New Report Highlights Economic Gains from Immigration and Immigration Reform

Written by on May 28, 2010 in Economics, Reform with 2 Comments
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In a report released this week, the New Policy Institute (NPI) synthesizes much of the available research on the ways in which immigration ultimately raises wage levels for the vast majority of native-born workers and benefits the U.S. economy as a whole. The report, entitled The Impact of Immigration and Immigration Reform on the Wages of American Workers, also summarizes a number of studies which have demonstrated the economic gains which would likely flow to all U.S. workers were unauthorized immigrants given a pathway to legal status. The NPI report reinforces the conclusion of a February IPC fact sheet on immigration and the economy that “employment is not a zero-sum game in which workers compete for some set number of jobs. Policies which lift the wages of workers, regardless of where they were born, benefit the entire U.S. economy. Workers who earn higher wages also buy more goods and services from U.S. businesses, and pay more in taxes to federal and state governments, both of which create jobs.”

According to the NPI report, the available evidence suggests that “high levels of immigration have had no adverse effect on the average wages of native-born Americans. In fact, studies indicate that the recent waves of immigration have positive long-term effects on average wages as capital investment rises to take account of the larger numbers of workers.” The report notes that after the legalization program created by the Immigration Reform and Control Act of 1986 (IRCA), “wages rose by 6 percent to 15 percent for previously-undocumented male immigrants and by 21 percent for previously-undocumented female immigrants. Those reforms also increased wages of previously legal immigrants. Research also suggests that those reforms led to modest wage gains by native-born Americans.” Moreover, as the IPC demonstrates in a November 2009 study, IRCA beneficiaries experienced significant gains over time as measured by a broad array of socio-economic indicators in addition to wages, including home ownership and education.

The NPI report also finds that, after “taking into account both spending and revenues, immigrants are not a net drain on most state, local and federal budgets. In any year, a handful of states with large numbers of recent immigrants with children incur significant net budget costs, largely from the educational and medical costs associated with the children. At the federal level, however, revenues from immigrants equal or exceed spending on immigrants.” In addition, according to the report, “on a longer-term basis, the lifetime earnings of immigrants, most of whom arrive in America at post school-age and without elderly parents eligible for Social Security and Medicare, are likely to exceed the lifetime government spending they claim.” These contributions are critical at a time when both Social Security and Medicare are facing a tide of red ink as the Baby Boomers retire, leaving the labor force and drawing upon their benefits.

Given the ability of unscrupulous employers to exploit unauthorized workers and drive down wages, particularly in less-skilled occupations, the NPI study also concludes that allowing unauthorized immigrants to earn legal status would raise wages for both formerly unauthorized workers and those relatively few native-born workers with whom they compete for jobs. As the IPC and Center for American Progress estimated in a January 2010 study by Dr. Raúl Hinojosa-Ojeda, the higher personal incomes of newly legalized workers would, over the first three years, increase consumer spending enough to support 750,000–900,000 jobs, and would generate $4.5-$5.4 billion in new tax revenue. Given the high unemployment rates and widespread budget deficits currently afflicting the United States, economic gains of this magnitude are not insignificant.

In short, the NPI report reinforces the findings of numerous researchers that immigration is a net benefit to the U.S. economy and to native-born workers, and that legalizing currently unauthorized immigrants would sustain new jobs and generate new tax revenue at a time when the nation desperately needs both.

Photo by rbbaird.

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