New Findings: Immigration Reform Will Help the U.S. Economy Grow

Few issues are as hot-button in Washington these days than immigration reform. Every topic, ranging from whether to raise the cap on high-tech worker visas to how to resolve the wage issues for agricultural workers, many of whom are undocumented, is on the table in the senate’s burgeoning immigration overhaul.

And for those who are attempting to gauge the impact that legalization of the country’s estimated 11 million undocumented workers would have on the country’s post-sequestration finances, there’s good news: A new study by the Center for American Progress (CAP) suggests that immigration reform would actually be good for the U.S. economy, and for the economic standing of all Americans, not just new immigrants.

The study was conducted by two CAP researchers, Robert Lynch and Patrick Oakford. Lynch, who is a visiting fellow at CAP, serves as the chair of the Department of Economics at Washington University. Oakford is a research assistant in CAP’s Economic Policy department.

The study examines the economic impact of immigration reform over a 10-year period with a focus on three possible scenarios: a) where citizenship and full legal status is granted to all undocumented immigrants; b) where legal undocumented residents are accorded legal residency status, and are given the opportunity to earn citizenship at the end of a five-year wait; and c) where undocumented immigrants are given legal status only, without access to citizenship.

The potential impact on the U.S. economy say Lynch and Oakford, would differ according to each scenario. Granting full citizenship and full legal rights to immigrants, for example, would help to expand the gross domestic product (GDP) by $1.4 trillion over a 10-year period (2013-2023). It would also inject 203,000 more jobs per year into the economy and provide more revenue for federal and state coffers. The country’s newly recognized citizens would see a 25.1 percent increase in their salaries in 5 years.  American salaries overall would increase by $791 million (over a five-year period), and the federal government could see as much as a $116 billion increase in taxes over a 10-year period.

The second scenario – affording legal status with the ability to gain citizenship in five years – would benefit the economy, but not as fully as the first scenario. The benefit to the GDP would be $1.1 trillion, and the employment sector would see an increase of 159,000 jobs a year. However, because immigrants would be required to wait five years for citizenship, it would take twice the amount of time (10 years) for their salaries to gain a 25.1 percent increase. As in the first scenario, affording documented status to unauthorized immigrants would help them to earn more. They would gain $503 billion more in salary over a 10-year period, and would pay $144 billion more in taxes. The federal government’s share of that increased revenue would be about half to two-thirds what it was in the first scenario ($91 billion) over 10 years.

In a situation in which current undocumented immigrants were only granted legal status (and not accorded access to citizenship), the economic benefits all around would be substantially less. The GDP would grow by $832 billion over the 10-year period, which would translate to a growth in incomes for Americans of $470 billion, and add another 121,000 jobs to the country per year. Incomes of those given new legal status could increase about 15.1 percent by the end of five years. The federal government’s share of taxes would be an estimated $69 billion over the 10-year period.

“These immigration reform scenarios illustrate that unauthorized immigrants are currently earning far less than their potential, paying much less in taxes, and contributing significantly less to the U.S. economy than they potentially could,” the researchers point out in their March 20 article on the CAP website. They state that the sooner immigration reform is implemented, the more significant the impact may be for the U.S. economy.

The researchers point out as well, that the benefits of immigration reform have been studied before.  Research done in the 1980s by George Borjas and Marta Tienda showed that there was more than a five percent gap in the earning capacity between legal immigrants and undocumented immigrants.

These days, say Lynch and Oxford, the gap may be even greater due to social and political circumstances that make it harder for undocumented immigrants to earn a fair wage.

Earlier findings by Michael Greenstone and Adam Looney have also pointed toward the need for new immigration policy. Their article published by the Hamilton Project at the Brookings Institute shows that immigrants improve the living standards of their U.S. neighbors by taking up jobs that complement the employment of non-immigrants. The authors also point out that the taxes paid by immigrants most often exceed the cost of the services they may use when first entering the country, confirming that a solid and supportive immigration reform policy will be good for the country and U.S. residents as a whole.

Image of rally #1 courtesy of ProgressOhio.

Image of rally #2 courtesy of Korean Resource Center.