The Economics of Immigration

The immigration issue has resurfaced, and the most recent “bipartisan” proposal sounds a lot like the last one. The pathway to citizenship for those who violated U.S. law and crossed the border is proffered as a practical solution for the 11 million (or more) illegal immigrants, mostly from Mexico and other parts of Latin America. The idea that they would pay a fine (what if they don’t have the money?) and back taxes (who can figure out what they owe?) is mere window dressing meant to position the proposal as a balanced approach, to use one of Obama’s favorite terms to describe leftist ideas couched in common sense rhetoric. The proposal also assures us that those with criminal records will be deported, without mentioning why this isn’t already occurring or why those with such records would register with the government under such a threat anyway. This is clearly about politics and demographics. I’d like to focus on a key issue, the type of immigrants we should welcome.

The proposal increases the number of visas provided to individuals skills in certain high-demand professions. This is an excellent idea and can easily be addressed without “comprehensive” reform. American firms face intense competitive pressure from rivals in other nations for a number of reasons, one of them being the shortage of workers in scientific and other technical areas. Such highly trained immigrants are well educated, usually speak fluent English, and offer an immediate contribution to the U.S. economy. They will pay taxes from the start. They represent a net economic benefit, not a cost.

In contrast, most of the “undocumented” immigrants currently in question are not part of this group. Because they tend to be less educated and do not speak fluent English, they immediately extract benefits from the system. Many firms are lobbying for various forms of amnesty because these immigrants are willing to do the jobs other Americans won’t, at least not for the wages they are offered. The social costs associated with individuals in this group–including schools for their children, medical care, and even incarceration–are much greater than the savings to business (see Robert Rector’s exhaustive study for a detailed look at the numbers). Put another way, a typical CEO is more concerned about the dollar saved by hiring an immigrant than the several dollars in costs shifted to society as part of the deal. This viewpoint doesn’t necessarily make the CEO a bad person, but we need to see the big picture and reject the idea because it only exacerbates the redistribution of wealth and increased debt.

Those who favor an amnesty solution comprise an interesting lot. In addition to the aforementioned business argument, others argue that illegals will not be deported anyway, so we might as well find a way to get them on the tax roles. Of course, this group would pay little if any net taxes anyway. Many Republicans see a political advantage in resolving the problem in a bipartisan way, although unskilled immigrant voters will always lean heavily to the party that provides the most entitlements. Still others have a soft heart for many of the immigrants who leave their home country just to find a minimum wage job. I share this sentiment, but I also recognize the irrationality of sharing public resources–those financed by other people’s taxes–exclusively with those in other countries who choose to violate U.S. sovereignty by crossing the border. If helping the downtrodden is really our objective, shouldn’t we be more interested in helping those who have respected our laws and haven’t come to the U.S.?

Admittedly, this is a complex issue. However, there is no reason why it cannot be addressed one point at a time. Securing the border, deporting criminals, and providing more visas for highly skilled workers need not be a part of a “comprehensive solution.” These measures can and should be passed immediately. Amnesty can be rejected if we are willing to get serious about deportation and prosecute companies that knowingly hire illegal immigrants. This is not the easy road to travel, but it is by far the best road over the long term.

5 thoughts on “The Economics of Immigration

  1. Our financial system is bleeding and we can’t stop illegal immigration. Unemployment wouldn’t be as high if only Americans were being hired. This is a cancer.

  2. Americans WILL do the jobs that immigrants do, just not for the wages illegal immigrants are paid. As Parnell points out, the amount that companies save by paying illegals less is much less than what they cost society in other areas.

  3. Dr. Parnell…question…will wages need to go up to attract non-illegals to do the jobs illegals currently do? Will this lead to higher prices?

    1. Good question Jeff…Yes, higher wages would be necessary to fill these jobs with Americans. As wages rise, companies also have an incentive to automate. For example, at $10 an hour it might be OK to pay laborers to pick crops manually, but at $20 an hour it might be more efficient to higher fewer workers and invest in technology that makes their work more efficient. WIthout illegal immigrants taking the jobs, companies might not have to hire as many workers, but they would have to pay them more. While certain prices linked to illegal immigrant labor would rise–examples include poultry, landscaping services, and various agricultural products–the higher wages for newly employed Americans would help the economy as well. The big advantage is the reduced expenditures for public services like schools, hospitals and prisons. As an example, consider how many new schools that are built to accommodate growth in an area wouldn’t be needed if only Americans and legal residents attended them? The savings would be huge and would more than compensate for price increases in certain sectors.

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