Prominent Economist Says Cuts in U.S. Immigration Threaten U.S. Economy and Innovation   

Austan Goolsbee, a professor of economics at the University of Chicago’s Booth School of Business and a former adviser to President Barack Obama, asserts, “The long-run health of the United States economy is in serious danger from a self-inflicted wound: the Trump administration’s big cuts in immigration.” [1]

First, he cites last year’s 70 percent decline in immigration to only 200,000 people, a principal cause of which was the Trump Administration’s “restrictions as well as the unwelcoming tone set by the president himself,” which will be exacerbated by its reduction of this year’s refugee quota to 30,000.

Second, Goolsbee says, “The impact of low immigration on the American economy will be profoundly negative, both now and in the future.”

He explains that the “growth rate of the economy comes from two parts: income growth per capita and population growth.” (Emphasis added.) However, the U.S. and other advanced economies are experiencing declining birthrates and aging populations. “The only way the United States [so far] has avoided the demographic pressure facing other rich countries is through immigration.”

“Without sustained immigration, [U.S.] economic growth will be notably slower.” Moreover, “lower immigration portends big problems because the basic American retirement system — Social Security and Medicare — relies on workers to pay for retirees, and the entire expansion of the work force over the next 15 years will come from immigration. Lower immigration rates will mean serious funding shortfalls for older Americans.”

Moreover, “evidence increasingly says having immigrants here makes workers born in the United States more successful.” These “immigrants start companies at twice the rate of native Americans.” There also is evidence that immigrants help foster innovation. “The essence of knowledge work is building on others’ ideas, and having fewer creative people from different backgrounds in the United States undermined the entire enterprise” under U.S. immigration laws of the 1920s that “were designed to block the entry of immigrants from Southern and Eastern Europe and from Asia in order to preserve the ethnic ‘character’ of the United States.”

In short: “Making outsiders feel unwelcome, blocking asylum seekers or putting their children in cages may succeed in reducing the flow of immigration to the United States. But the American economy will suffer.”

Conclusion

This article provides additional evidence for this blog’s  consistent argument about the U.S. need for more immigrants. [2]

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[1] Goolsbee, Sharp Cuts in Immigration Threaten U.S. Economy and Innovation, N.Y. Times (Oct. 11, 2019).

[2] See, e.g., these posts to dwkcommentaries.com: More Warnings of the Problems Facing U.S. Aging, Declining Population (Aug. 14, 2019); Another Report About U.S. Need for More Immigrants (Aug. 25, 2019); Minnesota’s Challenges of Declining, Aging Population (Oct. 2, 2019); Worthington’s Mayor Defends City (Oct. 3, 2019).

 

 

 

Worthington’s Mayor Defends His City  

The prior post discussed controversies surrounding Worthington, Minnesota in the southwest corner of the State. Now we thank the city’s Mayor, Mike Kuhle, for his robust defense of the city. Here are his main points.[1]

“Worthington’s immigration benefits far, far outweigh any perceived disadvantages. The ‘bus driver’ article [in the Washington Post], as it has become known, does not fairly represent the effects of immigration on our community.”

“Since the early 2000s, we have grown from a town of 10,000 mostly Caucasian residents to a population of more than 13,000. While most communities outside of the metropolitan areas have struggled to grow or even maintain populations, Worthington is moving ahead, in a variety of ways.

“Economic development”

“Worthington has 47 minority-owned small businesses that contribute to our tax base and provide jobs for our community. They pay real estate taxes either directly or through the rent they pay to landlords. The wages these businesses pay reverberate throughout our entire community. Our main street for the most part is filled with tenants and is thriving. I have been through communities that have main streets with a lot of vacant buildings. Not Worthington.”

“The JBS pork processing plant has grown because of the available workforce in our community. Its economic impact on our community and surrounding area is around $100 million in the form of wages, real estate taxes, sales taxes and hogs purchased from farmers within 100 miles of Worthington. Approximately 24,000 hogs are processed each day, from which the farmers benefit financially. The crops they grow that are turned into feed help to increase the value of their products. The hog facilities needed to grow the animals to meet the demand of JBS are an important source of income as well.”

“The ag bioscience/animal vaccine sector is thriving in Worthington as well.”

“Immigration has helped to provide badly needed employees for these businesses and the surrounding area. The farming community has benefited from the availability of immigrant workers. Without immigrants moving to Worthington, we would likely be a community in decline.”

Cultural diversity

“Worthington has about 12 different cultures represented, from Southeast Asia, Africa and Central America. Our dining options are among the best in our region. Diversity is a good thing for our community and surrounding area, much as it was back in the early 1900s. Back then, the influx of immigrants mostly from Europe helped our community and the entire nation grow and prosper. Change and growth are a good thing.”

Public safety”

“We ranked as the third-safest city in the state of Minnesota in 2019 thanks to our police officers and Public Safety Director Troy Appel, who have reached out to the different ethnic groups and gained trust and relationships. They get involved with the community.”

Need for federal government solutions

“We need sensible solutions to the whole issue of immigration from the federal government, Congress and the president. Immigrants are vital to communities such as Worthington, as they provide employees and benefit us culturally.”

We “really need a better and faster pathway to citizenship. Some immigrants do not have a pathway to citizenship and are then forced into illegal status. An improved immigration system is vital to the future of Worthington and other communities.”

“In the end. immigrants just want a chance for a better life, and the children want to be united with their families. Worthington needs employees to grow and prosper.”

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[1]  Kuhle, Counterpoint: In Worthington, where I’m mayor, immigrants help us grow, thrive, StarTribune (Oct. 2, 2019).

 

Japan Shows Why U.S. Needs More Immigrants   

This blog consistently has argued for the U.S. needing more immigrants.[1] This argument is strengthened by looking at the problems being experienced by Japan with practically no immigration, as recounted by Francisco Toro, a Venezuelan political commentator with Japanese relatives. [2]

“Japan’s population is shrinking, with far-reaching consequences that seep into every corner of life here. . . . As the country ages and older people die with no one to replace them, neighborhoods across Japan are also slowly dying.”

Just one sign of this is the existence of “abandoned houses like the one blighting my in-laws’ street. . . .Such houses have “fallen badly into disrepair. None of the heirs seems interested in [them]: The taxes are too high, and there isn’t really a market for this kind of house anyway.]”

“As many as 8 million houses in Japan are vacant, and the trend is only deepening. Rural villages are disappearing, and more and more Japanese towns and suburbs have become ‘dying communities’ where children are a rare sight; authorities barely manage to find the care workers needed to look after legions of retirees.”

“A solid [Japanese] political consensus has rejected mass immigration here for as long as anyone can remember, leaving this one of the most homogeneous countries on earth. You can think of Japan as a kind of Trumpian paradise: an ethnically defined national community with few foreigners. And no future.” (Emphasis added.)

Japan has a “demographic collapse that has left the country a pale shadow of the economic powerhouse that made Americans paranoid a generation ago. A chronic dearth of new workers has left economic growth lagging for a generation, turning “japanification” into economic shorthand for decline. All that — plus the ossified 1950s gender roles that simply never went away here — has turned Japan into one of the least attractive places for women to have children. Low birth rates only compound the demographic death spiral.”

“The [Japanese] government has begun making more work permits available to foreign workers, but makes little effort to help them integrate. Visa rules force most foreign workers to apply for extensions frequently and prevent them from bringing their families. By all accounts, discrimination in housing is rife, as well as perfectly legal. The foreign workers who do come can’t fail to hear the message: Come, work, but don’t think you’re welcome to stay.”

In short, “economic imperatives and cultural consensus are at war in Japan . . . . It’s no longer possible for the country to continue to pretend it can get by without migrants. But it’s politically impossible to truly welcome them, either. The result is that more and more jobs simply stay vacant, not just in industry and agriculture but also in the kinds of elder-care jobs this aging country most desperately needs to fill.”

For the U.S., Japan is “a bright red warning sign of demographic meltdown, and an indictment of a society that has chosen homogeneity over progress. . . . [H]omogeneity leads to decline, while diversity offers at least a chance of ongoing vitality and prosperity.”

Japan also may have a positive message for the U.S.  After reviewing the many problems in U.S. “assisted-living” facilities, the author says, “Perhaps the United States can learn from Japan, which is a few decades ahead of us in grappling with how to care for its rapidly aging population. Japan created a national long-term-care insurance system that is mandatory. It is partly funded by the government but also by payroll taxes and additional insurance premiums charged to people age 40 and older. It is a family-based, community-based system, where the most popular services are heavily subsidized home help and adult day care. Japanese families still use nursing homes and assisted living facilities, but the emphasis is on supporting the elder population at home.” [3]

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[1] See, for example, these 2019 posts to dwkcommentaries.com: Another Report About U.S. Need for More Immigrants (Aug. 25, 2019); More Warnings of the Problems Facing U.S. Aging, Declining Population (Aug. 14, 2019); Additional Support for U.S. Needing More Immigrants (May 18, 2019); Trump Erroneously Says U.S. Is “Full,” (April 9, 2019); U.S. Construction Industry Needs More Immigrants (April 3, 2019); Businesses Need More Immigrants (Mar. 24, 2019);“America’s Farms Need Immigrants” (Mar. 22, 2019).

[2]  Toro, Japan is a Trumpian paradise of low immigration rates. It’s also a dying country, Wash. Post (Aug. 29, 2019).

[3]  Anand, How Not to Grow Old in America, N.Y. Times (Aug. 29, 2019).

 

Another Report About U.S. Need for More Immigrants

A New York Times article uses the need for employees in Miami’s restaurants to illustrate the U.S. need for more immigrants.[1]

“More immigrants have streamed into South Florida than to most American cities, and for decades, employers have relied on them to wash dishes, put up drywall and care for grandmothers. Still, there are not enough to fill Miami’s relentless boomtown demand for [restaurant] workers.”

“As unemployment rates nationwide have sunk to record lows, filching workers — from kitchens and construction sites, warehouses and Walmarts, truck cabs and nursing homes — has become routine. In cities like Miami that are magnets for immigrants, newcomers have filled some job openings, but employers across several industries and states insist that many more are needed for their businesses to function, let alone grow.”

“[M]ost economists say . . . that there is plenty of room [for immigrants]. Immigrants make the country richer, they argue. For example, Douglas Holtz-Eakin, a former director of the Congressional Budget Office who has advised Republican presidential candidates and now leads the conservative American Action Forum, says, “Without immigration, we shrink as a nation. . . .That’s because growth is driven by two ingredients: the size of the work force and how efficiently those workers produce things. And both are creeping well behind the postwar average.”

A key reason in this analysis is “Americans are having fewer babies. Birth rates fell last year to a three-decade low, ensuring that the next generation of native-born Americans will be smaller than the current one.”

Moreover, “using census data, the investment company the Blackstone Group estimates that without immigration, the working-age population between 25 and 64 years old would drop by 17 million by 2035. [Its Vice chairman of Private Wealth Solutions says,]“We really need immigrants. If we have a shrinking population, it’s going to be tough to have rising G.D.P.,” or gross domestic product.”

“At the moment, there are 7.3 million job openings nationwide and six million people unemployed. That gap is expected to widen as the number of retirees grows faster than the number of new workers.”

While some immigrants may take jobs from U.S. citizens, “they also help create jobs — by generating demand for goods and services like groceries, haircuts and homes.” In addition, “immigrants complement American workers. More educated women, for example, may decide to work if the availability of immigrants makes child care more affordable.”

This positive economic impact is seen in Dallas, Texas where 32.2% of all businesses are owned by immigrants while generating 55,000 jobs and nearly $495 million of business income. A study concluded that “immigrants tend to be more able, ambitious, aggressive and entrepreneurial than those who chose to stay in their place of origin.” [2]

Overhanging businesses, especially restaurants, in finding and hiring more workers is the legal risk of hiring undocumented individuals. In March and April of this year “the Social Security Administration sent letters to hundreds of thousands of business owners, notifying them that the names of some employees did not match the Social Security numbers on their tax forms.” In response some employers are planning to fire their undocumented workers or adopt more stringent hiring procedures such as using the E-Verify program to check the new hires’ documents. If, however, the employers ignore these “no-match” letters, a subsequent immigration audit by Immigration and Customs Enforcement could conclude that they had “constructive knowledge” of their employees’ immigration status and thereby expose the employer to hefty fines and possible criminal charges. [3]

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[1] Cohen, Is Immigration at Its Limit? Not for Employers, N.Y.Times (Aug. 22, 2019). This blog consistently has argued that the U.S. needs more immigrants. See, for example, these 2019 posts to dwkcommentaries.com: More Warnings of the Problems Facing U.S. Aging, Declining Population (Aug. 14, 2019); Additional Support for U.S. Needing More Immigrants (May 18, 2019); Trump Erroneously Says U.S. Is “Full,” (April 9, 2019); U.S. Construction Industry Needs More Immigrants (April 3, 2019); Businesses Need More Immigrants (Mar. 24, 2019);“America’s Farms Need Immigrants” (Mar. 22, 2019).

[2] Vizcaino, ‘What do you lose if you don’t have anything?–Why 1 in 3 Dallas businesses are owned by immigrants, Dallas Morning News (Aug. 16, 2019)

[3] Yaffe-Bellany, Hiring Is Very Hard for Restaurants These Days. Now They May Have to Fire, N.Y. Times (Aug. 23, 2019).

More Warnings of the Problems Facing U.S. Aging, Declining Population

Other posts have warned about the problems facing the U.S.’ aging, declining population and the corresponding need for increased immigration.[1]

This was emphasized by a recent Washington Post article about developments in the State of Maine.[2] “Last year, Maine crossed a crucial aging milestone: A fifth of its population is older than 65, which meets the definition of ‘super-aged,’ according to the World Bank.”

“Across Maine, families . . . are being hammered by two slow-moving demographic forces — the growth of the retirement population and a simultaneous decline in young workers — that have been exacerbated by a national worker shortage pushing up the cost of labor. The unemployment rate in Maine is 3.2 percent, below the national average of 3.7 percent.”

“With its 65-and-older population expected to grow by 55 percent by 2026, Maine needs more nurses, more home-care workers and more physicians than ever to keep pace with demand for long-term-care services. . . . But the rising demand for care is occurring simultaneously with a dangerously low supply of workers. About one-third of Maine’s physicians are older than 60. In several rural counties in the state, close to half of the registered nurses are 55 or older and expected to retire or cut back their hours within a decade.”

This “disconnect between Maine’s aging population and its need for young workers to care for that population is expected to be mirrored in states throughout the country over the coming decade, demographic experts say. And that’s especially true in states with populations with fewer immigrants, who are disproportionately represented in many occupations serving the elderly, statistics show.”

Indeed, by “2026, Maine will be joined by more than 15 other states, . . . including Vermont and New Hampshire; . . . Montana; Delaware; West Virginia; Wisconsin; and Pennsylvania. Over a dozen more will meet that criterion by 2030.” Moreover, in the U.S. as a whole, “the number of seniors will grow by more than 40 million, approximately doubling between 2015 and 2050, while the population older than 85 will come close to tripling.”

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[1] See these posts to dwkcommentaries: More Immigrants Needed in U.S. (June 23, 2018); Federal Reserve Bank Endorses Need for More Immigrants (Nov. 11, 2018);  “America’s Farms Need More Immigrants” (Mar. 22, 2019); Businesses Need More Immigrants (Mar. 24, 2019); U.S. Construction Industry Needs More Immigrants (April 3, 2019); Additional Support for U.S. Needing More Immigrants (May 18, 2019).

[2] Stein, ‘This will be catastrophic’: Maine families face elder boom, worker shortage in preview of nation’s future, Wash. Post (Aug. 14, 2019).

State of Minnesota Faces  Increasing Shortage of Workers

Last week had great news for the State of Minnesota. The State government was projected to have a  $1.5 billion surplus in its budget over the next two years [1]

On the other hand, this great news was coupled with a more troubling projection. The tight labor market caused by retiring baby boomers is an immediate problem, and its pinch on growing businesses is only going to get worse.

The report itself put it this way, “The state continues to add jobs at a steady pace, driving the unemployment rate well below the U.S. rate. Together, high demand for labor and low unemployment continue to support growth in total Minnesota wage income and wages per worker. However, as retiring baby boomers dampen growth in the state’s workforce, forecast employment growth is increasingly constrained. This means that more of Minnesota’s growth in total wage income is expected to arise from higher wages per worker, and less from increases in the number of people working.”

“Strong demand for workers,” the report continued, “combined with low unemployment, continues to tighten Minnesota’s labor market. Statewide, there have been fewer unemployed job-seekers than open positions for the past 18 months. Other indicators, such as initial claims for unemployment insurance and temporary help employment, are at levels consistent with a tight labor market. In October, Minnesota’s seasonally adjusted unemployment rate was 2.8 percent, 0.9 percent below the national rate, 0.5 percentage points lower than a year ago, and the lowest unemployment rate the state has seen in more than 18 years.”

According to Walker Orenstein in MINNPost, there are five key facts underlying the projected worker shortage.

  1. There have been fewer unemployed job-seekers than open jobs for the past 18 months.

In October 2018, the state’s unemployment rate was 2.8 percent, which is 0.9 percent lower than the national rate and the lowest for the state in more than 18 years. The rate is still 5.4 percent for black Minnesotans and 5.0 percent for Hispanic residents, but those numbers also have dropped over the last few years.

  1. Job vacancies are up 16 percent compared to last year.

Minnesota has about 142,000 open jobs, a 16 percent jump over the same point in 2017. That’s more job openings compared to fewer than 100,000 unemployed people. The economic forecast report says the industries with the most open jobs are health care, accommodation and food service, retail and manufacturing.

When businesses can’t find people to fill the jobs they have open as baby boomers retire, it hampers their ability to grow and succeed. That crunch is being felt especially hard in the Twin Cities, where there are two job vacancies for every unemployed person, according to the report.

  1. Nearly 70 percent of people age 16 and older are employed.

Minnesota’s 68 percent rate of working people is the highest of any state and 7.4 points higher than the national rate,  This is great news, but  it also illustrates just how few people there are left for businesses to entice into working compared to other states.

  1. Wages are expected to rise as businesses struggle to find workers.

A “moderate acceleration” in salary growth is forecast. The forecasters expect wages to increase at higher rates than the national average during 2019 and 2020, but slow through 2023.

  1. More people are moving in, than out (for once).

From 2016 to 2017, nearly 8,000 more people moved to Minnesota from inside the U.S. than left the state, reversing a 15-year-long trend of negative domestic migration.

While the report warns one year of growth in this statistic doesn’t signal a long-term growth trend, the number of new Minnesotans is good news in an otherwise bleak landscape of worker shortages.

Shortage of Police Recruits[2]

A subset of the overall shortage of new workers is the problem Minnesota police departments are having in “attracting and keeping new police officers.”  For Minneapolis, “officials blamed the shrinking candidate pool on decreasing interest in the profession, lower enrollment and graduation rates from area college law enforcement programs, and ‘internal issues with the application, testing and hiring processes.’”

This also is a problem throughout the U.S. attributable to “low pay, high turnover and unflattering news coverage in the wake of high-profile police shootings.”

The Proposed Solutions to the Worker Shortage

The initial responses to this problem from Minnesota elected officials, in this blogger’s opinion, were meager at best.

Outgoing Speaker of the House Kurt Daudet (Rep.) suggested the state improve at enticing young people into trades and manufacturing — two industries struggling to fill positions. Gov.-elect Tim Walz (DFL) said some school districts lack the money to properly train an adequate workforce thanks to the state’s over-reliance on local property taxes to pay for schools.

So far at least, no public official is advocating for what the state really needs—more immigrants.[3]

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[1]  Minnesota Management & Budget, Budget and Economic Forecast (December 2018); Orenstein, A warning lurks beneath state budget surplus prediction: not enough workers to go around, MINNPost (Dec. 11, 2018); Berkel, Minnesota projects $1.5 billion surplus, StarTribune (Dec. 6, 2018).

[2]  Jany, Minnesota police look to combat crisis of statewide shortage in potential recruits, StarTribune (Dec. 13, 2018).

[3] See posts listed in the “U.S. Population & Immigration” section of List of Posts to dwkcommentaries—Topical—United States  (POLITICS).

Federal Reserve Bank Endorses Need for More Immigrants

On November 13 the Federal Reserve Bank of Minneapolis concluded its second annual Regional Economic Conditions Conference with a strong endorsement of the U.S. need for more immigrants.[1]

Its Senior Vice President and Research Director Mark Wright  summed up the proceedings by saying, ““What’s clear to me is that, in the same way that immigration has played a very large role in shaping the history of this country, it is going to do so again in the future, one way or another. The simple laws of demography and economics demand it.”

Wright added, “But what can’t get lost in purely thinking about the statistics, the spreadsheets, and the government budgets and how that’s affected by immigration, we also have to recognize that behind those statistics are the very real lives of many people, many families who are living in a great deal of uncertainty and great deal of difficulty right now.”

The conference’s keynote speaker, U.S. Senator Ron Johnson (Rep., WI), agreed. He said, “If you don’t have enough human capital, you’re not going to have a growing economy. No policies, no tax cuts, no deregulation is going to make up for the fact that we simply don’t have enough workers. … We’re going to need a vibrant, legal immigration population.”

Therefore, Senator Johnson called on his fellow members of Congress to adopt an approach of continuous (and incremental) improvement of immigration policy to be responsive to current conditions. He also emphasized the need for  a legal immigration system where states would have a stronger voice in determining the appropriate mix of skilled workers it could welcome to address local labor force needs and where greater emphasis was placed on immigrants work skills, rather than family reunification.

More specifically Johnson said he would reintroduce a bill to allow states to administer guest-worker visas allowing the individuals to stay in the U.S. for one year to take jobs, and he previously has suggested having an annual cap of 500,000 of such visas

Political reality, however, said Johnson, requires the Congress first to fix illegal immigration.

Another speaker, Ryan Allen, Associate Professor of  Community and Economic Development at the University of Minnesota’s Humphrey School of Public Affairs, emphasized that as fertility rates among native-born Americans lag and as the population ages, the growth of the labor force will stagnate, but for the inflow of immigrants. For the State of Minnesota, the labor force is growing at what Allen called an “anemic” one-half of 1 percent annually, and that’s not enough to ensure economic growth. In Allen’s view, to maintain the current labor force growth rate, Minnesota needs more than four times the number of immigrants that the state demographer projects will arrive in the state over the next three decades.

These thoughts were echoed by speakers from North and South Dakota. And a Montana immigration attorney redefined what “assimilation” of migrants should mean going forward. “They’re working, they’re providing for themselves and their family, they’re contributing to the economy by spending the money they earn. They are assimilated—perhaps not in language all of the time, perhaps not in skin tone or cultural background. They are assimilated in the sense that they are part of our economy.”

This Federal Reserve Bank’s President, Neel Kashkari, frequently makes these points about immigration.[2]

Conclusion

Recent Minnesota statistics provide further evidence of this need. Its unemployment rate in October remained at 2.8% while the state added jobs at a slower rate than last year and employers were working harder to attract and retain talent. A recent survey by the Minnesota Chamber of Commerce found that the difficulty of finding skilled workers is so pervasive that it is threatening business growth in the state. [3]

These conditions are also true throughout the U.S., Europe and other industrialized countries.[4]

It, therefore, is contradictory for the Trump Administration to increasingly deny and delay applications for legal immigration.[5]

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[1] Weiner, Human capital, demographics,, economic growth, and immigrants, Fed. Res. Bank of Mpls,  (Nov. 14, 2018); Ramstad, Sen. Ron Johnson says illegal immigration needs to be fixed before other reform, StarTribune (Nov. 14, 2018).

[2] E.g., Kashkari,  WSJ Op-Ed: Immigration Is Practically a Free Lunch for America (Jan. 19, 2018).

[3] Ramstad, Minnesota adds 3,400 jobs in October; unemployment holds at 2.8 percent, StarTribune (Nov. 15, 2018); DePass, Minnesota Chamber of Commerce Survey: Hiring woes threaten state’s business growth, StarTribune (Nov. 15, 2018).

[4] Noack, Fertility rates around the world are declining, some Trump supporters won’t like the solution, Wash, Post (Nov. 9, 2018); Freeman, Is America Running Out of Workers?, W.S.J. (Nov. 1, 2018). See also these posts to dwkcommentaries: U.S. Needs More Immigrants (April 14, 2018); Other Factors Favoring U.S. Immigration (May 17, 2018); Impact of Declining, Aging, Rural Population (May 22, 2018); More Immigrants Needed in U.S. (June 23, 2018); Fear of Change Driving U.S. and European Clamor Over Immigration (July 3, 2018); Outstate Minnesota Newspaper Stresses Need for Immigrants (July 27, 2018); Outstate Minnesota City Aided by Immigrants Aug. 5, 2018).

[5]  Bier, America Is Rejecting More Legal Immigrants Than Ever, N.Y. Times (Nov.15, 2018).