The American economy in the post-pandemic has been amazingly strong to the surprise of many—particularly the American right and their supporters. Of course, it doesn’t help that the Republicans have a strong interest in persuading the American public how bad the American economy is working. It is in their interest to deny that the economy is doing well, just as it is in the interest of the Democrats to say the economy is doing swimmingly. Added to that, the Republicans are interested in proving the weak economy is very much the fault of immigrants. In fact, they blame nearly everything on immigrants, their favourite scapegoat.

So where does the truth lie? Let’s take a look.

According to Paul Krugman the Nobel prize-wining economics professor the American economy is doing surprisingly well and not only that, but the cause of the buoyancy is also surprising. Immigrants are driving the economic boom.  According to him, “immigration is helping the U.S. economy — indeed, that it may be a major reason for our surprising economic success.”

Krugman pointed out how during Covid many people were deeply concerned that millions of American workers would lose their jobs and as a result many of those would lose their skills. Many of those might permanently lose skills. Investment and new business did in fact drop, but economists at the American Congressional Budget Office made projections just before Covid struck and then later realized some fascinating things. First the fears many Americans had that because of Covid millions of workers would be laid off and would leave the work force for good. That did not happen.

As Krugman explained

“If we compare the current state of the U.S. economy with Congressional Budget Office projections made just before the pandemic, we find that real G.D.P has risen by about a percentage point more than expected, while employment exceeds its projected level by 2.9 million workers.

How did we do that? American workers and businesses turned out to be more resilient and adaptable than they were given credit for. Also, our policymakers didn’t make the mistakes that followed the 2008 financial crisis, when an underpowered fiscal stimulus was followed by a premature turn to austerity that delayed a full recovery for many years. Instead, the Biden administration went big on spending, probably contributing to a temporary burst of inflation but also helping to ensure rapid recovery — and at this point the inflation has largely faded away while the recovery remains.

 

Instead of driving down the American economy as Trumpsters feared, immigration actually increased the economic potential of the economy. As Paul Krugman said in one of his series of New York Times articles on the subject,

“The budget office recently upgraded its medium-term economic projections, largely because it believes that increased immigration will add to the work force. It estimates that the immigration surge will add about 2 percent to real G.D.P. by 2034.”

As a result Krugman concluded, “there is no good evidence that immigrants are taking away jobs from workers born in America.”

Here is another unjustified common concern: Immigration will put downward pressure on wages because relatively uneducated immigrants will compete with better educate native born Americans. Krugman actually said he once believed that too. So did I. But unlike Krugman I am not a Nobel Prize winning economist.

Krugman says studies have shown that immigration has very little effect on the wages of native-born workers even when they have similar education levels. He says this is because the immigrants often complement the native born workers because they bring different skills to their occupations. They work together well! As Krugman said,

“Have wages for lower-wage workers declined? On the contrary, what we’ve seen recently is a surprising move toward wage equality, with big gains at the bottom.”

I was constantly told by friends in the US that immigration was wrecking the economy because the immigrants were taking advantage of the system. I t looks like that was not true.