Immigration A Net Plus? Of Course. But…

Yesterday, the President’s Council of Economic Advisers released a report titled “Immigration’s Economic Impact.” The report was intended to support the administration’s case for comprehensive immigration reform that would create a guest worker program and legalize the millions of illegal immigrants now residing here.
The CEA report is brief–eight pages with bibliography and charts–and easily digested. Based on my review, it uses its sources fairly. It presents a generally positive view of immigration’s net economic impact; key findings include:

1. On average, US natives benefit from immigration.***
2. Careful studies of the long-run fiscal effects of immigration conclude that it is likely to have a modest, positive influence.
3. Skilled immigrants are likely to be especially beneficial to natives.***

This New York Times article is a fair summary of the high points of the report.
What is extraordinary about the CEA document, in the context of the current debate, is that it expressly disavows any effort to assess the economic impact of illegal immigration on the economy. Footnote 1 states:

This document will use “immigrant” and “foreign born” interchangeably. The terms encompass both legal and illegal migrants. Because it is difficult to determine the legal status of migrants in standard data sets, the economics literature generally assesses all foreign-born workers together.

So the report conflates all immigrants, legal and illegal. (It is interesting that the Times’ account of the CEA report fails to mention this fact.) The importance of this commingling is suggested by this chart, which is appended to the report:
CAEChart389.jpg
The introduction to the chart helpfully points out that “Foreign-born workers are concentrated at the top and bottom of the education distribution relative to native-born workers.” That’s obviously correct: immigrants comprise 36% of those in the labor force with less than a high school education, and a whopping 41% of those with science Ph.Ds. Obviously, a large percentage of those in the former category are illegals, while substantially all of those in the latter category are legal. I’ve never heard of a Ph.D. from India swimming across the Rio Grande.
Conflating these two groups is completely pointless. No one has ever doubted that Ph.D.s in math, biology and physics contribute to our economy. The report acknowledges this obvious fact. For example, with respect to the impact of immigration on government finance:

From this long-run point of view, the NRC study estimated that immigrants (including their descendants) would have a positive fiscal impact–a present discounted value of $80,000 per immigrant on average in their baseline model (in 1996 dollars). The surplus is larger for high-skilled immigrants ($198,000) and slightly negative for those with less than a high school degree (-$13,000).

Put aside for a moment the futility of trying to estimate the taxes paid and benefits received not just by an immigrant (legal or illegal), but by his or her “descendants.” Even on this calculation, the net fiscal impact of low-skilled immigrants, most of whom, I think it’s safe to say, are illegal, is negative.
My biggest concern about allowing millions of illegal immigrants to remain in this country, while permitting many more to enter via a guest worker program–or further illegality, which, having been forgiven once again, will no doubt be encouraged–is its impact on the wages of relatively unskilled American labor. The CAE report acknowledges the legitimacy of this issue:

Fully 90% of US native-born workers are estimated to have gained from immigration. ***
[B]ased on Chart one [the chart reproduced above], one might expect the remaining least-skilled natives to face labor market competition from immigrants. Evidence on this issue is mixed. Studies often find small negative effects of immigration on the wages of low-skilled natives, and even the comparatively large estimate reported in Borjas (2003) is under 10% for immigration over a 20 year period.

This subject, and others that bear on the wisdom of legitimizing 12 million or more illegals, and importing many more low-skilled workers for the indefinite future, need to be fully and candidly debated. So far, this has not happened. The first version of “comprehensive immigration reform” was written behind closed doors, bypassed the committee hearing process, was protected from amendments, and–if its supporters had had their way–would have been rushed through the Senate in a matter of days. Version two is now being worked on. Once again, the backers of comprehensive reform intend to enact the bill on an expedited track, without hearings.
This is a topic that requires thorough analysis and debate. The fact that the administration’s eminent economists can only find a net positive effect on our economy and on our fiscal future–although not on our least-skilled workers–by conflating legal and illegal immigrants, Ph.D.s and roofers, does not suggest that we should be in any hurry to enact “reform” legislation of the sort now being proposed.
UPDATE: A reader at the Forum links to interesting and relatively technical commentary on the CEA report by Professor George Borjas, who has done some of the most important work in the area, here and here.
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