Rubén Hernández-Murillo

English

Research Papers in Economics

NationalEconomicTrends
October 2001
Give Me Your Skilled….
A previous issue of National Economic Trends
(January 2001) identified the role of immigration in sus-
taining the rate of U.S. population growth in the face of
a declining birth rate. A related issue is whether changes
in immigration policy could help the federal government
finance the increase in transfer payments—Social Security
and Medicare—that will occur when the baby-boom
generation retires.
A recent article suggests that immigration policy could
be reformed with this goal in mind.1 Storesletten (2000)
considers the differences between immigrants and the
native population and their implications for the projected
fiscal burden of the retirement of the baby boomers. His
findings suggest that a selective immigration policy—
one that would increase the inflow of medium- and high-
skilled immigrants of working age—would generate
additional tax revenue without a commensurate increase
in government spending. 
For immigration to have such a beneficial impact,
policies that influence the characteristics of individual
immigrants ought to receive as much attention as policies
that determine the number of immigrants admitted. Cur-
rently, on average, immigrants are younger than the native-
born. According to the March 2000 Current Population
Survey (CPS) of the Census Bureau, 79.0 percent of the
foreign-born were between the ages of 18 and 64 years,
compared with 59.7 percent of the native population. And
43.6 percent of the foreign-born were between the ages
of 25 and 44 years, compared with only 28.6 percent of
the native population.
The level of skills and education is also more variable
across the foreign-born population than it is across the
native population. According to the March 2000 CPS,
about 22.2 percent of the foreign-born had less than a 9th
grade education, compared with 4.7 percent of the native
population. The proportions that hold a bachelor’s degree
or higher education were much more balanced: 25.8 per-
cent among the foreign-born and 25.6 percent among the
native population. 
Storesletten finds that an increase in the inflow of low-
skilled immigrants alone would not be sufficient to main-
tain balance in future fiscal budgets. Nor is the average
skill level of current immigrants high enough to maintain
a balanced budget in the long run. Storesletten argues,
however, that an increase in the relative inflow of medium-
and high-skilled immigrants of working age would enable
the government to make promised transfer payments
without resorting to tax increases or spending cuts.
Under current immigration policy, it is not clear
whether the average skill level of immigrants has been
trending up or down. Studies of the Census and CPS data
suggest that the average skill level of new immigrants
has been declining since the 1980s relative to the native
population. An opposing study, however, disputes this
finding—at least with respect to legal immigrants—using
data from the Immigration and Naturalization Service.2
It is clear, however, that current immigration policy does
not explicitly aim to achieve a high average skill level
among new immigrants. 
Designing a selective immigration policy would un-
doubtedly prove difficult, as many past immigrants count
on being able to sponsor family members immigrating to
this country, regardless of their skill level. Nevertheless,
the United States could follow Canada and Australia in
implementing a preference system for potential immi-
grants that would give some weight to family ties as well
as skills. As the political process addresses immigration
issues, it is worth considering the potential economic
impact of switching from the current, rather passive,
system to a skill-based, strategic immigration policy.
—Rubén Hernández-Murillo
1Storesletten, Kjetil. “Sustaining Fiscal Policy Through Immigration,” Journal
of Political Economy, Vol. 108 (2), April 2000, pp. 300-23.
2Jasso, Guillermina, Mark R. Rosenzweig and James P. Smith. “The Changing
Skill of New Immigrants to the United States: Recent Trends and Their
Determinants,” NBER Working Paper No. 6764, October 1998.
Views expressed do not necessarily reflect official positions of the Federal Reserve System.
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Give me your skilled….

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Give me your skilled….

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