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November 18, 2011

USA’s Large Foreign-Born Population Boost Economic Growth

Shopping_street_mfIn 2010, the USA was home to 40.0 million foreign-born residents, according to the US Census Bureau, more than any country in the world. They provide a vital labour pool for the US economy, while boosting domestic consumption and providing businesses with opportunities. However, large remittances outflows, illegal immigration and lower earnings of Latin American-born residents are some economic impediments.

  • The USA's foreign-born population fills essential labour-intensive and professional positions in the labour market, aids population growth and stems population ageing, while providing ready consumers for businesses in segments such as education and money transfer services. Latin Americans accounted for 53.1% of all foreign-born residents, followed by Asians (28.2%), Europeans (12.1%) and Africans (4.0%) in 2010, according to the US Census Bureau;
  • The large proportion of Latin American-born residents are less affluent and educated than other immigrant groups and are less likely to acquire citizenship, many holding illegal resident status. Large outflows of remittances also take money out of the US economy, while businesses must employ multicultural marketing strategies to appeal to a wide range of consumers.

Implications

Foreign-born residents provide US businesses with the necessary manpower, while expanding the country's large consumer market, though untaxed labour hits government coffers:

  • Foreign-born residents reinforce American labour markets, covering skills shortages in well-paid specialist positions and filling labour-intensive, low-paid jobs not appealing to US-born citizens. The foreign-born population accounted for 12.9% of the total population in 2010;
  • However, Latin American-born residents earn less than other immigrant groups, are more likely to hold illegal residence and are often engaged in informal labour. At US$27,266 in 2009 (latest data available), the annual median earnings of Latin American-born residents aged 25+ were considerably lower than of other immigrant groups, according to the US Census Bureau;

Median Age and Earnings of Foreign-Born Residents of the USA: 2009-2010

Median age (years) / median earnings, aged 25+ (US$)

ScreenHunter_01 Nov. 18 14.03

Source: United States Census Bureau

Note: Bubble size indicates the size of the population group. Age and population size are based upon 2010 census figures and earnings are from the latest figures from 2009.

  • Latin American-born residents, most of whom are Mexican, are thus more restricted in both career options and purchasing power, limiting their consumption of luxury goods, while untaxed labour detracts from government revenues. However, Latin American immigrants generate opportunities for discount retailers and create a market for Spanish-language media and English language education, while filling unskilled labour shortages. Their US-born children also achieve income levels that approach US averages. The average gross income in the USA in 2010 was US$46,107;
  • Asia-born residents make up the majority of prosperous immigrant communities, responsible for 7.3% of US residents seeing US$100,000+ in total annual earnings in 2009, according to the US Census Bureau. Typically highly skilled and educated, they offer untapped market potential for big-ticket items and luxury goods. However, businesses must implement diverse, multicultural marketing strategies to appeal to this highly diverse group;
  • Foreign-born residents, who are typically younger and have higher fertility rates than US-born residents, are important to the US economy in both slowing population ageing and ensuring population growth, allowing for consumer market expansion and lessening the fiscal drag of the retiring baby-boom generation;
  • Nonetheless, the country's foreign-born population also accounts for a large portion of the US$49.7 billion (0.3% of total GDP) that left the US economy in the form of remittances in 2010, more than any other nation. This does, however, present opportunities for money transfer operators.

Largest Remittances Outflows by Country: 2010

ScreenHunter_02 Nov. 18 14.04
Source: Euromonitor from trade sources/national statistics

Prospects 
  • The high proportion of working-age, foreign-born residents will likely improve the health of the US economy in the medium term by slowing increases in the old-age dependency ratio (size of the population aged 65+ relative to the working population aged 15-64), which stood at 19.5% in 2010 and is forecast to reach 25.3% by 2020;
  • To fulfil their economic potential, Latin American-born illegal immigrants would require access to the same educational and labour opportunities as US citizens. Some states have already acted on this. Texas passed an act in 2009 that granted undocumented immigrants college tuition if they graduated from high school and lived in the state for a minimum of three years;
  • Nonetheless, US immigration policy since 2001 has shifted from encouraging legal immigration to securing the US-Mexican border. According to US Immigration and Customs Enforcement in October 2011, a record number of illegal immigrant deportations occurred in the 2010/11 fiscal year. President Barack Obama's administration is looking to implement immigration reform, backed by a growing number of Latino voters. However, there are unlikely to be major adjustments before the presidential elections of 2012.

 


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