Weighing immigrants’ economic power

February 1, 2013

“Now is the time to [reform immigration laws] so we can strengthen our economy.” So said President Barack Obama on Tuesday as he challenged Congress to give 11 million illegal residents of the United States a road map to citizenship.

“When you legalize those who are in the country illegally, it costs taxpayers millions of dollars, costs American workers thousands of jobs.” So said Representative Lamar Smith (R-Texas), senior member of the Judiciary Committee, earlier this week.

These statements contradict one another. One must be wrong.

Actually, both are.

There are powerful reasons to change the nation’s immigration rules, but economic necessity is not one of them. Yes, immigrants make a positive economic impact.  But little of the benefit, according to careful research, spills over to non-immigrant workers. The overall economy barely notices. Besides, there’s no evidence to suggest that illegal immigrants’ effect on the economy differs from that of legal immigrants.

Translation: The compelling reasons to reform our immigration rules involve politics, not economics. Therefore, Congress can amend immigration laws to fit our values and ambitions. It need not twist the rules out of fear of economic catastrophe.

Many of us picture immigrant workers in one of two ways ‑ both incorrect. Story No. 1: Illegal immigrants steal jobs from ordinary American workers. Inference: Let’s cut their numbers. Story No. 2: Immigrants – especially illegal immigrants ‑ work at jobs (agriculture, food preparation, construction, cleaning services) under conditions that American workers simply won’t accept. Inference: Let’s integrate illegal immigrants into the economic mainstream economy as quickly as possible.

Enough storytelling. What’s the evidence?

Story No. 1: Immigrants don’t steal jobs from anyone. They work hard, and they produce (everything from fruits and vegetables to engineering and physician services). That increases the output of goods and services, which puts downward pressure on consumer prices. We all reap the benefits. In return for their work, immigrants earn wages, which they spend on goods and services and that increased spending, let’s note, generates jobs for workers across the economy. Question: Do immigrants get paid about as much as the value of the products they produce, or are they underpaid – paid less than the value of the additional goods and services they produce? If underpaid, then immigrants are generating a surplus of output that non-immigrants get to consume.

The calculations can get complicated. And economists, no surprise, do not entirely agree. But the bulk of high-quality research points to the conclusion that the impact of immigrants is small, probably less than 1 percent of the nation’s total economic output. To borrow a term from higher mathematics, the impact is bubkes.

Story No. 2: Do immigrants play an irreplaceable role by taking jobs that Americans workers won’t go near? True, California growers don’t find an army of U.S.-born workers flocking to their fields to pick fruit. Nor do suburban homeowners find an army of U.S.-born workers flocking to their homes to clean bathrooms. Don’t fret. Stanch the flow of low-skilled immigrants and the laws of demand and supply will kick in, driving up the wages for these undesirable jobs until they become, yes, desirable.

That brings us to an important matter of continuing dispute. Even if immigrants don’t much affect the overall size of the U.S. economic pie, might the influx of low-skilled immigrants (mostly from south of the border) drive down the wages of one segment of the U.S.-born workforce, low-skilled workers, those without a high school degree?

Here, there is disagreement among the experts, though the differences are narrow. George Borjas of Harvard and others say low-paid Americans take a small to modest hit – perhaps three or so percentage points of their income. David Card, of the University of California, Berkeley, along with others, finds no evidence of such a hit.

Something not in dispute is the contribution immigrants make to small-business creation. Obama points to the estimate that a quarter of new small business owners are immigrants. True, immigrants are 30 percent more likely to create businesses than are U.S.-born citizens. But it’s hard to know what to make of such facts.  Though small businesses create hundreds of thousands of jobs each year, they, by way of bankruptcy or other closing, also account for the loss of a comparable number of jobs each year. Small business holds no special economic virtue.

But if the economics of immigration is anodyne, the politics is not. Proponents of putting immigrants on a faster track to citizenship accuse political opponents of cruelly leaving 11 million residents to twist slowly in illegal winds. Opponents of fast-tracking citizenship for illegal residents say we would commit an atrocity of a different kind if we put illegal immigrants on a faster track to citizenship than those who have followed the law, placing themselves on a wait list that will take decades, if not their lifetime, to clear.

Beyond these profound matters of fair play, there’s a cruder politics at stake. Senator John McCain (R-Ariz.) conceded last weekend that his party had better embrace immigration reform if it is to have any chance of attracting Latino voters in the next presidential election.

Is America better off thanks to immigrants with diverse talents? Of course. Is America better off because some immigrants come here with high scientific training or other rare skills?  Of course.

But these issues involve fine tuning.  Immigration policy is best chosen to reflect our political values.  How do we want to treat the “huddled masses yearning to breathe free?” How do we want to treat those who entered illegally but have lived exemplary lives thereafter? And so on.

The important point is that we can make these choices secure in the knowledge that the U.S. economy will do just fine whatever our decisions.


PHOTO: President Barack Obama arrives on stage to deliver remarks on immigration reform in Las Vegas, January 29, 2013. REUTERS/Jason Reed


No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/