Thursday, August 24, 2017

Cheating for GDP


You know, you can find anything on the internet. Anything except useful information on immigration. Mine is a simple question: If immigration stopped in 1960, how would the US population number be different today?

Notice I said "population number". I'm not asking how the population would be different. This is not a question about ethnicity or race. It's a question about population size.

Anyway, I couldn't find the numbers I was looking for. But I did find this graph at treehugger.com:

Graph #1, from Yale Essay Says Sustainability and Open Immigration are Often at Odds
The treehugger article (from 2009) says

A recent essay in YaleGlobal online by Joseph Chamie explores the controversial connection between immigration and overpopulation—a subject that is constantly framed morally or economically, but rarely environmentally.

The graph takes "no immigration" back to the early days of our nation, which doesn't serve my purpose. And there is no data file. But suppose we take the two numbers shown for 2009: A population of 307 million (actual) versus 127 million (with no immigration). With no immigration the U.S. population would have been less than half the actual 2009 population.


San Fransisco Fed President John C. Williams says

Over the medium term, the sustainable growth rate of the economy equals the sum of productivity growth and the growth rate of labor supply.

Over the longer term, labor supply growth will still play a key role in economic growth. Without immigration, the U.S. population would be less than half the size it is today. The U.S. labor force would be less than half the size it is today. And U.S. Real GDP would be less than half the size it is today.

You can look at it the other way: Because of immigration, Real GDP today is more than twice what it would have been with natural population growth. So you could say immigration allows us to boost economic growth. But that strikes me as cheating: Getting more economic growth by adding more people is not the same as getting more economic growth by increasing productivity.

Real GDP goes up because of immigration, but Real GDP per capita does not. We're not better off when immigration makes GDP go up. There are more of us demanding slices of the bigger pie. It's not like we all get bigger slices. As Nick Rowe put it, the country

becomes twice as big. Everything scales up in proportion. The supply of everything doubles, and the demand for everything doubles, so all prices (and wages) stay the same...

Wages don't double. Wages stay the same.

Or maybe demand doubles, but the supply of everything doesn't double because there are limits to growth. That pushes prices up. And because immigration accelerates population growth, the labor supply increases faster than the demand for labor. That pushes wages down. This is not the best of all possible worlds.

Anyway, it's cheating. Using immigration to increase GDP is cheating. Increasing productivity is the only way to go.

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