Most reasonable observers agree that there are serious structural impediments in the U.S. economy to reviving the fortunes of the middle class, working class and the poor, and thus structural reforms - bigger policy ideas - are needed to reverse this trend.
But sometimes an answer to a complicated economic problem is more simple than assumed. A perfect example of this is "immigration reform." Immigration reform is often discussed as a matter of fairness to immigrants, or national identity, or as border security/law enforcement issues, or as a threat to the jobs/wages of U.S. citizens. But, the economic benefits of immigration reform - and the economic harm of not implementing reform - are so great that the proper question is: how much is the U.S. economically harming itself by refusing to fix its broken immigration system? The answer, it turns out, is quite a lot . . . and so much so that immigration reform properly should be debated also as an economic imperative.
Background: many sources place the number of undocumented aliens living in the U.S. as between 11 to 13 million, and this population is disproportionately young and employed. In other words, any discussion about undocumented aliens is a discussion about a significant proportion of the U.S. workforce.
Viewed as "illegal" and non-citizens, this sizable U.S. workforce/population lives "in the shadows," vulnerable, exploited and often (but not always) separate from obligations (e.g., taxes), protections (e.g., disability, worker safety rules) and benefits (e.g., social security, medicare, Obamacare). Simply, current immigration policy creates a true (and enormous) "shadow economy" - unconnected to most public policy give-and-take (much less suffrage) - with the narrow benefits flowing primarily to the "employer class."
Despite the anti-immigration force's appeals to fear and nativism, common sense tells us that consigning millions of U.S. workers (that's what we are talking about) to second-class, exploited status can't be good for the economy as a whole and for the working population specifically. Indeed, Republicans' success at blocking immigration reform has succeeded primarily in harming the U.S.'s economic interests overall. Stated succinctly:
In evaluating the pros and cons of a legalization program, it is important to keep in mind that legalization is not only a humanitarian act; it is also a form of economic stimulus. The example of the 1986 Immigration Reform and Control Act (IRCA) demonstrates that workers with legal status earn more than workers who are unauthorized. And these extra earnings generate more tax revenue for federal, state, and local governments, as well as more consumer spending which sustains more jobs in U.S. businesses. Recent studies suggest that the economic value of a new legalization program would be substantial, amounting to tens of billions of dollars in added income, billions of dollars in additional tax revenue, and hundreds of thousands of new jobs for native-born and immigrant workers alike. In short, a new legalization program for unauthorized immigrants would benefit everyone by growing the economy and expanding the labor market.
How economically beneficial would immigration reform be? Below are four important examples:
1. Social Security: Social Security's financial stability, crudely stated, is predicated on the current work force supporting the retired workforce. The present threat, if any, to Social Security is today's declining (legal) workforce and the temporary demographic challenge of the aging Baby Boom generation. Obviously, Social Security is financially strengthened if millions more young workers/aliens participate and are not excluded from the SS pool:
Obama’s executive order would allow newly legalized workers to eventually collect benefits when they reach retirement age. But that’s a long way off for many of them, and any potential loss would be more than offset by the millions of young workers who will be brought into the system to pay taxes for three or four decades before they can collect benefits.
“The biggest problem we have with social security is there are fewer Americans to pay into the system to support people who are currently retired or about to retire,” says Ornstein, “so the more people working and paying into the system is better for everybody.”
Indeed, the
Center for American Progress concluded that:
As the immigration debate moves forward, policymakers should keep in mind the economic benefits of providing an earned pathway toward legal status and citizenship for undocumented immigrants. If undocumented immigrants acquire this status, they will pay hundreds of billions of dollars more in Social Security taxes than they will receive in benefits over the next 36 years. These large net contributions will fund the retirement benefits of millions of Americans and a sizeable share of retirees, decades before the majority of undocumented immigrants ever collect a penny in benefits. Moreover, these reforms would improve the financial stability of the Social Security system during the very period in which it is expected to be the most strained.
At bottom, Republican opposition to immigration reform - and the tax revenue that such citizenship brings in - can be understood (again) as devotion to their
destructive "Starve the Beast" ideology. Given the Republican goal to undermine or privatize Social Security, the most effective thing they can do is to diminish the crucial worker base. Republican opposition to immigration reform cannot be properly understood if it is divorced from their opposition to Social Security.
2. Economic Growth. Immigration reform also would provide a notably strong boost to economic growth. "The Congressional Budget Office (CBO) estimated that enacting the Senate immigration reform bill [would] increase real GDP relative to current law projections by 3.3 percent in 2023 and 5.4 percent in 2033 – an increase of roughly $700 billion in 2023 and $1.4 trillion in 2033 in today’s dollars." Overall, the Bipartisan Policy Center found that:
“Effective immigration reform can be a powerful instrument of economic revitalization. By increasing the overall population and particularly the number of working-age labor force participants, reform can help expand the economy, contribute to higher overall average wages, generate more consumer spending, and spur new demand for residential housing construction. By supporting stronger economic growth, immigration reform can also reduce the federal budget deficit substantially.”
3. Taxes/Deficit: Contrary to the myth of swelling the welfare rolls, "[t]he CBO found that
enacting Senate immigration reform bill [would] reduce the federal budget deficit by nearly $850 billion over the next 20 years." In addition,
as the Washington Post reported the consensus view:
Perhaps that was fresh on the minds of the policymakers Wednesday, who called immigration reform a means to reduce the more than $17 trillion national debt. . . .
Economist Glenn Hubbard, dean of the Columbia Business School and Mitt Romney’s former adviser, helped kick off the day’s trend. After moderator Lori Montgomery of the Washington Post asked -- “Is there anything we can do to make things better on any front?” -- Hubbard confidently responded: “Immigration reform.”
The fix, he reasons, would have a positive impact on population growth, the labor force growth and the housing market. And, he added, it would have a positive impact on the federal budget.
4. Employment/Inequality: The BBC reports that "[a] study by economists at UCLA estimates that [President Obama's immigration] proposal will generate, in the short term, $6.8bn in labour income, create around 160,000 jobs and create $2.5bn in tax revenue."
Even the Cato Institute has admitted that the evidence shows that "comprehensive reform would raise the “wage floor” for the entire U.S. economy, to the benefit of both immigrant and native-born workers." In particular, the Cato Institute argued:
The historical experience of legalization under the 1986 Immigration Reform and Control Act indicates that comprehensive immigration reform would raise wages, increase consumption, create jobs, and generate additional tax revenue. Even though IRCA was implemented during a period that included a recession and high unemployment (1990–91), it still helped raise wages and spurred increases in educational, home, and small business investments by newly legalized immigrants. Taking the experience of IRCA as a starting point, we estimate that comprehensive immigration reform would yield at least $1.5 trillion in added U.S. gross domestic prod- uct (GDP) over 10 years.1 This is a compelling economic reason to move away from the current “vicious cycle” where enforcement-only policies perpetuate unauthorized migration and exert downward pressure on already low wages, and toward a “virtuous cycle” of worker empowerment in which legal status and labor rights exert upward pressure on wages.
The above discussion of economic benefits is not remotely exhaustive. And none of this should be a surprise. A policy of criminalizing and/or marginalizing a significant portion of the workforce cannot be anything other than destructive to the larger society. Properly understood, immigration reform is also about tackling income inequality for all.
Democrats have done a decent job of making the moral argument for immigration reform. But, heading into the next national elections, Democrats also must do a better job of making the economic arguments in favor of immigration reform. Republicans have this immigration argument wrong on all counts. Immigration reform is not only the right policy, but stressing the economic benefits of immigration reform (and economic damage from current policies) properly frames the argument on the right terms - - i.e., the urgent need for immigration reform and the broad benefits to most all Americans from such reform.