As the U.S. Senate debates immigration reform, much of the public discourse has concerned the economic implications of such a sweeping new law. While moral and cultural issues are important considerations, the economic impact of immigration reform is significant and the public focus on this issue is warranted.
However, the debate has been skewed by misinformation and has often led to fallacious arguments by both sides. A recent report by the Heritage Foundation suggested that reform could cost taxpayers over $6 trillion in the long run. Conversely, advocates of the legislation argue that the reform will have zero negative economic implications for Americans. While neither argument is completely correct, the evidence shows that on balance immigration reform would have a net positive effect on the U.S. economy in both the short and long term.
To start, the Heritage Foundation report has been roundly criticized by most prominent economists for its methodology. For example, the report assumes that all 11 million undocumented Americans would immediately apply to change their residency status, and then subsequently apply for and collect every government benefit for which they were eligible. This lack of nuance leads to dramatically inflated estimates of government payouts. The report also assumes the Latino population in America will experience no upward mobility over time. In other words, it assumes no gains in education or income levels. That seems unlikely given that immigration reform would open a variety of new channels for higher education previously closed to undocumented immigrants.
In fact, when one considers that immigrants tend to be younger and have more children than the average American there is strong reason to believe these newcomers would bolster programs like social security or Medicare, which they would pay into immediately upon gaining legal status, but not be eligible to receive benefits from for decades. This was the conclusion drawn in a recent report from Harvard University that showed immigrants added a $115 billion to the Medicare fund between 2002 and 2009. During the same period American-born citizens withdrew $28 billion.
Another argument often launched against immigration reform is that it will take jobs away from those already working legally in the United States. However, this argument is based on the lump of labor fallacy and has been widely discredited by most economists. In order for the argument to hold, it must be assumed that new immigrants will not themselves add jobs to the economy through increased income and consumption. In reality, as immigrants become employed they become active contributors to the local economy and tend to boost employment.
Yet, while immigration reform should have a net positive effect on the overall economy, it will produce winners and losers. There will be far more winners than losers, but some people will inevitably lose employment opportunities in the near-term due to increased competition in the labor market. This, however, is an inevitable part of a free market, capitalist system. Some companies thrive while others fail. Trade policies create opportunities for some businesses and increase competition for others. And technological innovation is constantly effecting employment patterns; think of the number of cashiers who have been replaced by electronic checkout systems. While the government can and should cushion the blow dealt to those losing out and help them transition to new jobs, it should not be in the business of guaranteeing employment for all people at all times.
Finally, while not everyone will reap short-term benefits from immigration reform (though a vast majority will), the entire population should gain in the long-term. More financially sound welfare programs and more overall employment opportunities are something that every American will enjoy with time. Immigration reform should not be sugar coated as if no negative externalities could arise, but it should be made clear that the positive implications of reform will dramatically outweigh the negative ones.