Immigration Economics, By the Numbers



Economics of Immigration

The immigration debate often turns into a moralistic argument, with those on the left arguing for the expansion of amnesty and increased immigration quotas based on an idea of the right of movement and an obligation to provide sanctuary. Similarly, the argument from the right invokes the necessity of legal order and philosophical ideas of native culture in conflict with outside influence. Both of these tracts argue for positions based on ethical and theoretical concerns, rather than from a cost-benefit analysis of what is actually being contributed to the American equation by immigration. In this short symposia piece, I’d like us to look at objective facts, what economists actually know about the effect of immigration in three key areas – high-skilled labor, benefits of illegal immigrants specifically, and benefits to native-born workers broadly – to understand better the fiscal argument for liberal immigration policy. A disclaimer: this piece shouldn’t be taken to suggest that debates that look beyond the economics of the situation are not important. They are, and it would be a gross misunderstanding of the role of a politician to envision politicians as accountants, solely concerned with adding up pluses and minuses on a ledger. Rather, this contribution to our symposium is meant to step back from the heady debates about polity and identity that, though crucial to this broader intellectual endeavor, can often become all-encompassing. Philosophy and theory matters, but it useful to have some framework for understanding what we mean when we talk about cost and benefit.


High-Skilled Labor

Driven in part by former White House Chief Strategist Steve Bannon, the Trump administration has often spoken of limiting the H1B visa program for high-skilled workers. But this restrictionist plan denies the plain facts of the situation in Silicon Valley and throughout the American economy broadly – the United States has an annual deficit of 110,000 technology-related jobs. Technology as an industry makes up 7.1% of the national economy, and is a massive driver of growth. In fact, 37% of this year’s stock gains can be attributed solely to Apple, Facebook, Amazon, Microsoft and Alphabet. The current cap of 85,000 immigrants total is in itself insufficient to fill the demands of our economy. We can certainly retool the H1B program, and more importantly, we can make an earnest effort to begin training native-born workers for technology positions so that we aren’t reliant on importing foreign labor. But the status quo, as of now, is clear: American growth is closely tied to the recruitment of non-Americans to fill positions crucial to our fastest-growing economic sector. Closing the door to these cross-border hires will cripple a vital sector of our economy.


Specific Benefits of Illegal Immigration

Keeping the eleven million illegal aliens living in this country under illegal status doesn’t really make sense, looking solely at the economics. There are 8.4 million illegal immigrants employed in the United States – that number constitutes 5.2% of our total workforce. Estimates place the share of illegal workers in agriculture and animal husbandry somewhere between 50% and 70%. This isn’t an issue of foreign-born workers displacing Americans; the majority of jobs in some fields of employment simply could not be filled any other way. Trying to expel these workers would leave to massive shortages of agricultural products in the short-term, and immense inflation in the long-term. We can add to this the benefits of taxation of illegal immigrants – contrary to popular belief, the Congressional Budget Office has repeatedly concluded that the revenues made by taxes collected from illegal immigrants outstrip the cost of services rendered to these same illegal immigrants. The benefits of having this taxable body of people in the country manifest in concrete ways. One estimate from the Social Security Administration attributes a full 10% of the Social Security fund to contributions paid by illegal immigrants.

Illegal immigrant labor is key to our economy and to our budget. As such, the dollars and cents suggest that amnesty programs and reduced border control have positive economic and fiscal effects.

Broad Benefits to Native-Born Workers

So the old argument that immigrants flood across the borders to take our jobs is largely false. But even placing that argument aside, it would seem that immigration is ultimately a net-positive for American workers broadly. A 2010 study by Gianmarco I.P. Ottaviano, Giovanni Peri, and Greg C. Wright found significant evidence that, because immigration reorients the American economy away from offshoring, the resulting cost-savings actually increase the employment rate of native-born workers. There’s a simpler explanation here as well – available labor at the cost-level offered by most immigrants will often incentivize businesses to grow, creating new jobs rather than replacing the occupants of existing jobs.

The broader argument of course is one of growth – as a rising tide raises all ships, so does a growing economy benefit all Americans. Half of all of growth since the 1950’s is attributable to the science and technology industries; it’s obvious how the above-mentioned H1Bs are aiding the economic expansion. Further, immigrants tend to be working-age and thus cost little to expensive social services such as Medicaid.  Meanwhile they are assets to the economy, earning and selling. The best way to capitalize on their productivity is through legalization – as illegal immigrants are legalized, their earnings increase as they gain protections of law. At least one estimate places the economic benefit of amnesty to the economy at a full half-trillion dollars. Ultimately, there are few economic arguments against immigration, and in a few sectors, limiting or erasing it could be catastrophic. This information should not dictate our immigration debate entirely, but neither can it be ignored.

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