Is immigration good or bad for the economy? The answer is complex.
Is immigration good or bad for the economy? The answer is complex.
We’re pretty much certain to hear about immigration at the presidential debate next week and about the unprecedented number of migrants who’ve arrived at the U.S. southern border in recent years.
Former President Donald Trump has claimed the millions of immigrants who’ve entered the U.S. on the Joe Biden administration’s watch are harming the economy and undermining American workers. He’s threatened to deport millions of unauthorized immigrants if he wins the upcoming presidential election.
Vice President Kamala Harris, the Democrats’ candidate, pledged in a recent interview with CNN to enforce U.S. laws on border crossings — which have fallen recently — and push Congress to pass comprehensive immigration reform.
The Congressional Budget Office reports that 3.3 million people came to the U.S. in 2023 — many of them unauthorized — and predicts about the same number for 2024. That compares to 1 million per year, on average, in the 2010s. A lot of the new immigrants will be looking for jobs, housing and health care, which will have a big and complicated economic impact.
Border states like Texas have had to shoulder the brunt of costs from migrants crossing into the U.S.
“The influx of immigrants primarily from Central America has clearly created a lot of logistical and infrastructure challenges, particularly [in] some of the smaller cities along the border, Eagle Pass or Del Rio,” said Texas-based economist Ray Perryman of the Perryman Group.
Perryman points out that the state has more than 5 million immigrants, more than 1.5 million of them unauthorized. He says their labor is crucial. But there’s definitely a short-term burden from recent arrivals.
“Those sheer numbers do create some economic problems for how you house people, how you feed people, how you provide health care for people in the border communities,” he said. “And of course, Texas has transported some of these folks to other places.”
One of those places is New York state. Some who crossed the border have ended up in Buffalo, where new arrivals from Latin America have joined more established refugee and immigrant populations from Ukraine, Afghanistan, Somalia, Burma and Bangladesh, said Rob Leteste at the regional economic development organization Invest Buffalo Niagara.
“Our refugee and immigrant community, starting back in the ‘90s, has been a great strength for the city, revitalizing the neighborhoods on the West Side to increase home values and bring back a lot of people who were living in the suburbs,” Leteste said.
He said recent immigrants have helped revitalize area manufacturing and reverse labor shortages exacerbated by native-born population decline.
“A lot of the jobs that our refugee community is taking are more of the entry-level, production base, manufacturing, health care — that the employer has not been able to fill with the typical talent pipeline that we have in town,” Leteste said.
He said those jobs support other jobs higher up the income ladder. “If you can’t fill those 20 production worker jobs, by nature you can’t then have the first-line supervisor role or some of those roles that could be filled by someone that graduates with a four-year or a two-year degree.”
But what about the idea that immigrants — legal and unauthorized — will accept lower wages and take jobs from native-born Americans?
“I think people are reasonable to think that there is competition with immigrants on any given afternoon. There’s a certain number of jobs available and immigrants might be competitors,” said economist Michael Clemens, a professor at George Mason University and fellow at the Peterson Institute for International Economics.
But Clemens counters that common understanding with a wider macroeconomic view. The economy’s not a zero-sum game. When a recent immigrant gets a job, that doesn’t mean a native-born worker loses one.
“Jobs ultimately come from economic growth,” Clemens said. “And new people joining the American economy are a cornerstone of economic growth.”
How much economic growth?
“We’ve had 3% real [gross domestic product] growth, which is extraordinary for this stage of a business cycle,” said Harvard economist Jason Furman, who chaired the White House Council of Economic Advisers in the Barack Obama administration.
“We’ve been adding more than 200,000 jobs a month, on average,” Furman said. “That’s way higher than anyone thought could be sustained. A lot of the job increase has been in undocumented workers. It could never have happened without a large inflow of immigrants.”
A report published in July by the nonpartisan Congressional Budget Office, “Effects of the Immigration Surge on the Federal Budget and the Economy,” found that the entry of immigrants from 2021 to 2026 will result in at least 8.7 million more people in the U.S. than previous immigration trends would have predicted.
Most of the increase, compared to historical trends, comes from people referred to as “other foreign nationals” by CBO. This category includes unauthorized immigrants, those admitted for humanitarian reasons under immigration parole authority, as well as some foreign nationals awaiting proceedings in immigration court. Legal immigration — which CBO defines as “lawful permanent residents (LPRs) plus people who are eligible to apply to become LPRs on the basis of their current status, such as asylees and refugees” — fell significantly in some years during the Trump administration. Levels have returned to historic trends under the Biden administration, with approximately 800,000 new arrivals per year.
The additional 8.7 million immigrants to the U.S. cited in the CBO’s recent report, Clemens said, will boost consumer spending, domestic production and net savings in the economy. They’ll start new businesses, likely at rates higher than native-born Americans. And, of course, they’ll pay taxes.
“This will cause a $1.3 trillion increase in the gross domestic product of the U.S. economy per year by 2034,” said Clemens. “That’s a 3.2% increase.”
CBO predicts that immigrants’ additional wages and economic activity will raise federal tax revenue by $1.2 trillion — or 2.2% — above historical trend from 2024 to 2034. “The recent surge will reduce the federal deficit by almost $900 billion cumulatively over the next 10 years,” Clemens said, calling it a “gift” to native-born Americans.
But the immigration upswing also has downsides, especially for state and local government. According to the CBO report: “The surge in immigration will also affect the budgets of states and localities; its impact will vary among jurisdictions. Research has generally found that increases in immigration raise state and local governments’ costs more than their revenues.”
Clemens acknowledges this is a serious issue. “A lot of the short-term costs of providing services, providing public schooling to children, fall on local authorities. And that is a real cash-flow problem they should be shielded from by state and federal intervention,” he said.
Some economic studies have suggested immigrant workers can harm lower-skilled, less-educated native-born workers, according to University of Maryland economist Peter Morici.
“About a decade ago, the National Academy of Sciences looked at this and found a small, measurable effect at the low end,” said Morici. “In some situations, adding immigrants might suppress wages a lot. But right now, we have such a labor shortage for restaurants and so forth, that I doubt closing the shortage is going to have much of an effect. We’re in a very different place now — we simply don’t have enough young workers coming into the system.”
In Texas, Ray Perryman has studied the construction industry, where he said 30% to 40% of workers are undocumented. Still, he sees little evidence of that group undermining native-born workers.
“The wage structure is pretty much the same,” said Perryman. “Many of them pay Social Security and payroll taxes — that, of course, they’ll never be able to obtain the benefits from, and it helps the government.”
The overall impact of immigration on construction and housing will be mixed, said economist Nick Luettke, who has studied the issue at Moody’s. “When we look at immigration, it would affect both the demand and the supply side,” he said.
Gaming out a sharp reduction in immigration in the coming years — as many Republicans, including Trump, favor — Luettke said: “With fewer people in the country, especially renter households — and immigrants tend to be renters, especially the undocumented — fewer people trying to rent the same amount of spaces, economics would tell us rents are likely to decrease.”
On the other hand, Luettke said: “On the supply side, in construction, immigrants represent about a quarter of the industry, split roughly half and half between documented and undocumented workers. So a further reduction of immigrants would affect the ability to develop not only multifamily, but also single-family units.”
One economic boost happens as soon as immigrants arrive: They become American consumers.
Durgham Alyasiri, 33, works as a manager at M&T Bank in Buffalo, New York, where he oversees charitable giving programs, including those that support immigrants in the region.
At the age of 15, he arrived in upstate New York as a refugee from Iraq, with his single mother and two older siblings. It was October 2006, the family was on public assistance, “no phone in the house, no TV in the house, and nobody speaks English,” Alyasiri recalled. “And within the first few weeks, the worst snowstorm in 50 years.”
Other refugee families offered the Alyasiris this retail advice: “Don’t buy any winter clothes yet because there is this magical day in America where everything is 50% off.”
“That day was Thanksgiving,” Alyasiri continued. “Black Friday.”
So when the early fall blizzard hit — accompanied by power outages, tree limbs down, 2 feet of snow on the ground — they had nothing warm to wear. “Just running shoes in the waist-high snow,” said Alyasiri. “My mom was ready to pack up and leave.”
Instead, they went shopping.
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