Obama’s Next Act: Immigration Reform

Mexican migrant workers harvest organic parsley at Grant Family Farms on Oct. 11, 2011 in Wellington, Colorado. Photograph by John Moore/Getty Images

Washington won’t get much of a reprieve from verbal pyrotechnics once the drama of the fiscal cliff is over. Up next: major immigration reform. President Obama has made it clear that a comprehensive overhaul of the nation’s badly frayed immigration system is a second-term priority. Many Republican lawmakers are convinced the big takeaway from the 2012 election results is that conservatives need to rethink their hard-line stance on immigration—including illegal immigrants.

Here’s what Washington should do before tackling the tough job of rewriting the immigration laws: Create a quicksilver path to citizenship for the 11 million to 12 million undocumented workers in the U.S. (excluding the small number convicted of violent crimes or multiple felonies). The shift in status acknowledges that these foreign-born newcomers, like previous generations of immigrants, overcame significant obstacles to come to the U.S. to make a better life for their families. Illegal immigrants are neighbors heading off to work, sending their kids to school, and attending church. Their everyday lives would vastly improve by moving from the shadows of society into the mainstream.

More important from a public-policy perspective, the change would give a boost to the economy’s underlying dynamism. “What you’re doing in the short run is making it easier for workers to move between jobs, a relatively small effect,” says Gordon Hanson, a professor of economics at the University of California at San Diego. “The larger effect from eliminating uncertainty for these immigrants is creating incentives for them to make long-term investments in careers, entrepreneurship, education, homes, and community.”

Let’s state the obvious: A rapid transformation of illegal immigrants into legal immigrants isn’t in the cards. Amnesty—let alone citizenship—is an anathema to large parts of the electorate. Too bad, since the scholarly evidence is compelling that immigrants—documented or not, legal or illegal—are a boon to the net economy. “Competition fosters economic growth,” says Michael Clemens, senior fellow at the Center for Global Development in Washington.

The economic return from attracting skilled immigrants to the U.S. is well known. Foreign-born newcomers account for some 13 percent of the population, yet they are responsible for one-third of U.S. patented innovations. The nation’s high-tech regions such as Silicon Valley, the Silicon Hills of Austin, Tex., and Boston’s Route 128 rely on immigrant scientists, engineers, entrepreneurs, and employees. Better yet, economist Enrico Moretti at the University of California at Berkeley calculates that a 1 percent increase in the share of college-educated immigrants in a city hikes productivity and wages for others in the city.

Less appreciated is how much the economy gains from the efforts of less-skilled immigrants, including illegal workers. Throughout the country, foreign-born newcomers have revived beaten-down neighborhoods as immigrant entrepreneurs have opened small businesses and immigrant families have put down stakes. Immigrant workers have played a vital role keeping a number of industries competitive, such as agriculture and meatpacking. Cities with lots of immigrants have seen their per capita tax base go up, according to David Card, an economist at UC Berkeley. Despite the popular impression that a rising tide of immigrants is associated with higher crime rates, research by Robert Sampson of Harvard University and others offer a compelling case that it’s no coincidence that the growing ranks of immigrants tracks the reduction in crime in the U.S.

But don’t newcomers—legal and illegal—drive down wages and job opportunities for American workers? Not really. A cottage industry of economic studies doesn’t find any negative effect on native-born wages and employment on the local level. On the national level the research shows the impact on native-born Americans doesn’t drift far from zero, either positively or negatively. “In both cases, immigrants are more likely to complement the job prospects of U.S.-born citizens than they are to compete for the same jobs as U.S.-born citizens,” Giovanni Peri, an economist at the University of California at Davis, writes in Rationalizing U.S. Immigration Policy: Reforms for Simplicity, Fairness, and Economic Growth.

The counterintuitive results reflect a numbers of factors. Immigrants expand the size of the economic pie by creating new businesses, new jobs, and new consumers. Middle-class families find it easier to focus on careers with affordable immigrant labor offering gardening, child care, and other services. Many illegal immigrants aren’t fluent in English, so they don’t compete for the same jobs as native-born workers. Another factor behind the lack of direct competition is the higher educational level of native-born Americans. In 1960 about half of U.S.-born working-age adults hadn’t completed high school, while the comparable figure today is about 8 percent.

The real downside concern is on the fiscal side of the immigrant ledger. Yes, more taxes would go into Social Security, Medicare, and the like with legalization, but more people would qualify for Medicaid, welfare, and other benefits. At the local level, many school districts are strained financially from educating immigrant children, legal and illegal. That said, the prospect of fiscal costs would diminish as newly legalized immigrant workers move freely around the country seeking jobs, entrepreneurs are comfortable expanding their payrolls, and immigrant parents push their children to live the American Dream. “Over time, as entrepreneurs emerge and families are better able to get their kids through high school and college, you’re reducing the long-run fiscal claim of the group,” says Hanson.

There is no economic evidence that making roughly 6 percent of the workforce illegal will benefit the economy. Plenty of research supports the opposite case. A fast track to legality offers Washington a rare twofer: a just move that’s economically efficient.

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