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Trump's Immigration Views Aren't 100% Balderdash

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Donald Trump can thank me later. Drawing from a new study on the economic effects of immigration, I'm going to make the best possible case for the positions he's taking as the Republican nominee for president. 

Do immigrants take jobs away from native-born Americans? Do they lower wages? Do they drive up tax bills?

QuickTake Immigration Reform

Trump believes the answer to each question is yes, as he showed in a fiery speech last month in Phoenix, Arizona. Since I’m trying to help Trump out here, I’ll highlight the parts of the immigration study, released last week by the National Academies of Sciences, Engineering, and Medicine, that don’t prove him entirely wrong.

The authors of the report, "The Economic and Fiscal Consequences of Immigration," reviewed hundreds of previous studies, heard numerous academic presentations and ran calculations of their own, based on published research models.

On jobs, for example, the 495-page report finds that immigrants, who account for 16 percent of total hours worked, sometimes lower the employment rate of prior immigrants. Overall, though, immigrants have had little effect on the ability of native-born Americans to find jobs.

American teenagers who dropped out of high school were found in one study to have worked 3 percent fewer hours on average, possibly because of the availability of immigrant labor (though teens' ability to find jobs wasn't affected).

As for wages, the authors conclude that low-skilled immigrants have a short-term negative effect on the pay of other low-skilled workers. According to one model, immigrants have lowered others' wages by 5.2 percent. George Borjas, a Harvard professor known for his work on labor markets and immigration, tells me in an e-mail that the 5.2 percent translates into a $500 billion wage loss. Who's harmed? Mostly prior immigrants, followed by American high-school dropouts.

Those lower wages, however, generated an immigration surplus of $54 billion, which results from the goods and services that immigrants produce at lower cost to their employers. The net result is $54 billion in higher profit for stockholders and other owners of capital.

When researchers examined actual experiences -- the studies looked at numerous years and locations -- they found in two cases that a 1 percent increase in the labor supply caused native-born wages to decline by an average of 1.7 percent, and by less than 1 percent in most of the other studies. In some cases, workers received slight pay increases. When measured over 10 years, however, immigrants had little or no effect on wages.

QuickTake Skilled Immigrants

The story is different for high-skilled immigrants. Some studies found that they adversely affected the wages of selected groups, including holders of doctorates in a few fields, and that some professionals left those fields as a result.

But for the most part, high-skilled immigrants boost the wages of educated Americans. The reason could be that immigrants complement the skills of the native-born. Or it could be that innovations brought by immigrants raise the productivity of other workers, resulting in pay increases.

High-skilled immigrants are more innovative than native Americans, possibly because of their concentration in science and engineering. The presence of immigrant scientists seems to motivate American scientists, whose patentable discoveries have increased with the influx of highly educated immigrants. The patents of immigrants, however, were commercialized more often.

One study says immigrants represent 25 percent of new business owners, possibly because they couldn't find jobs with their foreign degrees so they started their own companies instead. The study concludes: "The prospects for long-run economic growth in the United States would be considerably dimmed without the contributions of high-skilled immigrants."

What about stress on government budgets? Here, the study finds evidence that immigrants do cost state and local governments more than they pay in taxes, mostly to educate immigrants' children.

In 2013, the total fiscal burden at all levels of government for 55 million first-generation immigrants (legal and unauthorized) was $279 billion, not a trivial figure.

The effect on the federal government is positive because undocumented immigrants aren't eligible for medical insurance through Obamacare, or for food stamps and other social-welfare benefits (although their American-born children qualify). Illegal immigrants also contribute substantially more to Social Security and Medicare than they withdraw. 

But even on the state and local level, after about 16 years in the U.S., immigrants' contributions turn positive. The second-generation (native-born children of immigrants) add a net $30 billion to government coffers. And third generations pay far more in than they take out of government, contributing $223 billion a year.

The costs to state and local government are offset by gains elsewhere in the economy. Immigrants account for about a third of household formation, for example, and thus are reliable consumers. This decade, they are expected to account for more than a third of home-ownership growth. Their presence in the labor market reduces the prices of child care, food preparation, house cleaning and construction for others.

So Trump is right that undocumented immigrants with little education push down the wages of some other workers, but the losers are largely prior immigrants and American high-school dropouts. He's also right that illegal immigrants cost state and local governments some money.

But Trump also says that what matters on immigration policy is whether it improves the well-being of the American people. Looking at the effects of immigration over multiple generations, and across all types of workers and employers, the study overwhelmingly shows that it does. Sorry, Donald, I tried.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net