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The Cost of Xenophobia might Shock the Western World

by Lauren V. Williams

            Demonstrations of white nationalism have erupted across the Western world in recent years. As immigrants and people of color have grown in size and cultural power, politicians like Donald Trump and Marine Le Pen have capitalized on the fears of the white majority. Rallying cries of anti-immigration and ethnonationalism have become the norm. They subsequently promoted a paradox to their people – in order for their countries to succeed, they must reject diversity in an increasingly multicultural world. However, Western countries will need immigrants to strengthen the foundation of their economies in the coming decades. White Americans and Europeans alone will not have the population or market growth potential to compete with the rising economies of the rest of the world. In fact, if Western countries continue down the path of xenophobia, they will accelerate their loss of economic power on the global stage in the near future.

            Far right leaders across the United States and Europe justify their xenophobia in economic terms. Donald Trump began his campaign by saying, “When Mexico sends its people, they’re not sending their best. They’re not sending you. […] They’re bringing drugs. They’re bringing crime. They’re rapists.” 

Trump said that that his remarks in which he called Mexicans rapists was “peanuts” compared to the “truth” at a 2018 rally in Wilkes-Barre, Pa.
Sourced from Global News

            About a year later, he polished his remarks by saying, “Newcomers compete for jobs against the most vulnerable Americans and put pressure on our social safety net and generous welfare programs.” 

            Leaders from Germany to Hungary have exhibited similar sentiments. Marine Le Pen from France’s National Rally Party said, “More and more are coming from the third world, taking advantage of our benefits.” 

Marine Le Pen at the launch of her 2017 French presidential campaign, promising a crackdown on immigration and globalization.
Sourced by the Financial Times.

            Trump proclaimed that he would protect the country’s economy by preventing immigrants from entering the United States. However, his policies hurt the economy by affecting the supply and demand of goods and services. Harvard economist George Borjas postulates that since immigrants fill the gaps in local labor markets, they improve market efficiency. He estimates that the efficiency gains are as much as $5 to 10 billion per year. Therefore, stemming immigration hurts our economy on the labor supply side. 

            Policies like Trump’s 2019  “public charge” rule similarly hurt demand. The policy stated that officials should reject legal immigration applications if the applicants receive or are projected to receive public benefits. This policy discouraged families from receiving health care, food and housing assistance that could help keep them afloat. Yet, devastating the economics of immigrant families can’t happen in isolation. Since the growth rate of the US-born white population is declining, immigrants have become proportionately more significant buyers within the economy. For example, immigrant families make up 40% of the total growth in US housing. Moreover, every 100,000 person increase in immigration improves the long-range actuarial balance of Social Security by 0.08% in taxable payroll. Therefore, immigrants increase demand directly by their contributions and indirectly through Social Security. 

            Immigrants also boost the economies of most European countries. A 2012 study found that immigrants tend to contribute more in taxes and social security payments than they cost from individual benefits. Even in countries that were the exception, like France, the report found that lower wages and a 1980s reduction in immigration led to an aggregate decline in tax and social security contributions. However, a 2014 study found that a 10% increase in immigrant share raises the wages of native French citizens by 3.3%. A 2016 study found that immigrants, especially immigrant families from developing countries, increase France’s GDP per capita and reduce France’s unemployment rate. Therefore, immigrants remain a fundamental factor of the economy in Europe and the United States.

            Without immigrants, the United States and Europe are facing a demographic time bomb. The white populations of these countries have low birth rates and fast aging populations. Since these populations are also the world’s oldest, the United States and Europe are facing a wave of retirements and age-related health problems. Projections estimate that there will be about 50 million fewer working age people in Europe in 2035 than in 2010. 1 in 5 US citizens will be of retirement age by 2030. As the working age population hollows out, the tax base to fund social programs will substantially decrease. Healthcare spending, which is already 25% of Europe’s GDP, will increase by 2.3% by 2040. US health expenses will increase from 15% of GDP in 2016 to 19.4% as soon as 2027. Even though the native populations of people of color are increasing in the United States, immigration will still be significantly needed there and in Europe to support the working-class base of the economy that funds social programs. This goes to show that the benefit of nativism now will be a devastating cost in the future.

            As the Western world debates its domestic policy, the rest of the world is rising. China and India are projected to surpass the United States as the largest economies within a few years. By 2050, the 27 countries making up the European Union will be less than 10% of global GDP – combined. Countries like Indonesia, Mexico and Nigeria will take their place. These growing and developing countries have tremendous economic potential. Their young populations will provide a solid worker base and a consistent supply of incoming market demand. If the Western world wants to maintain its economic power domestically and internationally, they can either embrace the opportunity offered within their diversity, or they can watch the rest of the multicultural world pass them by.

Lauren V. Williams
Lauren V. Williams

Lauren V. Williams is a Yale undergraduate from Chicago, Illinois. As the founder of The Young Vote, her mission is to elevate the voices of young people in the political sphere.

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