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Immigration Benefits the Economy

February 16, 2013

Members of Congress are in recess next week, when they will return to their districts and hold discussions and town halls with their constituents. In 2009, the issue of health care reform was at the forefront. Today, many town halls are likely to focus on issues surrounding immigration reform.

Facts are important in any policy debate, but more so in the area of immigration, where misperceptions and misstatements abound. With respect to immigration reform, it is important to note that economists and researchers agree: Immigration Benefits the Economy.

In an influential paper, Francesc Ortega from Queens College CUNY and Giovanni Peri from the University of California, Davis and NBER explain The Effect of Trade and Migration on Income.

Our results show that openness to immigrants, instrumented by its geography-based gravity predictors in a cross-country regression of 147 countries, has a significantly positive and large effect on income per person in year 2000.  . . .

Overall our findings strongly suggest that openness to foreigners plays an important role in determining the long-run economic success of countries and is possibly even more important than openness to trade. (Emphasis added.)

A helpful analysis by summarizes the evidence against the argument that immigrants take jobs from U.S. workers.

Study after study has shown that immigrants grow the economy, expanding demand for goods and services that the foreign-born workers and their families consume, and thereby creating jobs. There is even broad agreement among economists that while immigrants may push down wages for some, the overall effect is to increase average wages for American-born workers.

Adam Davidson of NPR’s Planet Money and a blog on the New York Times, explains in a recent post that there is a net benefit to the economy whether workers are documented or undocumented.

There are many ways to debate immigration, but when it comes to economics, there isn’t much of a debate at all. Nearly all economists, of all political persuasions, agree that immigrants — those here legally or not — benefit the overall economy. “That is not controversial,” Heidi Shierholz, an economist at the Economic Policy Institute, told me. Shierholz also said that “there is a consensus that, on average, the incomes of families in this country are increased by a small, but clearly positive amount, because of immigration.”

The benefit multiplies over the long haul. As the baby boomers retire, the post-boom generation’s burden to finance their retirement is greatly alleviated by undocumented immigrants. Stephen Goss, chief actuary for the Social Security Administration, told me that undocumented workers contribute about $15 billion a year to Social Security through payroll taxes. They only take out $1 billion (very few undocumented workers are eligible to receive benefits). Over the years, undocumented workers have contributed up to $300 billion, or nearly 10 percent, of the $2.7 trillion Social Security Trust Fund.



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