Fed Report Predicts Immigrant Influx

A new wave of immigrants over the next century will enlarge the U.S. labor pool at a time when a growing proportion of the population will be reaching retirement age, but their arrival may slow growth in productivity, a Federal Reserve report said Tuesday.

The Census Bureau projects that the U.S. population will grow more slowly over the next century than ever before and age rapidly, with the proportion of those older than 65 hitting record highs.

This will mean the U.S. once again will become a nation of immigrants, a report by the Boston Federal Reserve Bank said, noting immigration in the last decade already had neared proportions last seen in the early 1900s as Europeans flocked to U.S. shores.

A preliminary draft of the report was presented at a Fed conference on the economic impact of demographic change.

The new wave of immigrants, mainly from Latin America and Asia, and their children, will account for more than half of the increase in the U.S. population over the next century, according to the report written by Boston Fed economists Jane Little and Robert Triest.

From an economic standpoint, the key question is whether the new wave of immigrants, many of whom have relatively lower levels of schooling compared with U.S. natives, will be able to achieve the higher productivity--output per worker--needed to deliver living standards expected by the aging population.

Although economic analysis suggests productivity growth is fastest when population growth is slow, as firms increase the use of labor-saving equipment, this fails to take into account the past trend of increasing educational attainment.

James Smith, chairman of Labor Markets and Demographic studies at Rand Corp., a Santa Monica-based think tank, disagreed with the Boston Fed report’s premise that lower levels of immigrant educational achievement would hurt productivity.