Immigrants have long been cast as outsiders who take jobs and damage the economy. Wharton’s Zeke Hernandez dispels these stereotypes and others in his new book, The Truth About Immigration: Why Successful Societies Welcome Newcomers. This episode is part of the “Meet the Authors” series.


The Net Positives of Immigration

Dan Loney: Zeke, you make the case with the book that we need to broaden the conversation on the economic benefits of immigration. You say that most people are stuck on this perennial issue of whether immigrants take jobs or lower wages. Give us a sense of what you’re trying to bring forward with the book.

Zeke Hernandez: I’ve been researching this for nearly 20 years, and also speaking to a lot of audiences about this. What I’ve observed is the big problem in the way that we talk about immigrants in the economy is that we never get past questions that are about whether immigrants are harmful to us. Like, do immigrants take jobs or lower wages? And that’s an important question.

But when you look at the data, you realize that immigrants not just don’t do harm, but they are net positives in a very extreme sense. They bring a lot of good. It’s very different to say that something is not bad, than to say that something is good, right? Like, below zero versus above zero. We just need to broaden the lens to see the big picture, then those questions that people commonly ask, we’ll understand them in the right perspective.

Let’s start very high level. What goes into a successful economy? What goes into a successful business? Well, just think of the inputs you need. You need, of course, people and talent. But you need investment. You need ideas and innovation. You need customers. You need new technologies. You need all kinds of things that are inputs into a successful economy and a successful business.

The research tells us that immigrants contribute positively to all of those ingredients, so we have to broaden the conversation by thinking about that. And a successful economy and a successful business doesn’t just have a lot of those ingredients, a lot of those inputs, but it has a great variety of those. People that come from different backgrounds bring more and a greater variety of those two things. That’s the big picture. And if we frame the conversation that way, then we can really understand the economic effect immigrants have.

Loney: Has there been somewhat of an underselling of the value that immigrants have on an economy?

Hernandez: Completely. Because typically, if you read the headlines or the popular conversation, or especially the political conversation, the most positive we tend to get is, “Oh, immigrants fill job shortages.” There’s a shortage in this particular industry, we need foreign-born talent. Whether it’s nurses, construction workers, manufacturing workers, people with STEM skills, immigrants fill those shortages and so they kind of plug holes in the economy. And that’s, of course, a really important function.

But we never get to the win-win, in that immigrants create all these incredible innovations. Immigrants bring more investment. Immigrants do all these things that are not just plugging holes. So yeah, we’re totally underselling the issue. And I’m sure we’ll have a conversation about what those positives are.

How Immigration Actually Impacts the Economy

Loney: Let’s continue there. Because I think you can look at a variety of avenues right now of where the value of immigration can be in this country. When you think about who makes up the workforce right now, a lot of conversation is about the older generations that are moving closer towards retirement. You have to replace those people, and part of that will be around immigration.

Hernandez: It’s even more than that, because it’s not just people that are retiring. We lose 700,000 people in prime working age to death every year in this country. We don’t even replace that many through our legal immigration system. You have to plug in the holes left by retirees and people who are leaving the workforce for tragic reasons. And that’s just the beginning.

Loney: This sounds somewhat similar to the debate about diversity in the office or on a board of directors. That the more options you present in that situation, the better the final product can be. In this instance, the more options you have in a workforce, the better the bottom line will be for companies.

Hernandez: Absolutely. This is not just an economy-wide thing, but a business thing. We have evidence that when firms hire people from different national backgrounds, they perform better. They’re also more innovative. But here’s the part that is really insightful: Those people from different international backgrounds make native workers more creative and more productive.

Here’s one example. Immigrants in the U.S. are 18% of the inventive workforce, meaning people who patent. But they account for 36% of all patents in the United States. Now, that number, you can break it down in a way that’s really interesting. A total of 23% of patents are patents where the immigrants are directly the inventors on record. But the other 13% is native inventors patenting more because they work with immigrant inventors. Why? Because the immigrant inventors bring new ideas. They bring new networks. They bring new ways to solve problems. That’s what I mean by a win-win. It’s not that natives are losing at the expense of immigrants. They’re both better off because of those differences and that variety.

Loney: You talk in the book about the connection between immigration and job creation and investment. Tell us about what you see there.

Hernandez: That’s such an important question, because that’s one of the most misunderstood aspects of what immigration does to the economy. Let’s do a simple example. We’re sitting here in Philadelphia, and just a few miles from here is a place called Hometown, Pennsylvania — a small town, 3500 people. Last year, EMD Electronics announced the expansion of a facility that would create 200 high-skilled manufacturing jobs. These were jobs to create parts that are really critical for chips. The kind of jobs that everybody wants in America.

Hometown seems like a weird place for a high-tech facility to grow and create 200 jobs. But then you realize that EMD Electronics is a subsidiary of a German company, and you’re like, “What does that have to do with anything?” Well, it turns out that Hometown, long time ago, was founded by German immigrants. And it’s not a coincidence that today a German company is investing and thriving and creating jobs in Hometown, Pennsylvania.

We have a lot of research showing that where immigrants go, firms make investment. And these effects last for generations. Where there’s a lot of, say, Germans, historically, a lot of German investment will follow. It’s true for Mexican firms. It’s true for Korean firms. It’s true for every nationality. This is what I call the investment-immigration-jobs triangle. Immigrants arrive, they foster investment from their home countries, those investments create jobs.

The other link between immigration and investment in jobs is that immigrants are 80% more likely than natives to start businesses of all kinds, from the high-tech Google and Zooms of the world to the mom-and-pop restaurants that we all love to eat in. Regardless of size, regardless of type of business, immigrant-founded businesses create more jobs than native-founded businesses. Whether it’s through pulling capital from their home countries, or investing their own capital in new businesses, immigrants create jobs through that triangle I just mentioned.

The Future of Global Immigration Policy

Loney: All that you’ve laid out really does highlight the need for proper policy around immigration. That has been a debate that’s been going for many years now without conclusion.

Hernandez: Another reason that I wrote this book is that not just in the United States, but in every country that’s having the debate that we’re having, there’s an obsession with how immigrants come in. Legally, illegally, for work, for family reasons. Of course, it’s important to know that. But we’re not obsessed enough with what immigrants do once they’re here.

We have to separate immigration, which is what people do when they come, which is what we’ve been talking about. They create all these economic benefits and cultural benefits that we haven’t spoken about. Once you understand what immigrants do, it gives you more clarity on what our policies should be for how many and how people should come in. If immigrants are just not bad, the policy is very different than if immigrants are net positives and bring all the benefits we just talked about.

In the United States, the analogy that I often use is that our immigration system is really outdated. The last time we updated our system here was in 1990. The economy was $9 trillion in size back then. Today, it’s $25 trillion in size. We have an economy that’s more than double the size, operating with a system — a speed limit, if you want to think about it — that is just too low. Right? Not only do we not replace the number of working-age people who die, but we’re not even providing enough people for all the growing businesses that we need. We just need more and a greater variety of pathways in.

Loney: This becomes a global problem that you’re talking about, longer-term?

Hernandez: Yeah. And I’ll make a bold prediction here. A lot of rich countries so far have been what I call immigration choosers, meaning they’ve had sort of their pick of the litter because there’s a lot of people who want to move to those countries to make a living and find a better life and contribute. But because of demographic trends in most of the world — birth rates shrinking, people aging, new people coming from fewer and fewer countries — I think there’s going to be a lot more geopolitical competition and a lot of countries are going to become immigration beggars. They’re going to be desperate for the talent and the people they need. So, I think we better get our act together before we become immigration beggars.

Loney: You mentioned innovation. What other areas benefit from having immigrants?

Hernandez: I gave the example earlier of patents, and that’s what I call highbrow innovation. Not just patents, but we think of high-tech startups. Zoom, Google, Intel. You name a high-tech startup, there’s at least a 50% chance that it had an immigrant co-founder.

I think the part that gets under-appreciated as what I call the lowbrow innovations, meaning the things that we do, we eat, we spend our time on every day that we completely take for granted, that we don’t realize we’re brought by new people. I’ll get just a few examples from throughout a normal day. You wake up, you brush your teeth. Colgate toothpaste — immigrant. You go check your email on your smartphone. Well, that smartphone wouldn’t exist without the contributions of immigrants. Maybe you want to have Mexican food, Italian food? A pizza, a hamburger for lunch? Well, all of those are immigrant contributions. You want to go to the movies. A very high proportion of the actors, actresses, directors, makeup artists that made that movie really good are foreign-born.

Walk through your supermarket aisle. Think of the items you buy regularly, and remove from the aisles the items that were brought in by immigrants. Your cart will be at least half empty. And sports. Soccer. You like to do karate, you like to do yoga, you like to go to the gym to do Zumba. All of those are things that were introduced by immigrants.

The point is, a huge proportion of what you spend your time and money on, that makes your life richer and more interesting, was brought in by foreign contributions. And those are innovations just as much as a patent is an innovation.

Loney: With all of those areas you just touched on, you’re talking about a potential significant negative impact from not having enough of the right focus so that you can push forward.

Hernandez: We have historical precedents that show that very clearly. We hit the 100-year anniversary of the 1924 National Origins Act in the United States. It was the biggest restriction of immigration in U.S. history. It dropped immigration by over 90% for four decades in this country. We have very good evidence now to show that this was really damaging to the United States. For example, native-born scientists, who were less exposed to immigrants, patented nearly 70% less, permanently. Places in the U.S. that lost the most immigrants due to those restrictions, to this day, 100 years later, receive less investment than they did before, and invest less overseas than they did before. American workers lost jobs and got lower quality jobs.

We know what happens, because it happened before. And I think we’re at a historic moment where we need to be really clear about what immigrants do so that we make better decisions about our policies. This is not just in a macro sense. This, again, to the business-minded people who are listening to this, affects the everyday running of your business. Where are you going to recruit talent? Where are you going to get good ideas? How are you going to find customers? How are you going to find new markets? That’s all going to be, to a great degree, because of foreign-born talent.