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Immigrants Boost the Wages, Income and Economic Output of Cities

Immigrants Boost the Wages, Income and Economic Output of Cities
Jason Reed/Reuters

Last week, a bipartisan group of Senators dubbed the "Gang of Eight" unveiled a sweeping bill [PDF] The Washington Post called "the most ambitious overhaul of the nation's immigration system in three decades." Its approach is two-pronged. It provides a much-discussed "path to citizenship" — albeit an arduous one — for many of the country's 11 million undocumented immigrants. At the same time, it purports to fortify border control, appropriating billions of dollars for fencing, drones, and other measures. The bill also upgrades the visa system, authorizing tens of thousands of additional H-1B visas for high-tech workers, establishing a new visa category for the "guest worker," and revamping the criteria for visas for family members.

A great deal of the immigration debate in the United States is driven by the notion that undocumented and mostly unskilled immigrants take jobs away from Americans and depress their wages. But the bulk of research on the matter shows that immigrants add a lot more to the U.S. economy than they take from it.

Immigration has long provided fuel for America's entrepreneurial engine, from steel magnate Andrew Carnegie and Intel founder Andy Grove to the creators of Google and Yahoo. As entrepreneur Vivek Wadhwa has documented, while immigrants make up just "12 percent of the U.S. population, immigrants have started 52 percent of Silicon Valley's technology companies and contributed to more than 25 percent of our global patents." And as AOL co-founder Steve Case recently pointed out, "Research shows that every 100 additional foreign-born workers in STEM [science, technology, engineering, mathematics] jobs created 262 additional jobs for native U.S. workers."

Low-skill immigrants add to America's economic dynamism as well, working hard at "manual intensive tasks" that Americans are generally reluctant to do, according to research by the economist Giovanni Peri and others.

As the debate over immigration heats up in Washington, I thought it would be useful to take a fresh look at the numbers. My Martin Prosperity Institute colleague Zara Matheson mapped U.S. Census figures on several dimensions of "foreign-born" people (immigrants) across the 50 or so large U.S. metros with more than a million people. (The Census data, it's worth noting, tally all foreign-born people in the U.S., both legal and illegal, though it is reasonable to assume that people who came into the country illegally avoid Census-takers and are thus under-counted.) The slides below show these maps for foreign-born people, foreign-born adults with college degrees, and foreign-born adults with science and engineering degrees across America's large metros.

What is the connection between immigrants and the wealth of cities and metro areas? Are immigrants a drag on local economies, depressing wages and incomes, as some suggest? Or do metros with more immigrants have higher rates of innovation, economic output, and wages? Obviously this is a complicated issue, where causality works both ways. Immigrants, after all — and this goes for both highly skilled and less skilled immigrants — are more likely to be drawn to places that offer more and better jobs, higher wages, and better living standards.

To gain some insight into this, my MPI colleague Charlotta Mellander ran two sets of correlations on three key measures of immigration — the overall share of foreign-born, the share of foreign-born adults with college degrees, and the share of foreign-born adults with science and engineering degrees. The first compares each measure of immigration to key measures of metro innovation, talent, wages, income, and other factors. In the second, she ran partial correlations to control for the effect of already skilled metros, based on the share of science and technology workers overall. While correlation is not causation, and causality likely works in both directions here, the takeaway is clear. Contrary to much of the political conventional wisdom, when it comes to U.S. metros, higher shares of immigrants are associated with many good things.

Those opposed to immigration often argue that immigrants take jobs away from Americans and put downward pressure on wages. But Mellander's analysis finds that the share of foreign-born people is closely correlated with higher wages and better economic performance of metros. Wages, income levels, and levels of economic output are strongly associated with all three measures of foreign-born. These correlations remain strongly positive when controlling for regional shares of science and technology workers. Of course these associations are likely to work both ways: wealthier metros both need and can absorb more immigrants.

Metros with more foreign-born people also have higher concentrations of high-tech industry and more venture capital investment, according to Mellander's analysis. The metro share of high-tech industry and the metro level of venture capital investment are both strongly associated with all three measures of foreign born. These relationships remain positive when we control for the overall share of science and engineering workers. This is, of course, in line with studies that show that a high proportion of leading edge high-tech start-ups are founded by immigrants. (Here again, it's important to point out that these associations are likely to work in both directions.)

Immigrants not surprisingly are concentrated in larger, denser metros. All three measures for immigration are positively correlated to higher metro populations, density, and concentrated or population-weighted density. The correlations again remain positive and significant when we control for science and engineering workers overall.


U.S. Border Patrol surveys the border fence adjacent to the Arizona-Mexico border near Naco, Arizona on March 29. (Samantha Sais/Reuters)

Immigration across metros hews closely to America's red/blue political divide. The level of foreign-born people is positively correlated with blue states that voted for Obama and negatively correlated with red states that voted for Romney. Ironically, opposition to immigration in red states and metros may be exacerbating their economic challenges.

A 2012 study published in a special issue of The ANNALS of the American Academy of Political and Social Science on "Immigration and the Changing Social Fabric of American Cities" found that immigrants not only add to large or high-tech cities and metros but also to older, more economically hard put communities and rural towns. Tracking immigration, especially Hispanic immigration during the 1990s and 2000s, it finds that immigration can provide a "lifeline to many places that are hollowing out."

The big picture is that immigration is a good thing for the American economy, and, judging from our analysis, a good thing for metros in particular, being associated with higher wages, higher incomes, and more high-tech industry, among other things. While we are unable to say whether immigration causes or reflects better economic performance, it is clear the two go together. These associations hold for foreign-born people overall as well for high-skill immigrants.

In light of these findings, it makes sense for Congress to include "city-based visas" in the immigration reform package. As developed by Brandon Fuller of NYU's Urbanization Project and his colleagues, the basic idea is to allow cities the ability to "choose to sponsor undocumented immigrants, provided the city is willing to take on the responsibility of making them legal residents and eventually citizens."

Overall, the new bill is a big step in the right direction. When all is said and done, America owes much of its historical prosperity to its openness to entrepreneurial, ambitious, and talented immigrants. As I wrote in my 2010 book The Flight of the Creative Class, the United States "doesn't have some intrinsic advantage in the production of creative people, new ideas, or start-up companies. Its real advantage lies in its ability to attract these economic drivers from around the world. Of critical importance to American success in this last century has been a tremendous influx of global talent."

As the debate over immigration reform begins in earnest, one can only hope that our legislators will focus on the real economic issues rather than the highly emotional and largely false distractions about crime, poverty, and un-American values. After all, the biggest danger we face from immigrants is having too few of them.

Top image: The U.S. Senate's "Gang of Eight" during a news briefing on Capitol Hill in Washington on April 18. (Jason Reed/Reuters)

Richard Florida is Co-Founder and Editor at Large at The Atlantic Cities. He's also a Senior Editor at The Atlantic, Director of the Martin Prosperity Institute at the University of Toronto's Rotman School of Management, and Global Research Professor at New York University. He is a frequent speaker to communities, business and professional organizations, and founder of the Creative Class Group, whose current client list can be found here. All posts »

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