The Economic Potential of Executive Action on Immigration

Written by on December 12, 2014 in Economics, Executive Action with 1 Comment

11942712503_31d7b070b9_kMayors from cities across the country met in New York City earlier this week to discuss the implementation of President Obama’s immigration plan. These mayors support of executive action because they recognize the economic benefit to their cities as well as the role that executive action will play in keeping families together and enabling immigrants to become more engaged in their communities. “Immigration has been the foundation for human capital on which cities like Syracuse were built and we need comprehensive solutions for the next generation,” Syracuse Mayor Stephanie Miner said. Indeed, the series of immigration executive actions would have a beneficial—if modest—impact on the U.S. economy, according to several analyses. Specifically, the president’s actions are likely to increase Gross Domestic Product (GDP), reduce the federal deficit, and raise both tax revenue and average wages—all without any appreciable impact on native-born employment.

To what extent could the president’s executive action on immigration impact the economy? First, executive action would, over the next 10 years, increase GDP by at least 0.4 percent ($90 billion) or as much as 0.9 percent ($210 billion), according to the White House Council of Economic Advisers (CEA). The CEA also estimates that the full package of executive actions would lead to a decrease in federal deficits of somewhere between $25 billion and $60 billion over the next 10 years. Second, executive action would expand the country’s tax base by billions of dollars over the next 10 years, according to the CEA. Likewise, the Center for American Progress found that individual states would also experience tax gains as unauthorized immigrants begin to work legally and file taxes on slightly higher wages. And finally, the CEA estimates that executive action would raise average wages for U.S.-born workers by 0.3 percent, or $170 in today’s dollars, over the next 10 years.

The CEA also anticipates that the executive actions would have no impact on employment of U.S.-born workers. As the CEA explains, “the additional demand associated with the expanded economy would offset the additional supply of workers.” In other words, it is unlikely that the changes announced by President Obama would cause jobs to be taken away from native-born workers. Empirical research has demonstrated repeatedly that there is no correlation between immigration and unemployment. Immigrants—including the unauthorized—create jobs through their purchasing power and entrepreneurship, buying goods and services from U.S. businesses and creating their own businesses, both of which sustain U.S. jobs. The presence of new immigrant workers and consumers in an area also spurs the expansion of businesses, which also creates new jobs.

“We are a nation of immigrants,” Tacoma Mayor Marilyn Strickland noted. “The longer we wait for comprehensive immigration reform, the longer we wait to realize our full economic and social potential as a nation.” Immigration executive action’s economic potential represents only the beginning of how immigration reform can fully benefit the economy. As research shows, congressional legislative action on comprehensive immigration reform would yield even greater economic benefits nationally and locally than the programs created through executive action. But for now, “absent congressional action,” Secretary of Commerce Penny Pritzker said that the administration’s actions “will address some of the deficiencies in our immigration system while at the same time helping grow our economy.”

“True, we can only realize the full benefits of immigration reform with a comprehensive bill passed by Congress,” said Jason Furman, chairman of the CEA. “But the administrative steps that the President has announced…represent a good start and a meaningful boost to the economy.” Nevertheless, Furman notes that “ultimately, these benefits are just a taste of the significantly greater benefits we would get from bipartisan legislation that brings our immigration system fully into the 21st century.”

Photo by Simon Cunningham.

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