Will the US Shut the Door on Growth?
The Trump Administration is seeking to implement a number of policies that would restrict authorized and unauthorized immigration even as he aspires to guide the economy to a higher rate of growth. Labor force growth is one of the building blocks of an economy’s growth potential; declining US birth rates and an aging workforce are the overriding reason estimates of the economy’s growth potential have declined by more than a percentage point to below 2% in recent years. Immigration has been an important offset to slower population growth. Research also suggests that immigration has a positive and significant impact on productivity, the other linchpin of potential growth and the driver of improvement in living standards. Successful efforts to reduce immigration may provide a short-term boost to wage growth in some sectors, but will likely come at the cost of near term growth and longer term growth potential.