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Tuesday, January 14, 2020

Immigration, the Economy, and the Federal Budget

From CBO:
About 47 million people living in the United States in 2018 were born in other countries. Roughly three-quarters of those people were here legally. They included naturalized citizens, lawful permanent residents (who are also known as green-card holders), refugees, people who were granted asylum, and people who were temporarily admitted for a specific purpose, such as extended work or study. (The people accounted for in this document do not include visitors for business or pleasure.) The remaining one-quarter, or about 11 million people, were here illegally, having either remained here when their temporary legal status expired or crossed the border illegally. For more than a decade, the number of people remaining when their temporary status expired has exceeded the number crossing the border illegally, mostly because the number of illegal border crossings has declined.

Effects of the Foreign-Born Population on the Economy
Immigration, whether legal or illegal, expands the labor force and changes its composition, leading to increases in total economic output—though not necessarily to increases in output per capita.
The effects of immigration on wages depend on the characteristics of the immigrants. To the extent that newly arrived workers have abilities similar to those of workers already in the country, immigration would have a negative effect on wages. To the extent that newly arrived workers have abilities that complement those of workers already in the country, immigration would foster productivity increases, having a positive effect on wages. But it is difficult to disentangle the influence of immigration on wages from the influence of other forces, such as changes in technology and the global economy.
A change in the legal immigration status of people who are already in the United States would affect their wages and productivity. People with legal immigration status are usually authorized to work; so are recipients of Deferred Action for Childhood Arrivals (DACA). People without legal immigration status are usually not authorized to work (although many work regardless). And if people were to acquire legal status, they would be better positioned to ask for more compensation and become likelier to be employed in jobs that best matched their skills, increasing their wages and productivity.

Effects of the Foreign-Born Population on the Federal Budget
People’s direct effects on the federal budget depend largely on the taxes that they pay and the government programs in which they participate. Foreign-born and native-born citizens are liable for the same taxes and eligible for the same programs. Foreign-born people who are not citizens are generally liable for federal taxes, but their eligibility for various federal programs depends on their immigration status. (Similarly, people’s effects on state and local budgets depend on their liability for state and local taxes and their use of state and local public services. For example, increases in population exert budgetary pressure on community resources, such as schools.