New Immigration Reform: 111 Economists Can’t Be Wrong

It is a noteworthy event whenever one hundred top experts from the nation's leading think tanks and universities agree on something. More so for economists. They have quite the reputation for quibbling over all aspects of policy from ideology and models to planning and implementation.

Last Tuesday, in an open letter to the House, 111 economists deemed immigration reform "an opportunity to improve the long term prospects for economic growth, enhance the skills of the U.S. labor force and augment the flexibility of the Nation’s labor market." They argue that growth immigration reform could reduce the federal deficit by up to $300 billion. It would be quite disappointing for the government to pass up such an opportunity ... even more so when there are broad based benefits from a revved up immigration system. Viewed from a long term, big picture perspective, the majority of Americans stand to gain, from bringing immigration laws into more consistency with economic reality.

Immigration is intricately tied to economic activity. Much as values like individual freedom and the spread of American culture paint the U.S. in an attractive light, economic opportunity drives the rational choice to uproot oneself from one's country of origin. Admittedly, there are also push factors from back home like population growth and weak economies. However, migrant workers (legal or otherwise) keep flowing into the country because there are more jobs available, and at higher wages, too. Two observations confirm this: First, the rate of labor participation for male workers aged 18-64 years increases as we move from undocumented workers (94%) to legal immigrants and citizens (85% and 83%). Again, as the Brookings graph shows, unauthorized immigration across the U.S. border declines only after the onset of the 2008 recession despite progressively tighter border security measures after the 2001 attacks. As jobs dry up, the inflow of undocumented workers also takes a plunge.

Despite the expansion of the US economy over the past few decades, immigration laws have not budged. Regardless of labor market needs, visa caps have remained fixed at low levels. This was where the 1986 act failed. There were no provisions for adjusting immigration caps for workers as per market demands. Policy makers left it to employment verification to deter future illegal immigration. Without reference to what the actual effect of increased immigration is, the fear politics of "low-skilled immigrants will take American jobs" has prevented coherence between legally sanctioned labor flows and demand in the market.

There is certainly a double standard for immigration compared to other aspects of globalization. Unlike capital, goods, and production processes, labor is more visible when crossing international borders. While purchasing a T-shirt, it is relatively rare for someone to look at the "Made in China" label and consider the potential American worker who could have manufactured that product. On the other hand, when interacting with a non-native speaker of English at the local grocery store, it is much easier to wonder whether immigrants are taking over the U.S. The irony is that while outsourcing and trade move entire sectors (and jobs) out of the economy, immigration, especially when regulated, gives local workers a better shot at competing or moving up to newly created positions. However, the perception that immigrants have invaded the U.S. market skews the discussion. In reality, the underlying economic process is more complex. 

For one, experts from conservative and liberal and independent think tanks show that immigrants complement rather than substitute for American workers. Immigrant skill levels are concentrated on the high and low ends of the distribution while the majority of Americans fall in the middle of the spectrum. This is also true for undocumented workers, whose skill and education levels overlap with a small portion of the American population. Even for this minority, removing an immigrant worker does not translate into a job opening for an American worker. This is because immigrant workers differ from native ones in terms of location, occupation, and level of experience.

It is through this complementing process that immigrants generate more economic activity, with the potential to benefit everyone. For every new cohort of low skilled or high-skilled immigrants a firm hires, several managerial positions open for middle skilled professionals. Studies performed in the wake of the 1986 Act also show that legalization led to modest increases in wages for low-skilled workers. Furthermore, immigrants themselves consume products giving rise to markets to meet their demand. This means even more jobs in the U.S. economy overall.

The time is now ripe for reformed immigration. Unlike 2006, there is a deal in place with labor organizations on caps for new temporary low skilled workers (W-Visa) and high skilled H1B workers. This sets a good background to negotiate a law that maintains a good balance between protecting American workers and allowing labor inflows to fluctuate with market demands. The U.S. economy is projected to create about a million new low-skilled jobs by 2020 that cannot be outsourced or mechanized. Fewer and fewer Americans want these jobs. The options are to have new immigrants take up these jobs and grow the economy, or leave them unfilled. This is why lawmakers should take advantage of the current momentum to reform immigration — so that they can create a law that engages the reality of how powerful economic forces can be, even compared to U.S. law.

The argument here is not to promote business interests above all else, or advocate unlimited immigration leaving American workers completely unprotected. Rather, both the public and lawmakers need to consider the dynamic relationship between immigration and economics from a holistic, systematic perspective. As the Gang of Eight immigration bill moves to Senate consideration and the still-greater hurdle at the House, representatives ought to move past the politics of ideology, partisanship and fear, or at least ground it in economic principles to allow for a more vibrant and pragmatic discourse. The goal should be to pass a new law that can contain a reasonable amount of labor flows as per the demands of the U.S. labor market.