The voices of Urban Institute's researchers and staff
September 29, 2016

Labor force growth increasingly depends on immigrants and their children

September 29, 2016

Forty years after their arrival in the labor force, the massive wave of baby boomers has begun to exit through the retirement door. Replacing them—given today’s slower population growth—requires reinforcement by immigrants and their children. Pretty soon, those workers will be the primary source of growth in America’s workforce.

When the leading edge of boomers entered young adulthood during the 1970s, annual labor force growth rates, augmented by rising workforce participation by women, more than doubled to 2.6 percent per year. Today, workforce growth has fallen to less than three-quarters of 1 percent per year and is expected to drop even lower by 2030. Such low growth in the labor force depresses the growth of the economy.

At the same time, immigration to the United States rose steadily from the 1970s until the Great Recession. Since then, immigration has continued increasing, but at a slower pace.

How immigrants and their children fit into the workforce picture is neatly explained in the graph below, which comes from the recently released report from the National Academies of Sciences on the economic and fiscal consequences of immigration. To measure the transformation in workforce growth, the report looks at changes in the working-age population among three groups: the immigrant generation (first generation), their children (second generation), and all native-born whose parents are also native-born, (third-plus generation).

Until 2000, native-born Americans were majority contributors to workforce growth. But by 2000, that began to shift, as immigrant workers and their adult children outnumbered growth by their US-born counterparts.

The current decade has been a major turning point, as the oldest boomers begin to retire. While in the 1970s, there were 18 million new native-born third-plus generation workers, there will be a mere half million additions this decade. In fact, this group of US-born workers is projected to reverse to a decline of seven million in the coming decade, as more exit the labor force for retirement than young people enter.

How do immigrants add up in this context? Their working-age growth in the last decade (almost 10 million) made up for the shrinking growth among the third-plus generation of US-born residents. But immigrant growth will continue to shrink in the next, because fewer are arriving, and arrivals from earlier decades are beginning to retire.

Instead, we see a prominent role emerging for their children (the second generation), swelling their ranks by nearly seven million as they come of age between 2020 and 2030. The United States may not have intended to bolster its workforce so significantly through immigration, but the second generation is beginning to shore up our workforce and will be the primary source of growth in our aging economy by 2020.

The dramatic slowing of overall labor force growth in our aging nation means our economy will increasingly depend on immigrants and their children.

Opinions about tax burdens and any other economic consequences immigration might produce should be reassessed in light of the major demographic shift in our workforce. Investing in the education of the children of immigrants will pay off in the long run as these workers play a more prominent—and needed—role in our labor force.

Dowell Myers is a professor at the Sol Price School of Public Policy, University of Southern California.

Marcia Cruz (C), who is originally from El Salvador, stands with other immigrant workers during a rally on May 18, 2015 at the headquarters of AFL-CIO in Washington, DC. Labor leaders were joined by immigrant workers in the rally and vowed to defend President Barack Obamas immigration executive actions. Photo by Alex Wong/Getty Images


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