Sunday, January 17, 2010

The Economic Benefits of Comprehensive Immigration Reform

Raising the Floor for American Workers
The Economic Benefits of Comprehensive Immigration Reform
by Dr. Raúl Hinojosa-Ojeda January 2010

To see C-SPAN discussion, see here.


Executive summary
The U.S. government has attempted for more than two decades to put a stop to unauthorized
immigration from and through Mexico by implementing “enforcement-only” measures
along the U.S.-Mexico border and at work sites across the country. These measures
have failed to end unauthorized immigration and placed downward pressure on wages in a
broad swath of industries.

Comprehensive immigration reform that legalizes currently unauthorized immigrants and
creates flexible legal limits on future immigration in the context of full labor rights would
help American workers and the U.S. economy. Unlike the current enforcement-only strategy,
comprehensive reform would raise the “wage floor” for the entire U.S. economy—to
the benefit of both immigrant and native-born workers.

The historical experience of legalization under the 1986 Immigration Reform and Control
Act, or IRCA indicates that comprehensive immigration reform would raise wages,
increase consumption, create jobs, and generate additional tax revenue. Even though
IRCA was implemented during an economic recession characterized by high unemployment,
it still helped raise wages and spurred increases in educational, home, and smallbusiness
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 cumulative U.S. gross domestic product over 10 years. 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.

This report uses a computable general equilibrium model to estimate the economic ramifications
of three different scenarios: 1) comprehensive immigration reform that creates a
pathway to legal status for unauthorized immigrants in the United States and establishes
flexible limits on permanent and temporary immigration that respond to changes in
U.S. labor demand in the future; 2) a program for temporary workers only that does not
include a pathway to permanent status or more flexible legal limits on permanent immigration
in the future; and 3) mass deportation to expel all unauthorized immigrants and
effectively seal the U.S.-Mexico border. The model shows that comprehensive immigration
reform produces the greatest economic benefits:

* Comprehensive immigration reform generates an increase in U.S. GDP of at least 0.84
percent. Summed over 10 years, this amounts to a cumulative $1.5 trillion in additional
GDP. It also boosts wages for both native-born and newly legalized immigrant workers.

• The temporary worker program generates an increase in U.S. GDP of 0.44 percent. This
amounts to $792 billion of cumulative GDP over 10 years. Moreover, wages decline for
both native-born and newly legalized immigrant workers.

• Mass deportation reduces U.S. GDP by 1.46 percent. This amounts to $2.6 trillion in
cumulative lost GDP over 10 years, not including the actual cost of deportation.2 Wages
would rise for less-skilled native-born workers, but would diminish for higher-skilled
natives, and would lead to widespread job loss.

Legalizing the nation’s unauthorized workers and putting new legal limits on immigration
that rise and fall with U.S. labor demand would help lay the foundation for robust, just,
and widespread economic growth.

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