigration can solve the demographic dilemma—

but not without the right policies

Giovanni Peri

Immigrant

Swan Song