New Report: The Economic and Fiscal Consequences of Immigration
President-Elect Trump’s controversial immigration proposals have without a doubt caused many to question the future of immigration policy and the effect it will have on our nation’s immigrant community. Among those who work closely with immigrants, such as in our immigration law practice, we know that immigration has great power and helps to propel our economy. That’s why we believe it was very timely that the National Academies of Sciences, Engineering, and Medicine (NAS) published its recent 2016 report, and we share here some of its findings on our blog, as it confirms the positive effects of immigration.
Specifically, the report provides a comprehensive assessment of the impact of immigration on economic and fiscal outcomes for the U.S. Through extensive data, the report confirms that immigrants make valuable contributions to economic growth, innovation, and entrepreneurship in the U.S. and are essentially integral to the nation’s economic growth. At the end of this post, there is a link to the full report (the site will request an email in exchange for a free PDF download of the full report). We have below summarized some of the major findings of the report.
Impact on Employment, Wages, and the Economy
Effects on wages. When measured over a period of 10 years or more, the impact of immigration on the wages of native workers overall is very small. To the extent that negative wage effects are found, prior immigrants – who are often the closest substitutes for new immigrants – are most likely to experience them, followed by native-born high-school dropouts, who share job qualifications similar to the large share of low-skilled workers among immigrants to the United States.
Role of immigrants in consumer demand. The contributions of immigrants to the labor force reduce the prices of some goods and services, which benefits consumers in a range of sectors including child care, food preparation, house cleaning and repair, and construction. Moreover, new arrivals and their descendants are a source of demand in key sectors such as housing, which benefits residential real estate markets.
Effects on employment levels. There is little evidence that immigration significantly affects the overall employment levels of native-born workers. Any negative effects were small and were experienced primarily by other recent immigrants and those who did not graduate high school.
Impacts on economic growth. Immigration is integral to the nation’s economic growth. The inflow of labor supply has helped the United States avoid the problems facing other economies that have stagnated as a result of unfavorable demographics, particularly the effects of an aging workforce and reduced consumption by older residents. In addition, the infusion of human capital by high-skilled immigrants has boosted the nation’s capacity for innovation, entrepreneurship, and technological change. Research suggests, for example, that immigrants raise patenting per capita, which ultimately contributes to productivity growth. The prospects for long-run economic growth in the United States would be considerably dimmed without the contributions of high-skilled immigrants.
Impact on Federal, State, and Local Budgets
All population subgroups contribute to government finances by paying taxes and add to expenditures by consuming public services—but the levels differ. On average, individuals in the first generation group of immigrants are more costly to governments, mainly at the state and local levels, than are the native-born generations; however, immigrants’ children—the second generation—are among the strongest economic and fiscal contributors in the U.S. population overall, contributing more in taxes than either their parents or the rest of the native born population.
This outcome is primarily driven by two factors: first, the lower average education level of the first generation translated into lower incomes and, in turn, lower tax payments; second, higher per capita costs (notably those for public education) were generated at the state and local levels because the first generation had, on average, more dependent children than other adults in the population. Today’s immigrants have more education than earlier immigrants, and as a result, are more positive contributors to government finances. If today’s immigrants had the same lower educational distribution as immigrants two decades ago, their fiscal impact, would be much less positive. Thus, the total net fiscal impact of immigrants across all levels of government has become more positive over time.
For more information, a copy of the full report can be downloaded at (note that the site will request an email in exchange for a free PDF download of the full report):