Immigration reform and the U.S. economy
By Heidi M. Pascual
A recent study conducted by Dr. Raul Hinojosa-Ojeda, an economics assistant professor at the University of
California-LA, and released by the Immigration Policy Center and the Center for American Progress (a nonpartisan
research institute based in Washington), concludes that Comprehensive Immigration Reform (CIR), which includes
a legalization program for undocumented immigrants, would boost the United States economy by $1.5 trillion over
10 years. The study, briefly titled, “Raising the Floor for American Workers,” also contends that an enforcement-
only policy would result in a loss of $2.6 trillion in GDP over 10 years. Hinojosa-Ojeda came up with his findings by
using a computable general equilibrium (CGE) model based on historical data culled from the 1986 legalization
program.
A summary of the study’s findings conclude that:
• The higher earning power of newly legalized workers would result in increased tax revenues of $4.5-$5.4 billion
over three years;
• Higher personal income would also generate increased consumer spending — enough to support 750,000-
900,000 jobs in the U.S.;
| Heidi M. Pascual |
• Legalization increases workers’ wages (less-skilled newly legalized workers, higher skilled workers, and native-born U.S. workers), as
“wage floor” rises for all workers, particularly in industries where current low-skilled unauthorized immigrants work;
• Mass deportation would reduce U.S. GDP by 1.46 percent annually, or $2.6 trillion loss in GDP over 10 years, excluding the actual cost of
deportation; and
• Mass deportation would also result in widespread job loss, and wages of higher skilled natives would decrease.
On January 7, 2010, the Center for American Progress- American Immigration Council hosted a telebriefing on immigration and the
economy, which was focused on the above study. The panelists were Hinojosa-Ojeda (author of the report); Dan Griswold (Director, CATO
Institute-Center for Trade Policy Studies); Heather Boushey (Senior Economist, Center for American Progress); and Benjamin Johnson
(Executive Director, American Immigration Council). Angela Kelly (Vice President, CAP-Immigration Policy and Advocacy) moderated the
discussion.
Asian Wisconzine would like to share with our readers the highlights of this important discussion.
In her introduction, Angela Kelly said that Hinojosa-Ojeda’s report assesses the economic impact of various immigration proposals
including legalizing undocumented workers, and that the results are, frankly, startling. Kelly added that these results should be noted by the
policy makers in the upcoming immigration debate that is expected to start soon. She also emphasized that it is interesting to note that “left
meets right” in this panel, with the presence of Griswold from the CATO Institute, a right-leaning think tank.
Dr. Raul Hinojosa-Ojeda
“What’s significant about this study is that it’s based on the historical record of the good things that happened 20 years ago when we did
legalization,” Hinojosa-Ojeda averred. “What we have is a study built on an extensive survey that was done after the last legalization [under
the] Immigration Reform and Control Act of 1986, which was implemented from 1988 to 1991. During that period of time, when the legalization
occurred, surveys were done that showed that the average recently legalized worker had over 15 to 20 percent increase in wages after
having a very stagnant history of wage performance in the United States.”
He also emphasized that these legalized workers moved into much more productive sectors or if they retained their jobs, became more
productive as they started investing in their own human capital, in terms of language, education and job skills. The newly legalized workers,
Hinojosa-Ojeda said, became productive members of their communities, as investors, property owners and small business developers. Their
children, in particular, became exceedingly strong in terms of one generation growth after legalization.
“Fast forwarding to the present, we now essentially take those parameters and implement them and measure the reverberation that could
happen throughout the entire economy, both through the immediate legalization as well as moving through a process where the future flows
would come into the United States in legal fashion,” he continued. “In a condition where the ‘wage floor,’ if you will, has now been raised,
which is the primary impact of legalization, we would actually have a pattern of economic growth with higher wages, and less demands for
immigration to meet the needs of the United States.”
Comparing the results of his study to current policy directions, Hinojosa-Ojeda contended that if we continue down the path of
‘enforcement-only’ as a solution, and a full strategy of deportation in this country, there would be a traumatically negative effect in the U.S.
economy. “In fact, those actual deportations of the undocumented populations, rather than creating an economic opportunity, would reduce
economic growth in this country by a startling $2.5 trillion, which even in the context of this very severe economy that we have had over the
past two years, is a very significant number.”
Dan Griswold
At the outset, CATO Institute’s Dan Griswold stated that he had read Hinojosa-Ojeda’s study closely and expressed hope that all his
“liberal, democratic friends in Washington” will read it and take its conclusions to heart.
“I think the most important findings (of this study/report) are that restrictions of low-skilled immigration impose cost upon the economy
beyond the direct expense of enforcement, and that in contrast, legalization actually raises the incomes of native-born Americans by
expanding the economy and creating better paying jobs,” Griswold said, in agreement to the study’s findings. “I also think the first half of the
paper is a very useful survey of the literature, kind of a history of this debate, an update of what we’ve spent on enforcement. I think the
opponents of immigration would say that we really haven’t tried enforcement. I think the numbers on this paper show that that is simply false.
Enforcement-only has failed. We tried it; and it has failed.”
Griswold was pleased that Hinojosa-Ojeda mentioned in his report that the CATO Institute published a similar study in August 2008 by Dr.
Peter Dixon and Maureen Rimmer. Although somewhat different in its methodology, it also used the Computable General Equilibrium
approach. He said that the CATO Institute study used the same model used by the U.S. International Trade Commission and the Homeland
Security Department to analyze trade and immigration policies. “But the bottom line is, numbers were remarkably similar,” Griswold said.
“Our conclusion was even more of us native-born Americans workers and households being $100 billion better. We’re very much in the same
ball park, which reinforces the credibility of both studies.”
Griswold also agreed that a crackdown is very costly. “Reducing illegal immigration not only incurs direct expenses for the government,
but direct from the economy — the productivity of American workers,” he stressed, adding that the key to the success of immigration reform,
however, is addressing future flow of immigrants. “I am heartened to see that there’s a section in this study today titled ‘Effective Immigration
Must Address Future Flow.’ Homeland Security Secretary Janet Napolitano at the Center of American Progress last month said that ‘that is the
third leg of the stool that must be addressed.’”
Comparing the present study to that of the CATO Institute’s report, however, Griswold said that the latter gave more credit to creating a
temporary worker program in terms of benefiting U.S. workers. “If we don’t have a robust temporary worker program, we’re really only doing
the 1986 Immigration Reform and Control Act all over again, which was missing that third leg,” Griswold said “It had an amnesty — a general
legalization of 2.7 million, and it had tough reinforcement, but no provision for letting in workers in the future to meet future labor force needs.”
Griswold, however, ‘nitpicked’ some terms used in the Hinojosa-Ojeda report, such as “free labor rights,” which was not defined in the
study. “I wonder if that’s a cold word for more unionization,” he said, “which I don’t think this is about.” Another term Griswold questioned
was “flexible legal limits,” which he suggested should be defined.
Overall, Griswold emphasized that the findings of the study and the CATO Institute’s 2008 study (two very different institutions) are similar.
Heather Boushey
Boushey underscored that Hinojosa-Ojeda’s study is based on prior experience and is fact-based. She started by saying that workers who
do not have legal right to work are easily coerced into taking jobs that offer lower wages because the employers have all the power. “Illegal
immigrant workers tend to have low-paying jobs and the worse work conditions. Basic labor standards that are enforced for other workers
are not enforced for those kinds of jobs.”
She agreed that legalizing these workers would increase the wages of those on the bottom, and explained the economic logic of the
study, as follows:
• About 70 percent of our economy is driven by consumption. Therefore, giving a significant chunk of workers higher wages and better
working conditions would allow them to spend more for goods and services, housing and education. These will have a positive effect on the
economy overall.
• Productivity gain-A lot of workers in this country who do not have legal right to work are in jobs that are below their skill level, such as
nurses (working as housekeepers) and engineers (working as day laborers). That is a net loss for the economy because those skills are not
fully utilized and that pulls down productivity.
“Comprehensive Immigration Reform that legalizes currently unauthorized immigrants and creates flexible legal limits on future
immigration in the context of insuring that every worker has basic labor rights, would help both American workers and our economy,”
Boushey stressed.
Ben Johnson
In the context of the immigration debate at large, Ben Johnson said there are two important things about the Hinojosa-Ojeda study: it
spotlights the potential for a very large input into our economy at a time we need it; it is an important reminder of what the focus of immigration
reform effort ought to be.
“How do we provide benefits to the American economy and to the American workers?” Johnson asked. “I think that is where the debate
needs to be. It is about providing opportunities for all workers. It is about achieving economic growth for the economy as a whole.”
Immigration, he continued, has always been a powerful tool for our economy. “We have created one of the most flexible, dynamic labor force
the world has ever seen,” Johnson said. “Look at how we moved from agrarian to industrial and now to information age economy, and we’ve
done that faster and more efficiently than any other country in the world, in large part because of this flexible labor force. Immigration has
played a significant role in that.”
He talked about reports through the years (that focused on the costs of immigration), saying they were so short-sighted and ignored the
larger issues of productivity and economic boost. “They don’t think of immigrants as producers and consumers,” Johnson explained, “they
ignore issues of entrepreneurship and job creation, and sort of play fast and loose with this issue of how to treat their children. All of our
children are initially very costly, but the investments that we make in our children are investments that pay off in huge ways moving forward.”
Johnson also stressed that we can’t simplify the issue of unemployment and blame immigration for it. “Workers in our economy are not simply
cogs in a giant machine,” he said. “They are not interchangeable. They have very different skills; they live in different regions; they are of
different ages; they have different levels of experience and [are in] different places in their careers. The problem of the unemployed workers in
Detroit cannot be resolved by removing an immigrant laborer in Central California who is involved in agricultural work.” He added that that
those two issues must not be confused and addressed in a simplistic way.
On the notion that the coming of illegal immigrants with low skills has dragged the economy down, Johnson said that over the last 30
years, the share of our workforce that has less than a high school diploma has gone down every year. “We should be proud of the fact that we
have a domestic labor force that is better educated, but we cannot ignore the economic implications of that. We can’t ignore the fact that we
are an economy that is driven a lot by consumerism, which means a lot of service jobs that don’t require a lot of education and training.”
For more information on this telebriefing, including its video and the complete study of Dr. Raul Hinojosa-Ojeda, please go to
immigrationpolicy.org/special-reports/raising-floor-american-workers.
“wage floor” rises for all workers, particularly in industries where current low-skilled unauthorized immigrants work;
• Mass deportation would reduce U.S. GDP by 1.46 percent annually, or $2.6 trillion loss in GDP over 10 years, excluding the actual cost of
deportation; and
• Mass deportation would also result in widespread job loss, and wages of higher skilled natives would decrease.
On January 7, 2010, the Center for American Progress- American Immigration Council hosted a telebriefing on immigration and the
economy, which was focused on the above study. The panelists were Hinojosa-Ojeda (author of the report); Dan Griswold (Director, CATO
Institute-Center for Trade Policy Studies); Heather Boushey (Senior Economist, Center for American Progress); and Benjamin Johnson
(Executive Director, American Immigration Council). Angela Kelly (Vice President, CAP-Immigration Policy and Advocacy) moderated the
discussion.
Asian Wisconzine would like to share with our readers the highlights of this important discussion.
In her introduction, Angela Kelly said that Hinojosa-Ojeda’s report assesses the economic impact of various immigration proposals
including legalizing undocumented workers, and that the results are, frankly, startling. Kelly added that these results should be noted by the
policy makers in the upcoming immigration debate that is expected to start soon. She also emphasized that it is interesting to note that “left
meets right” in this panel, with the presence of Griswold from the CATO Institute, a right-leaning think tank.
Dr. Raul Hinojosa-Ojeda
“What’s significant about this study is that it’s based on the historical record of the good things that happened 20 years ago when we did
legalization,” Hinojosa-Ojeda averred. “What we have is a study built on an extensive survey that was done after the last legalization [under
the] Immigration Reform and Control Act of 1986, which was implemented from 1988 to 1991. During that period of time, when the legalization
occurred, surveys were done that showed that the average recently legalized worker had over 15 to 20 percent increase in wages after
having a very stagnant history of wage performance in the United States.”
He also emphasized that these legalized workers moved into much more productive sectors or if they retained their jobs, became more
productive as they started investing in their own human capital, in terms of language, education and job skills. The newly legalized workers,
Hinojosa-Ojeda said, became productive members of their communities, as investors, property owners and small business developers. Their
children, in particular, became exceedingly strong in terms of one generation growth after legalization.
“Fast forwarding to the present, we now essentially take those parameters and implement them and measure the reverberation that could
happen throughout the entire economy, both through the immediate legalization as well as moving through a process where the future flows
would come into the United States in legal fashion,” he continued. “In a condition where the ‘wage floor,’ if you will, has now been raised,
which is the primary impact of legalization, we would actually have a pattern of economic growth with higher wages, and less demands for
immigration to meet the needs of the United States.”
Comparing the results of his study to current policy directions, Hinojosa-Ojeda contended that if we continue down the path of
‘enforcement-only’ as a solution, and a full strategy of deportation in this country, there would be a traumatically negative effect in the U.S.
economy. “In fact, those actual deportations of the undocumented populations, rather than creating an economic opportunity, would reduce
economic growth in this country by a startling $2.5 trillion, which even in the context of this very severe economy that we have had over the
past two years, is a very significant number.”
Dan Griswold
At the outset, CATO Institute’s Dan Griswold stated that he had read Hinojosa-Ojeda’s study closely and expressed hope that all his
“liberal, democratic friends in Washington” will read it and take its conclusions to heart.
“I think the most important findings (of this study/report) are that restrictions of low-skilled immigration impose cost upon the economy
beyond the direct expense of enforcement, and that in contrast, legalization actually raises the incomes of native-born Americans by
expanding the economy and creating better paying jobs,” Griswold said, in agreement to the study’s findings. “I also think the first half of the
paper is a very useful survey of the literature, kind of a history of this debate, an update of what we’ve spent on enforcement. I think the
opponents of immigration would say that we really haven’t tried enforcement. I think the numbers on this paper show that that is simply false.
Enforcement-only has failed. We tried it; and it has failed.”
Griswold was pleased that Hinojosa-Ojeda mentioned in his report that the CATO Institute published a similar study in August 2008 by Dr.
Peter Dixon and Maureen Rimmer. Although somewhat different in its methodology, it also used the Computable General Equilibrium
approach. He said that the CATO Institute study used the same model used by the U.S. International Trade Commission and the Homeland
Security Department to analyze trade and immigration policies. “But the bottom line is, numbers were remarkably similar,” Griswold said.
“Our conclusion was even more of us native-born Americans workers and households being $100 billion better. We’re very much in the same
ball park, which reinforces the credibility of both studies.”
Griswold also agreed that a crackdown is very costly. “Reducing illegal immigration not only incurs direct expenses for the government,
but direct from the economy — the productivity of American workers,” he stressed, adding that the key to the success of immigration reform,
however, is addressing future flow of immigrants. “I am heartened to see that there’s a section in this study today titled ‘Effective Immigration
Must Address Future Flow.’ Homeland Security Secretary Janet Napolitano at the Center of American Progress last month said that ‘that is the
third leg of the stool that must be addressed.’”
Comparing the present study to that of the CATO Institute’s report, however, Griswold said that the latter gave more credit to creating a
temporary worker program in terms of benefiting U.S. workers. “If we don’t have a robust temporary worker program, we’re really only doing
the 1986 Immigration Reform and Control Act all over again, which was missing that third leg,” Griswold said “It had an amnesty — a general
legalization of 2.7 million, and it had tough reinforcement, but no provision for letting in workers in the future to meet future labor force needs.”
Griswold, however, ‘nitpicked’ some terms used in the Hinojosa-Ojeda report, such as “free labor rights,” which was not defined in the
study. “I wonder if that’s a cold word for more unionization,” he said, “which I don’t think this is about.” Another term Griswold questioned
was “flexible legal limits,” which he suggested should be defined.
Overall, Griswold emphasized that the findings of the study and the CATO Institute’s 2008 study (two very different institutions) are similar.
Heather Boushey
Boushey underscored that Hinojosa-Ojeda’s study is based on prior experience and is fact-based. She started by saying that workers who
do not have legal right to work are easily coerced into taking jobs that offer lower wages because the employers have all the power. “Illegal
immigrant workers tend to have low-paying jobs and the worse work conditions. Basic labor standards that are enforced for other workers
are not enforced for those kinds of jobs.”
She agreed that legalizing these workers would increase the wages of those on the bottom, and explained the economic logic of the
study, as follows:
• About 70 percent of our economy is driven by consumption. Therefore, giving a significant chunk of workers higher wages and better
working conditions would allow them to spend more for goods and services, housing and education. These will have a positive effect on the
economy overall.
• Productivity gain-A lot of workers in this country who do not have legal right to work are in jobs that are below their skill level, such as
nurses (working as housekeepers) and engineers (working as day laborers). That is a net loss for the economy because those skills are not
fully utilized and that pulls down productivity.
“Comprehensive Immigration Reform that legalizes currently unauthorized immigrants and creates flexible legal limits on future
immigration in the context of insuring that every worker has basic labor rights, would help both American workers and our economy,”
Boushey stressed.
Ben Johnson
In the context of the immigration debate at large, Ben Johnson said there are two important things about the Hinojosa-Ojeda study: it
spotlights the potential for a very large input into our economy at a time we need it; it is an important reminder of what the focus of immigration
reform effort ought to be.
“How do we provide benefits to the American economy and to the American workers?” Johnson asked. “I think that is where the debate
needs to be. It is about providing opportunities for all workers. It is about achieving economic growth for the economy as a whole.”
Immigration, he continued, has always been a powerful tool for our economy. “We have created one of the most flexible, dynamic labor force
the world has ever seen,” Johnson said. “Look at how we moved from agrarian to industrial and now to information age economy, and we’ve
done that faster and more efficiently than any other country in the world, in large part because of this flexible labor force. Immigration has
played a significant role in that.”
He talked about reports through the years (that focused on the costs of immigration), saying they were so short-sighted and ignored the
larger issues of productivity and economic boost. “They don’t think of immigrants as producers and consumers,” Johnson explained, “they
ignore issues of entrepreneurship and job creation, and sort of play fast and loose with this issue of how to treat their children. All of our
children are initially very costly, but the investments that we make in our children are investments that pay off in huge ways moving forward.”
Johnson also stressed that we can’t simplify the issue of unemployment and blame immigration for it. “Workers in our economy are not simply
cogs in a giant machine,” he said. “They are not interchangeable. They have very different skills; they live in different regions; they are of
different ages; they have different levels of experience and [are in] different places in their careers. The problem of the unemployed workers in
Detroit cannot be resolved by removing an immigrant laborer in Central California who is involved in agricultural work.” He added that that
those two issues must not be confused and addressed in a simplistic way.
On the notion that the coming of illegal immigrants with low skills has dragged the economy down, Johnson said that over the last 30
years, the share of our workforce that has less than a high school diploma has gone down every year. “We should be proud of the fact that we
have a domestic labor force that is better educated, but we cannot ignore the economic implications of that. We can’t ignore the fact that we
are an economy that is driven a lot by consumerism, which means a lot of service jobs that don’t require a lot of education and training.”
For more information on this telebriefing, including its video and the complete study of Dr. Raul Hinojosa-Ojeda, please go to
immigrationpolicy.org/special-reports/raising-floor-american-workers.
