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Immigrants in the U.S. Economy: A Host Country Perspective. Pia Orrenius, Ph.D. Federal Reserve Bank of Dallas. Sam Houston State University Huntsville, Texas April 12, 2008. Disclaimer: The views expressed herein are those of the presenter;

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immigrants in the u s economy a host country perspective

Immigrants in the U.S. Economy: A Host Country Perspective

Pia Orrenius, Ph.D.

Federal Reserve Bank of Dallas

Sam Houston State University

Huntsville, Texas

April 12, 2008

Disclaimer: The views expressed herein are those of the presenter;

they do not necessarily reflect the views of the Federal Reserve

Bank of Dallas or the Federal Reserve System.

overview
Overview
  • Immigration
    • Population, labor force growth
    • Changing characteristics of foreign born
    • Reasons for coming: Cyclical, regional effects
    • U.S. workers
    • Taxpayers
    • Policy
slide7
Foreign-born share of employment

growth substantial

Percent

2003-2006 Source: BLS

slide8
Foreign-born share of employment

growth by selected occupations

Percent

2003-2006 Source: BLS

increasingly bimodal education distribution of foreign born workers
Increasingly bimodal education distribution of foreign-born workers

Percent

Source: Ottaviano & Peri, 2005

illegal inflows rival legal
Illegal inflows rival legal

Source: Jeffrey Passel and Roberto Suro, Pew Hispanic Center (2005)

three out of ten foreign born are undocumented
Three out of ten foreign-born are undocumented

Source: Pew Hispanic Center(2005)

why do they come
Why do they come?
  • Economic conditions
    • Destination
    • Origin
  • Family reunification
  • Social or political conditions
    • War
    • Persecution
real time migration u s and mexican business cycles
Real-time migration, U.S. and Mexican business cycles

Thousands, SA

Migrant apprehensions

Source: CBP, Department of Homeland Security

apprehensions a function of labor demand detrended employment apprehensions lagged 6m
Apprehensions a function of labor demand(Detrended employment, apprehensions lagged 6m)

Thousands, SA

Thousands, SA

Employment

Apprehensions

Source: BLS, DHS

slide19
Growth in the foreign-born population

1990-2006

Percent

0 - 99

100- 199

200- 299

300- 434

Source: Census, ACS

state gdp growth drives foreign born population growth
State GDP growth drives foreign-born population growth

FB growth + GSP +

FB growth + GSP -

FB growth – GSP +

FB growth – GSP -

Source: Census, ACS, BEA

effects of immigration on natives
Effects of immigration on natives
  • Immigration has effects similar to trade
    • GDP rises, GDP per capita rises
  • Who benefits?
    • Immigrants
      • Bulk of GDP increase goes to them
      • Natives get $30 to $60 billion
    • Consumers
      • Prices of certain goods and services fall
    • Capitalists (investors, producers, homeowners)
effects of immigration on natives1
Effects of immigration on natives
  • Who loses?
    • Wage effects
      • Low-skilled native workers
      • Prior immigrants
    • Fiscal effects
      • Certain taxpayers
wages of less skilled workers in long run stagnation
Wages of less-skilled workers in long-run stagnation

Real median weekly earnings by education level

High school diploma, no college

Source: BLS

wages of less skilled workers in long run stagnation1
Wages of less-skilled workers in long-run stagnation

Real median weekly earnings by education level

High school diploma, no college

Source: BLS

wage effects of immigration
Wage Effects of Immigration
  • Models with large adverse effects (Borjas 2003)
    • Assume perfect substitutability, no change in capital
    • 3% drop in native earnings on average
    • 9% drop for natives who are low-skilled
  • Other models (Ottaviano & Peri 2006)
    • Allow imperfect substitutability, change in K
native born labor force change by education
Native-born labor force change, by education

Thousands

Source: 1996-2006; BLS, Haver Analytics

native and foreign born labor force change by education
Native and foreign-born labor force change, by education

Thousands

Source: 1996-2006; BLS, Haver Analytics

wage effects of immigration1
Wage Effects of Immigration
  • Models with large adverse effects (Borjas 2003)
    • Assume perfect substitutability;no change in K
    • 3% drop in native earnings on average
    • 9% drop for natives who are low-skilled
  • Other models (Ottaviano & Peri 2006)
    • Allow imperfect substitutability, change in K
    • 2% rise in native earnings on average
    • 1% drop for low-skilled natives
    • Big declines for prior immigrants
fiscal impact of immigration
Fiscal impact of immigration
  • Fiscal impact
    • Tax contributions minus transfer payments and cost of public services received, expressed in net present value
  • Tax contributions include
    • Payroll, income, sales, property taxes
      • Majority of illegal immigrants have payroll taxes withheld
  • Public transfers and services include
    • Education, health care, welfare (EITC, TANF), police and fire
  • Estimates
    • Gold standard: National Research Council (1997)
    • Recent work: Robert Rector’s piece for Heritage
      • Household-level analysis
nrc immigrants have positive fiscal impact when including their descendants
NRC: Immigrants have positive fiscal impact when including their descendants

1996 Dollars, NPV

Level of Education

Source: National Research Council, The New Americans (1997)

nrc but immigrants have a negative fiscal impact in their lifetime
NRC: But immigrants have a negative fiscal impact in their lifetime

1996 Dollars, NPV

Source: National Research Council, The New Americans (1997)

where is policy headed
Where is policy headed?
  • More interior enforcement
    • No-match program, Real ID Act, worksite raids, higher employer fines
    • E-verify: immigration status verification
    • Local, state enforcement of immigration laws
    • Local, state ordinances reg. illegal immigrants
no match letter program forthcoming safe harbor guidelines could have big impact
No-match letter program: forthcoming safe harbor guidelines could have big impact
  • SSA sends no-match letters to employers with workers whose SS numbers don’t match names
  • Under original proposed rules, employers have to fire workers within 90 days
  • If caught, employers assumed to have ‘constructive knowledge’ and may face stiff penalties
  • If implemented without comprehensive reforms, no-match could impact millions of workers & grow shadow economy
where do we go from here
Where do we go from here?
  • Implications of no-match, interior enforcemnt
    • Relative demand for illegal workers falls
      • Segmented labor markets
        • More employment off-the-books; Decline in tax receipts
      • Lower wages, worse working conditions for illegals
        • Turnover, lost benefit coverage
        • Move from large to small employers
      • Greater inequality; slower assimilation
    • Reallocation of workers across states, localities
    • Less illegal immigration, all other things same
conclusion
Conclusion
  • Foreign-born important role in economic growth
  • Benefits of immigration extensive
  • Labor market impacts limited; fiscal impact sizable
  • Current policies & unintended consequences
where undocumented immigrants live
Where undocumented immigrants live

Source: Pew Hispanic Center(2005)

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