The Pros and Cons of Immigration Reform

How it affects job growth and wages

Reviewed by Michael J BoyleReviewed by Michael J Boyle

Immigration reform can be contentious for many Americans. The Trump administration reduced the number of undocumented immigrants in the U.S.—a group of roughly 10.5 million people in 2017, according to the Pew Research Center. While he cited an array of reasons for this action, from human trafficking concerns to abstract population caps—“our country is full,” he announced in April 2019—his argument was always largely economic.

Senators Elizabeth Warren, Bernie Sanders, Kamala Harris, and Cory Booker all advocated downgrading illegal border crossings to a civil offense. Even President Joe Biden played up their positive contributions to society.

So who’s right and who’s wrong when it comes to undocumented workers and the economy? We’ll look beyond the heated rhetoric and explain what researchers from both sides of the political spectrum have to say. 

Key Takeaways

• Undocumented workers often take low-skilled jobs and are more willing to work nights and weekends.
• Increased immigration has a very small positive impact on the wages of native-born Americans on a long-term basis.
• First-generation immigrants cost the government more per capita, but their children cost less than native-born Americans.

Impact on the Job Market

Trump’s hard line on undocumented immigrants was wrapped in the assumption that those immigrants take jobs from American citizens. On the surface, this appears to be a logical conclusion for a cohort that represents nearly 11 million people. But, advocates say this argument ignores the dynamic nature of the job market.

Contributions of Immigrants to the U.S. Economy

Immigrants aren’t just workers—they’re also consumers who buy goods and services. Some researchers believe mass deportation would shrink overall economic output. Bipartisan research and advocacy organization New American Economy estimated that this would result in a $1.6 trillion reduction in gross domestic product (GDP).

What’s more, undocumented workers often take low-skilled jobs in which American citizens have little interest, including those in labor-intensive fields like agriculture and forestry. Another NAE report found that low-skilled immigrants were 18% more likely to work unusual hours than their U.S.-born counterparts.

Because birthrates are dropping in the U.S.—the average American woman in 2022 was having 1.7 children, according to The World Bank—some experts say immigrants can help fill a hole in the labor market that will ultimately boost the economy.

“The future growth prospects of the U.S. economy are severely constrained by a lack of working-age population growth,” the Conference Board’s non-partisan Committee for Economic Development wrote in a 2018 policy brief.

Because roughly half of the immigrants from Latin America are between 18 and 35, the U.S. doesn’t have to shoulder the cost of their schooling. Bringing in even 100,000 of these immigrants annually would represent an injection of human capital that would otherwise cost us $47 billion in education and childcare costs, says the CED.

Note

Immigration reform helped ramp up deportations, secured funds for a longer border wall, and suspended the entry of most new immigrants because of COVID-19.

Will Wages Drop?

One of the claims you’ll often hear amnesty critics say is that allowing more workers to compete for American jobs will suppress wages for existing employees.

Wages Increase and Decrease

The basic rules of supply and demand would seem to support that claim. When the number of workers goes up, the amount companies have to pay presumably goes down.

However, several studies have shown that the impact on wages among low-skilled workers is relatively modest. Most put it at less than 1%. Researchers Gianmarco Ottaviano and Giovanni Peri found that in the long run, increased immigration had a very small positive impact, 0.6%, on the wages of native-born Americans.

Even if pay for these jobs were to decrease, that might not be the case in every field. Supporters of immigration reform say that the availability of more workers is a boon for businesses, which benefit from lower production costs.

Demand for Skilled Workers Can Grow

This theoretically strengthens demand for high-skill jobs that don’t face as much competition from undocumented workers, such as managers and accountants. Therefore, reform could presumably boost wages, at least marginally, for jobs that require a college degree.

Important

According to one analysis, the fiscal impacts of immigrants are generally positive at the federal level when projected over a future time horizon of 75 years.

Effect on the Treasury

One of the most contentious concerns is over the effect that illegal immigration has on government coffers. A path to citizenship for workers who are already in the country means many of them would contribute federal and state income taxes for the first time.

But they would also have access to a range of benefits to which they’re currently locked out—education at public schools, Medicaid, nutrition assistance, and the earned income tax credit (EITC).

Financial Cost vs. Contribution of Immigrants

In 2017, researchers Robert Rector and Jamie Bryan Hall of the right-leaning Heritage Foundation analyzed the Reforming American Immigration for Strong Employment (RAISE) Act, which would limit the number of visas given to low-skilled workers.

They suggested that immigrants without a high school degree—the typical level from Latin America is a 10th-grade education—receive an average of $4 in government benefits for every $1 they contribute in taxes. Rector and Hall concluded that the 4.7 million low-skilled immigrants estimated to enter the U.S. in the next decade would be a net drag on the Treasury of $1.9 trillion.

But a 2016 National Academies of Sciences, Engineering, and Medicine report paints a very different picture. Using data from 1994 to 2013, the authors agreed that first-generation immigrants cost the government more on a per-capita basis than citizens born in the U.S., based on their lower earning power.

However, the NAS found that their children are less of a drag on federal and local budgets than their peers. That’s because second-generation immigrants exhibited “slightly higher educational achievement, as well as their higher wages and salaries.” As a result, they pay more in taxes.

Adding to Social Security

There’s also some evidence that immigrants help bolster Social Security, which retiring Baby Boomers are pressuring with withdrawals. Back in 2013, chief actuary Stephen Goss of the Social Security Administration and other researchers estimated that roughly 1.8 million immigrants used a Social Security card that did not match their name to gain employment in 2010.

The result? These individuals tended to pay far more into the system than they pulled out in benefits. At the time, Goss asserted that undocumented residents kicked $13 billion into Social Security through payroll taxes, but only gained $1 billion in benefit payments. In 2022, they reportedly paid $25.7  billion in Social Security taxes.

What’s a Good Immigration Policy?

Broadly speaking, a good immigration policy could be one that secures U.S. borders yet welcomes immigrants with an achievable path to legal residency and citizenship. It could support the nation’s security and prosperity while strengthening its future by admitting people from around the world.

How Many Immigrants Entered the U.S. Illegally in 2022?

According to U.S. Customs and Border Protection, there were 2.2 million illegal border crossings, not including those at official checkpoints, just at the U.S.-Mexico border.

Do Undocumented Immigrants Hurt the U.S.?

This can be a primary point of contention among U.S. politicians. Some argue that undocumented immigrants are a severe drain on U.S. resources and threaten the financial lives of Americans. Others demonstrate that they often take lower paying jobs that are going unfilled, contribute to the economy as consumers and taxpayers, and support social welfare programs. Their children tend to go on to contribute to the U.S. economy more substantially.

The Bottom Line

Former President Trump energized his Republican base with his get-tough approach to immigration, arguing that unlawful residents are an unmitigated drain on the American economy.

However, those who cross into the U.S. without documentation also lower costs for their employers and represent a sizable consumer group. Indeed, some research indicates that they create more job opportunities than they take. While some studies have shown that illegal immigration suppresses wages in low-skill segments of the workforce, the effect over time, if any, appears to be minimal.

And while first-generation immigrants may cost the government more than native-born workers because of their lower incomes, many pay far more into Social Security than they receive. They also add younger workers to the nation’s aging labor force.

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