Immigration Reform 2013: Economic Effects Will Make or Break This Deal

As much of the country returns to relative normalcy after the events in Boston that have shaped the news for the past week, it is time to turn our attention to some of the important legislation that is awaiting action in Congress. Perhaps the one with the greatest potential impact on American life and the economy is comprehensive immigration reform. What will help determine the success or failure of this reform is the effect it will have on America’s economy. There are differing views on the impact of reform, and their differences are palpable.

On one hand, both the White House and the Center for American Progress argue that good, comprehensive immigration reform will have a net positive effect on the economy. One of the main talking points is that immigrants who gain a legally recognized status (preferably citizenship, but residency is also a possibility) will lead directly to an increase in American Gross Domestic Product. Other potential positives of immigration reform include increased wages for workers across the spectrum, and increased demand for goods and services, therefore leading to more jobs.

The logic behind this line of thinking is as follows: Formerly illegal immigrants who gain residency or citizenship will be able to demand higher wages in accordance with the law. As a result, they will be able to buy more goods and services in the open market with the higher amounts of money they will have their disposal. The increased demand will necessitate increased supply, which someone has to produce. The need for production workers will predictably lead to increased job growth in the economy, as much as 203,000 jobs per year according to American Progress, meaning even more people will have more money to buy more goods and services.

This is admittedly a simplification that also serves as a good example of the predicted impacts of the principles of supply and demand on a market economy, but it still serves to illustrate the potentially bountiful positive impacts of illegal immigrants being granted legal status.

One caveat to these projections is that the decisions of lawmakers on the path to citizenship or residency will ultimately determine how great the impact of immigration reform will be. For example, under the current proposal from the Gang of Eight senators, illegal immigrants will first have to gain registered provisional status, and then wait 10 years for a chance at citizenship, and this is only after certain border control parameters are met. In this scenario, the aforementioned impacts will almost certainly be less than if citizenship were automatically granted, since the timeline is so much more elongated and difficult to navigate.

The significant opposite viewpoint is generally advanced by Georg Borjas at the Center for Immigration Studies, which advances a policy of “low-immigration, pro-immigration.” Borjas argues that immigration does in fact raise the standard wages of immigrants, but not for American workers in general. Instead, he argues that the increased supply of workers that could be made legal would possibly result in wages for equal workers lower.

Here again, this is the use of the simple supply and demand curve, but instead it is used to demonstrate how increased supply without increased demand can result in lower prices (wages) at equilibrium.

These two points of view paint two very different pictures of the impact of comprehensive immigration reform. On one hand, it is argued that immigration reform leads to increased wages for all workers, as well as more jobs and greater Gross Domestic Product. Conversely, the other party insists that reform leads to lower wages due to increased supply of workers in the labor market. In my opinion, Borjas’s view has several faults that result in missing the mark on the impact of immigration reform.

While the perspective of the White House and American Progress may be overly simplistic and rosy, I think they present the more likely picture, and serve as an excellent reason to advance comprehensive immigration reform for the greater good of the American economy.

Now the question becomes, how will those who determine policy feel?