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McKenna: Hey @realDonaldTrump: Shrinking economies don’t create jobs

Globe and Mail reporter Barrie McKenna.

Most countries – Canada included – see immigration as an antidote to the challenge of slow growth and the greying of the population.

Here, for example, is what Finance Minister Bill Morneau's Advisory Council on Economic Growth concluded in a recent report: Boosting immigration will help sustain Canada's social-safety net, create jobs, raise living standards and spur entrepreneurship and trade.

U.S. President Donald Trump isn't having any of that. In a speech to Congress last week, Mr. Trump laid out his plans for an immigration overhaul, arguing that keeping more people out and deporting those in the country illegally will boost wages and create millions of jobs for Americans.

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Even as he praised Canada's point system for rating prospective immigrants, Mr. Trump ripped apart its economic logic. Opening the borders to large numbers of immigrants, he said, "depresses wages for our poorest workers and puts great pressure on taxpayers."

Mr. Trump is not alone in this belief. It has become the mainstream view among Republicans in Congress. Republican Senators Tom Cotton and David Perdue recently introduced a bill that would cut immigration levels in half to 500,000 a year from roughly a million now. Slashing the quota, Mr. Cotton explained, will "reduce the pool of labour, put upward pressure on wages and bring more Americans into the labour force."

In other words: dramatically curtail immigration, and watch jobs and wages soar.

Buy into the logic, and the wall on the Mexican border (estimated cost: $22-billion U.S.) and the refugee ban make perfect sense.

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This is, of course, economic nonsense. And Mr. Trump and his fellow Republicans should know better.

The United States has gone down this road before and it hasn't worked. In the early 1960s, U.S. President John F. Kennedy abruptly ended a program that allowed half a million Mexicans a year to work on U.S. farms. Like Mr. Trump, critics blamed the migrants for stealing jobs and depressing the wages of hard-working Americans.

The problem is that it wasn't true then, and it isn't true now. In a recent paper issued by the National Bureau of Economic Research (NBER), economists Michael Clemens, Hannah Postel and Ethan Lewis dug into the archives and found that cancelling the so-called bracero, or manual-labourer, program "failed to raise wages or substantially raise employment for domestic workers." Instead, farmers invested in technology, mechanizing vast areas of agriculture.

The envisioned return of blue-collar jobs is a mirage. Instead, restricting immigration is more likely to create jobs for robots and computer programmers. And it will shrink the economy.

Forget Mr. Trump's pledge that he'll get the U.S. economy growing at 3.5 per cent a year.

The job-creation bonanza predicted by Mr. Trump is more likely to become an economic disaster – especially if the United States couples sharply curtailed immigration with wrenching mass deportations of undocumented workers. Deporting all undocumented immigrants now in the United States would cost as much as $600-billion (U.S.) and reduce gross domestic product by $1-trillion, according to a 2016 study by Ben Gitis and Jacqueline Varas of the American Action Forum, a conservative think tank.

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The nearly seven million unauthorized workers in the United States contribute an estimated 3 per cent of private-sector GDP, according to another NBER study, released in 2016. In California, they contribute 7 per cent. Like other immigrants, they earn wages, pay taxes, buy homes and create other jobs in the economy.

Legalize these workers, and the economy would grow even faster. The Congressional Budget Office estimated in 2013 that creating a legal path for unauthorized immigrants and boosting legal immigration would lift growth by 3.3 per cent after a decade.

Another of Mr. Trump's assertions is that immigrants are a drain on the public purse. But even the U.S. Social Security Administration says undocumented workers pay $15-billion a year into the pension scheme, while withdrawing just $1-billion because they are ineligible for most benefits.

Immigrants are also more likely to be entrepreneurs and inventors. Half of the nearly 90 U.S. tech start-ups worth more than $1-billion were co-founded by immigrants, according to a 2016 study by the National Foundation for American Policy.

New York Times columnist David Brooks recently dubbed Mr. Trump's misguided immigration plan "The National Death Wish."

Unfortunately, Mr. Trump isn't a huge fan of the "failing New York Times." So let's Tweet him:

Hey @realDonaldTrump: Shrinking economies don't create jobs #economics101.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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