In the coming days the Congressional Budget Office (CBO) will issue a “score” (price tag) on the Senate immigration bill. Many expect that they will come up with a number that shows we gain more than we spend by reforming our immigration laws. However, at this point, the most expansive scenario contemplated by the CBO is focused on future flows of immigrants into the United States and does not include the economic benefits stemming for creating a pathway to legal status and eventual U.S. citizenship for the millions of unauthorized immigrants already living in the country. If the CBO adopts this sort of approach in scoring the immigration reform bill they could miss the economic benefits associated with legalization, which are likely to be substantial believe many economists.

Previous immigration reform proposals in 2006 and 2007 evaluated by the CBO showed that revamping the legal immigration system would result in a boost to the economy. However, the fiscal and economic impact of legalizing the undocumented population (which much of the specialized literature shows would be positive) was not adequately addressed then either.

Immigrants, be they newly arrived through legal channels or newly empowered through legalization—do not simply pay income taxes and consume public benefits. They are workers who add value to the economy through what they produce. They are consumers and entrepreneurs who create jobs through their purchasing power and the businesses they establish, both of which sustain U.S. jobs and generate new streams of tax revenue.

Should CBO keep all of these variables in mind as it scores the immigration reform bill now making its way through the Senate?

 What do you believe the economic impact of immigration reform might be on the U.S. economy?

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  • Chris Stiffler

    When “scoring” the immigration bill, we must take into account the impact on labor market efficiency and overall
    spending in the economy. Providing a pathway to citizenship would increase economic productivity and wages as millions of previously-clandestine workers would then be able to work in the open, obtain loans, increase their human capital, and mobilize to more efficient work places without fear of deportation.

    Numerous studies have documented the increase in wages that naturalized
    immigrants earn over non-naturalized. The effect would arguably be bigger for undocumented labor. Controlling for other factors that influence wages like education, undocumented workers currently earn between 10 and 25
    percent less than their naturalized counter parts. Providing a pathway to citizenship would eliminate that pay reduction. By removing the uncertainty of unauthorized status, it allows immigrants to raise their incomes and improve the efficiency of the labor market. It also encourages both them and their employers to invest in education and training that eventually leads to higher productivity and wages. Legalized immigrants also tend to open more bank accounts, increase labor mobility, buy
    homes, and start new businesses.

    Increasing previously unauthorized workers’ wages by 15% would translate into approximately $4,000 a year per worker. Adding that much additional spending into the U.S. economy would induce the creation of thousands more jobs. These induced effects should be accounted for when CBO estimates the costs and benefits of the immigration reform bill.

    Chris Stiffler
    Colorado Fiscal Institute