Immigration Reform’s Economic Benefits

by David Bier on February 12, 2013

in Immigration, Labor, Regulation

Comprehensive immigration reform is coming. For those that don’t speak D.C. doublespeak, that means more costly, useless, and privacy-invading border drones, more guards and fences, more employer prosecutions, and national identification for all Americans. On the other hand, it means much more legal immigration and legalization for immigrants already here illegally. Looking at only these last two parts, what will the economic impact be?

1) Fewer deportations mean less wasteful federal spending. College of William and Mary professor of economics Rajeev Goyle estimated in 2005 that if we could find all 11 million deportable immigrants, the cost of mass deportation to be $206 billion over 5 years, or $41 billion annually. Five years later, the Center for American Progress put the number at $285 billion over 5 years. Immigration and Customs Enforcement (ICE) has found that it costs at the margin $12,500 to deport a single person. This translates to $138.8 billion, ignoring the capital costs.

2) Fewer deportations raise GDP. Ignoring the unlikely event we can force out all 11.1 million unauthorized immigrants, even a strong enforcement effort that reduces the number of unskilled workers by 28% would lower GDP by $80 billion or 0.5% of the income of U.S. households, according to economists Peter Dixon and Maureen Rimmer in 2009. In 2012, Berkley Econ Professor Raúl Hinojosa-Ojeda found that the number would likely be $2.6 trillion in lost GDP over ten years, not including the actual fiscal cost of deportation (Prof. Goyle found the same number in 2005). In 2012, the Department of Agriculture looked at the economic impact of cutting the unauthorized population in half over 15 years. It found that it would reduce U.S. wages by 0.3 to 0.6%. In 2009, the dairy industry concluded similarly that eliminating 50 percent of migrant workers would reduce its sales by $6.7 billion, cutting GDP $11 billion.

3) Legalization would increase GDP. In 2012, Hinojosa-Ojeda found in 2012 that the just wage increases due to legalization for immigrants would raise GDP $30 billion to $36 billion over just three years. Economists Manuel Pastor and Justin Scoggins estimated the “wage premium” that immigrants receive from naturalization and concluded that it would add $21 to $45 billion in GDP over ten years. If unauthorized immigrants gained the average wage increase from legalization during the last legalization in 1986, as the Public Policy Institute of California found, GDP would get an annual $35.52 billion bump or $355.2 billion over ten years.

4) More immigration would increase U.S. wages. Immigrants complement the skills over U.S. workers, creating better job opportunities and higher wages. The White House Council of Economic Advisers found in 2007 that annual wage gains from immigration are between $30 and $80 billion. Economist Giovanni Peri found in 2007 that wages for workers with at least a high school degree grew by 2 percent due to immigration between 1990 and 2004. Peri and Gianmarco Ottaviano, using a model that takes into account comparative advantage gains, found that immigration in 2010 increased the wages of all Americans by 0.6% with a positive effect on low-skilled Americans. UC Berkley economist David Card discovered the same thing in 2005 looking at city specific data.

5) More immigration lowers prices. Economist Saul Lach found in 2007 that the higher output from immigration also lowers prices by 0.5% on average. MIT’s Patricia Cortes in 2006 found that immigrants lowered prices in immigrant-dominated industries by 1.3%. In 2007, economists Robert E. Lipsey and Birgitta Swedenborg showed that countries that keep labor scarce consume much fewer labor-intensive goods. For example, there are far fewer restaurants in Nordic countries due to the inability to find labor. In New York City in 2012, the Fiscal Policy Institute found lower education immigrants own 70 to 90 percent of all laundry, taxi and limousine, grocery, beauty salon, and day care small businesses.

6) More high-skilled immigration increases jobs and innovation. Immigrants have twice as many patents and Nobel Prize recipients per capita than natives. In 2006, immigrant founded companies produced $52 billion in sales and employed 450,000 workers. Immigrants served either as founder, CEO, or VP of engineering in more than three quarters of top 50 venture-backed companies. Even 100 new temporary high-skilled immigrants create 183 new jobs for U.S. workers, according to economist Madeline Zavodny.

Alarmist claims about immigration–produced by the havens of protectionist garbage, Center for Immigration Studies and Federation for American Immigration Reform–should be interpreted in context of the overwhelming evidence partially presented above that legal immigration has a profoundly positive effect on the economy. Legalization (of some kind) and more legal immigration will benefit America’s economy, not because of some intrinsic element of immigrants, but because, as late economist Julian Simon said, people are the ultimate resource—not some nasty drag on the world.

Comments on this entry are closed.

Previous post:

Next post: