Immigration Reform Would Bring Massive Economic Benefits, Study Says

Comprehensive immigration reform would add $1.5 trillion to U.S. gross domestic product over the next ten years, if enacted, according to a study released recently. It also would increase wages both for native-born and newly-legalized immigrant workers, according to the study by UCLA professor Raúl Hinojosa-Ojeda. The study was published by two Washington think tanks, the Center for American Progress and the Immigration Policy Center. [See: Raising the Floor for American Workers: The Economic Benefits of Comprehensive Immigration Reform (PDF 778KB].

The study examined the economic impact of three potential solutions to the problem of illegal immigration in the United States: (1) comprehensive immigration reform, including a path to legal status for illegal immigrants and flexible limits on future immigration that respond to changes in labor-market demand; (2) a temporary worker program without a path to legalization or flexible limits on immigration; and 3) outright deportation, en masse, of illegal immigrants in the United States.

Of the three options, mass deportation was the least attractive, resulting in an estimated $2.6 trillion in lost GDP over ten years, in addition to the staggering costs of finding and deporting the estimated 12 million illegal immigrants in the United States. According to the study, this approach would benefit low-skilled native-born workers, who would get higher wages, albeit with decreased wages among higher-skilled natives, and massive job loss. The second-best option, according to Professor Hinojosa-Ojeda, a temporary worker program, would increase GDP by an estimated $792 billion over ten years, but decrease wages for both native-born and newly-legalized immigrant workers.

By contrast, comprehensive immigration reform would add approximately $1.2 billion in new consumption over ten years, along with $256 billion in additional investment, according to Professor Hinojosa-Ojeda. Under this scenario, wages would rise for BOTH native-born and newly-legalized immigrant workers, creating what Hinojosa-Ojeda calls a “wage floor” for all workers, “particularly in industries where large numbers of easily exploited, low-wage, unauthorized immigrants currently work.”

The path to legalization would be anything but easy, under Professor Hinojosa-Ojeda’s scenario, which assumes that illegal immigrants would be required to register with the government, pay an application fee and a fine, as well as back taxes, with legal status and eventual citizenship available only if they pass a criminal background check. All applicants would be required to learn English, and future immigration quotas would be strictly tied to labor market demands.

The study was based on historical data from the legalization efforts that followed enactment of the 1986 Immigration Reform and Control Act, or IRCA. The study notes that, although IRCA was implemented during a recession with high unemployment, it nonetheless brought about higher wages and increased investments in homes, small businesses, and education by newly-legalized immigrants. A similar pattern would be expected to follow enactment of a comprehensive immigration reform bill, according to Professor Hinojosa-Ojeda.

The report was sharply critical of the “enforcement only” approach that has been the cornerstone of U.S. efforts to curb illegal immigration. According to the study, this approach is costly, ineffective and counterproductive; costly and ineffective, because it means fielding an enormous – and growing – force of border patrol agents, without making a significant impact on the number of illegal immigrants coming across the border. This is counterproductive, the study concludes, because the southwestern U.S. border has become far more lethal, as illegal immigrants seek ever more remote crossing points in unforgiving desert and mountain terrain. Stepped-up border enforcement has also created a thriving market for people-smugglers. Perversely, a tighter border has also induced more illegal immigrants to stay in the United States, instead of coming and going across the border, as was previously a common practice.

Perhaps the greatest unintended consequence of the “enforcement-only” approach is the impact on wages. The UCLA study found that “[t]he enhanced enforcement regime moves unauthorized workers further underground, lowering their pay, and ironically, creating a greater demand for unauthorized workers.” This results in a vicious circle: wages enter a downward spiral as more and more industries find it necessary to hire illegal workers. This is a lose-lose proposition. It would be preferable, by far, to bring illegal immigrants in from the shadows, finding acceptable timelines to provide all the protections that every other worker in the United States has. This would destroy the incentive, once and for all, for companies to try to cut costs by cutting corners.