Wharton@Work

July 2024 | 

Shattering Myths: Five Truths About Immigration

Shattering Myths: Five Truths About Immigration

Cutting through the noise with compelling evidence and hard facts, The Truth About Immigration has already ignited conversations across the political spectrum. Challenging readers to reconsider their preconceived biases and long-held beliefs, self-professed “accidental immigration scholar” Zeke Hernandez offers a meticulously researched, enlightening exploration of the global hot-button issue. The greatest takeaway from Wharton@Work’s discussion with the author? Immigration isn’t just good for immigrants. The economic and social benefits they bring are critical to our national well-being.

Wharton@Work: For centuries, immigrants have been vilified as out to take our jobs, making our communities unsafe, and undermining our culture. What are the origins of those misconceptions?

Zeke Hernandez: It's part of what I label the villain argument in the book. It comes from the fact that we have inherited and believe a series of mental models of how the economy works that are just flat-out wrong. For example, we assume that when a new person moves into a community, they compete for the jobs of natives. That's based on the assumption that every worker in the economy is identical and people only come to the economy and work. But we don't stop to think of what those workers do with their paycheck. It turns out they have to spend it. And so more workers also means more consumers, which means that businesses have to grow.

We only think of immigrants in a really one-dimensional way. If I describe your contribution to the economy by saying you fill a job and that's all you do, that's obviously preposterous. Yes, you fill a job, but you also are a consumer. You're a taxpayer. You might have an idea, you might start a business, you might invest. In any community, there are many people that do all of those things. But somehow when it comes to immigrants, we think about them only as workers. We also know from decades of research that immigrants are much less likely than natives to commit crimes or be incarcerated.

W@W: What about the view of immigrants as helpless victims who need charity?

ZH: In every country, the most common alternative to the villain story is the victim story, the tired and poor huddled masses in the poem on the Statue of Liberty. While it's true that there are some immigrants who need a helping hand when they arrive, they soon become net contributors. The victim story might make us feel good because we're being compassionate and helpful, but it's another false mental model. It ignores the fact that new people do all of the things I just mentioned. When I say that those two narratives are wrong, it's not my opinion. I've been studying this for 20 years and this is what the data very clearly show. And so, in an interesting way, whether you think immigrants are villains or victims, and most people think one or the other, you are completely mischaracterizing what a new person does when they arrive in an economy and in a community and in a society. Immigrants don't need your fear and they often don't need your compassion.

W@W: How do you quantify immigrants’ impact on their new communities and countries?

ZH: If we focus on just economic benefits, there are at least five and they're all quantifiable. The first is greater investment where immigrants settle, which happens in at least two ways: immigrants are 80 percent more likely to start businesses than natives. They put their own capital into your community, which in turn creates jobs. And immigrants are magnets for investment by companies from their home country. Wherever they go, immigrants create more investment through those two avenues.

The reason I start with investment is because investment is a seed of every other economic benefit. If no one's investing in your community or in your country, that's it. There will be nothing else. The second benefit is that immigrants bring more of what I call highbrow and lowbrow innovation. On the highbrow side, think of everything from patents to high-technology products. Immigrants represent just 16 percent of inventors in the U.S., but they're responsible for 36 percent of all patents.

Immigrants are just 14 percent of the population, but they start a quarter of all businesses in the United States. If you narrow it down to businesses that grow to be valued at a billion dollars or more, or businesses in the Fortune 500, about half were started by immigrants. It’s a population that punches way above its weight when it comes to innovation. But I also think it's very important to talk about what I call lowbrow innovation — everyday things that we spend our time and money on, that we like, that we enjoy, that are introduced not because of a brilliant individual immigrant with a PhD, but because there's a critical mass of people from different backgrounds. That includes foods — everything from sriracha sauce to pasta, to pizza, to hamburgers, to sushi — and activities, from doing yoga, to listening to salsa music, to playing basketball. Those are all immigrant contributions.

The third benefit is that immigrants fill our public coffers. Were it not for foreign-born people, our fiscal system would be in deep, deep trouble. The average immigrant contributes, in net present value terms, $260,000 in taxes to the United States. Multiply that by all the immigrants and it’s over $10 trillion in taxes that the U.S. would miss out on. That's a net present value, so it's a much larger amount over time. Think of our programs like Social Security and Medicare. Our birth rates aren't keeping up to fund them, so the only place we're going to find taxpayers is bringing in new people.

Jobs are the fourth benefit. Immigrants are net job creators. I can't say that strongly enough because whenever people talk about immigrants in the economy, the most common concern is that immigrants take jobs away from natives. That's not true. But even more importantly — and this is the part we never get to — is that at best we say that immigrants fill job shortages on farms or in construction or in manufacturing. And while that's true, there's a very big difference between saying immigrants plug in labor shortages and saying that immigrants create jobs for native workers. That's actually what the evidence shows.

Immigrants create jobs through all the reasons I just explained: investment, innovation, and new businesses. Because of immigrants’ inventions, there are many tech start-ups that create jobs, and because of their labor, existing businesses are able to do more than they could without them. A good example is a restaurant: many new immigrants don't speak English very well, but they are very grateful to take a dishwashing or cooking job while they get their feet wet in the U.S. economy. That allows a restaurant to stay open and create more jobs.

Finally, the fifth benefit is a matter of skill and talent. There are a lot of areas in our economy where immigrants bring new and different skills and talents. The one that's most obvious is in science and engineering, where immigrants represent over a third of the workforce with bachelor's degrees and just about half of the workforce with graduate degrees. If you're talking about AI, over half of PhDs in the U.S. that have skills in AI are foreign-born; without them, you don't get ChatGPT, you don't get Microsoft's Bing or Apple Intelligence. And that's true not just in AI, but in biotech, in engineering, and in so many other fields.

W@W: So, is it fair to say that by severely limiting immigration, we lose those benefits?

ZH: We not only lose all of those benefits, but you create harm for America and Americans. You hurt the economy, you hurt workers, you hurt innovation, and you hurt national security. We have evidence that that happens: as a result of the 1920s immigration quotas, U.S.-born scientists, who would have collaborated with southern and eastern European scientists, became nearly 70 percent less inventive. U.S.-born workers also lost jobs: to this day, 100 years later, places that lost the most immigrants to those restrictive quotas receive less investment and make less investment. It’s not speculation about the damage those quotes created — it's well documented.

W@W: You are a business school professor. What is your message for business leaders?

ZH: Even though I'm talking about issues that are big picture, affecting our macro economy and our society, this is very much a business issue, because thriving businesses ultimately benefit our economies and our communities. All five of the benefits created by immigration are done through business, either because immigrants work in a business or they start a business of their own. It's businesses that make investments in communities. It's businesses where most innovation happens. It's businesses that create products that people consume. It's businesses that hire talent. And it's businesses that pay many of the taxes that fill our public coffers. I would hope that business leaders understand that immigration is much more than something they vote on every four years. Immigration is central to the ability of a business to thrive.

W@W: Why do you describe yourself as an “accidental immigration scholar”?

ZH: I didn't set out to study immigration when I started graduate school. I really wanted to understand the connection between business and economic growth, in part because of my upbringing in Latin America. I saw and was moved by a lot of poverty, and I wanted to understand what creates economic growth, particularly the role of business, because I'd also noticed that a new business does more to alleviate poverty than a lot of aid money, because the business is creating jobs and bringing investment and revitalizing a community. I accidentally backed into immigration as a variable I couldn't ignore, because it turns out that if you want a healthy flow of capital, investment, innovation, ideas, and jobs, you need people and the movement of people. And so, I realized I can't separate the economy or economic growth from people. I’ve spent 20 years very slowly and painstakingly doing the research to discover all the ways in which the movement of people is central to all the things that you and I want for a healthy community. Bad mental models have us think of the economy as money and fed speak and interest rates, but none of that's the economy. Those are indicators of the economy. The real thing is people. I don't want to oversimplify it, but it took me a long time to realize that in some ways, it's conceptually that simple.

W@W: You end the book with a call for “factual optimism.” With those misguided mental models still at the forefront of the discussion of immigration, what makes you optimistic?

ZH: There's a big disconnect between what the headlines say and what politicians say and what people actually feel. Seventy percent of Americans think immigrants are a good thing for this country. Less than a third want immigrants deported. The majority of Americans want those Mexican workers to remain, even if they're not here with legal authorization, because they recognize the good they do. People who deal in reality, like business owners, mayors, and city council members, understand that we need immigrants to balance the budget, to create and fill jobs, to attract investment.

The problem is with a small but highly motivated minority that does very well by pushing the victim narrative — and they have disproportionate influence in our media and in our public discourse. So, while I acknowledge the political fights and the dysfunction that we have in this country, I think that the majority is already positively inclined and open to the facts. I think that's what the data tell us. Part of the reason I wrote this book was to say that exactly 100 years after we passed restrictive quotas, we can't make the same mistake again. Here are talking points. Here are facts. Here are numbers.