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Immigration, Aging, and the Regional Economy – Chicago 2009


States, regions and communities are all facing a doubling of the 65+ population in the next twenty years. This will put economic strain on government programs designed to serve the needs of older adults in communities. One possible solution is for local communities to encourage more immigration to add younger, tax-paying adults to help fund support for the increase in older adults. Cityscape, an academic peer-reviewed journal published by the U.S. Department of Housing and Urban Development, published this technical analysis of the impact of additional immigration to the Chicago region.

Key Points

The analysis and models described in this article compare Chicago to the rest of the United States. The models are designed to predict over time the impact of immigration across a variety of measures, like wages and gross regional product. The models show that wages initially fall as a result of increased immigration, due to the supply shock and a fall in the capital/labor ratio. However, this effect appears to be reversed after 2040 as the increasing number of immigrants will provide contributions to taxes that will reduce the social security tax burden and thus increase the after-tax income of native workers.

Other key points include:

  1. The model assumes that over time, immigrants and their offspring acquire skills that make them no different than the native population.
  2. Given this assumed skill development, immigration appears to reverse a projected decline in gross regional product (GRP), and actually has a positive impact on the regional economy.
  3. Because Chicago gains more immigrants as a percentage of its base population than the United States as a whole over the predicted time period, it increases its share of gross domestic product. In other words, increased immigration ultimately is a good thing for the region.
  4. Immigration will have a positive impact on the social security tax rate until 2050, when effects of immigration will begin to diminish regionally, and nationwide.

How to Use

The Chicago region’s relatively high levels of immigration ultimately have a positive impact on tax revenue, providing the area with more money to spend meeting the needs of its older adult population. This scientific and detailed article provides policymakers with information to discuss changes in immigration policies that encourage immigration and create programs to integrate new immigrants into a community.

View full report: Immigration, Aging, and the Regional Economy – Chicago 2009 (PDF – 578 KB)

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