Transcript Slide 1

Raising the Floor for American Workers
The Economic Benefits of Comprehensive Immigration Reform
by Dr. Raúl Hinojosa-Ojeda
January 2010
(1)
The U.S. economy cannot afford to continue with the current
broken immigration system. Our border and interior enforcement policies
are not cost-effective and have not resulted in deterring undocumented
low wage immigration, but rather have only pushed problems further
underground.
“When you try to fight economic reality, it is
at best an expensive and very, very difficult
process and almost always doomed to
failure”
Michael Chertoff, DHS Secretary
(2)
Reaping the economic benefits of legalizing the nation’s
undocumented workers is now an economic necessity, not simply a moral
and civil rights imperative. Providing legal status has very positive effects
on the wages of both recently legalized and native workers, and as well as
the economy as a whole.
(3)
This report presents the economic impact results of moving
from the current “broken immigration/enforcement only” scenario, to a
scenario of finally implementing real comprehensive immigration
reform.
• A legalization scenario would minimally generate over $1.5 trillion in additional GDP
growth over the next decade, compared to the status quo, while mass deportation would
reduce GDP of the U.S. by nearly twice that amount (-$2.05 trillion over ten years).
• As in the case of IRCA, legalization also actually reduces the demand for immigration by
raising wages of the recently legalized, thus reducing the demand for easily exploitable, low
wage migrants.
• This scenario modeling can thus show why enforcement without legalization cannot
reduce illegal immigration and why legalization makes the need for costly enforcement
approaches less necessary.
• While these “static effects” are impressive, these model results are only the most
conservative of estimates since they do not incorporate the much more powerful “dynamic
effects” of post-IRCA savings, investments, and related productivity growth.
Figure 1: Apprenhensions and Expenditures
1800
4500
1600
4000
1400
3500
1200
3000
1000
2500
Expenditures (in real 1990$ Millions)
800
2000
600
1500
400
1000
200
500
0
0
19891990199119921993199419951996199719981999200020012002200320042005200620072008
Source: U.S Department of Homeland Security, Office of Immigration Statistics
Apprehensions (in thousands)
Figure 10: US Unemployment Rate: 1980-2008
12
10
IRCA implementation: 1988-1992
Percentage
8
6
4
2
0
Figure 11: US Workers and Legalized
Mean Hourly Wages: 1988-1992
and First Job
12
10
8
First US Job
6
1988 (Application)
1992
4
2
0
U.S. Workers
Legalized Workers
Figure 12: Males and Female Legalized Workers: Wages at First Job, 1988
and 1992
10
9
8
7
6
First US Job
5
1988 (Application)
1992
4
3
2
1
0
Male
Female
Figure 13: Wages of Legalized Workers by State of Residence
$9.50
$9.00
$8.50
$8.00
$7.50
First U.S. Job (1982)
At Application (1988)
In 1992
$7.00
$6.50
$6.00
$5.50
$5.00
California
Texas
New York
Other
Figure 14:Wages of Legalized Workers and English Skill
$11.00
$10.50
$10.00
Legalized
Workers
$9.50
Not at all
$9.00
Not very
well
$8.50
$8.00
Very well
$7.50
$7.00
$6.50
$6.00
$5.50
$5.00
First U.S. Job (1982)
At Application (1988)
In 1992
Figure 15:Wages of Legalized Workers and Years of School
$11.50
$11.00
$10.50
$10.00
$9.50
$9.00
6 or less
$8.50
7 to 11
12 or more
$8.00
Legalized Workers
$7.50
$7.00
$6.50
$6.00
$5.50
$5.00
1982
1988
1992
Figure 16: Yearly Earnings After IRCA
$38,000
$34,000
$30,000
$26,000
U.S. Workers
Legalized Workers
$22,000
$18,000
$14,000
$10,000
Individual Earnings 1991 (median)
Family Earnings 1991 (median)
Figure 17: Apprehensions Rate Decrease Post IRCA
800
700
600
500
Arrest per officer
400
Arrest per 1,000 Linewatch-Hours
300
200
100
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Source: U.S Immigration and Naturalization Service
Figure 18: Mexican Undocumented Emigration Decreases Post
IRCA
25
20
Axis Title
15
Legal
Undocumented (apprenhensions)
Contract Labor (H2 Workers)
10
5
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
0
Source: U.S Immigration and Naturalization Service
Legalization Cohort Experienced
Lower Poverty Levels and More
Home Ownership
Figure 20: Wages of Legalized Immigrants Pre and Post IRCA
40
36
32
28
24
20
% Before IRCA
% After IRCA
16
12
8
4
0
$2-4
$4.01-6
$6.01-8
$8.01-10
$10.01-12 $12.01-14 $14.01-16 $16.01-18 $20.01-22
$24.01+
By
commission
Figure 21: Occupations Held Pre and Post IRCA
24
20
16
12
% Before IRCA
% After IRCA
8
4
0
Figure 22: Benefits in Jobs Pre and Post IRCA
80
70
60
50
40
30
20
10
0
% Before IRCA
% After IRCA
YES
NO
Figure 23: Percentage of Filed Taxes Pre and Post IRCA
60
50
40
YES
30
NO
20
10
0
% Before IRCA
% After IRCA
Figure 24: School Enrollment Pre and Post IRCA
40
35
30
25
Before IRCA
20
After IRCA
15
10
5
0
No
Yes
Not Specified
Figure 25: Use of Financial Services Pre and Post IRCA
60
50
40
30
Before IRCA
After IRCA
20
10
0
Remittance
Bank
Account
Health
Insurance
None
Store Credit Credit Cards
Car
Insurance
Home Loans Auto Loans
Other
Insurance
Figure 26: Property Ownership Pre and Post IRCA
60
50
40
Before IRCA
30
After IRCA
20
10
0
None
Home
Business
Land
Apartments
Other
Yes (not specified)
Figure 27: Business Ownership Pre and Post IRCA
60
50
40
Before IRCA
30
After IRCA
20
10
0
No
Yes
•Scenario 1 - Mass deportation/closed border with Mexico. In this scenario, over 4 million migrant
workers (and their dependents) are deported, or alternatively, never allowed to enter the US.
•Scenario 2: Guest worker program facilitating the entry of more exploitable workers from Mexico,
without legalization. In this scenario, the U.S. creates a legal Guest Worker program that allows continued
immigration at current wage rates, but only on a temporary basis. New guest workers or the current
undocumented would not be granted a path to citizenship, and would have limited labor rights. In this
scenario, the inflow of migrants becomes more responsive to the given wage differential, as the cost of border
crossing and the risk of apprehension decline. Because of its temporary nature, a new guest worker plan
with limited labor rights would keep U.S. immigrant wages low without a built up of human capital or labor
productivity.
•Scenario 3: Legalization of Migration. The U.S. enacts immigration reform that allows undocumented
immigrants to come forward, register, pay an application fee, a fine, and gain legal status. Applicants would
be required to learn English and pay all back taxes owed. As in IRCA, wages of the newly legalized would
rise as would their human capital, consumption, investment and productivity. Legal migration would be
allowed based on rising demand for labor, but with full labor rights and at a higher wage. Spending on
interior immigration enforcement would decrease because the number of undocumented immigrants has
decreased significantly, allowing for increased spending on enforcing labor/wage/hour/OSHA laws. Border
enforcement expenditures would level off or decrease to the extent that spending on infrastructure has already
taken place and the number of unauthorized crossings would decline. The common theme of these results is
that legalization results in greater income gains AND less demand for (legal) migration.
Figure 28: GDP Alternative Scenarios
(Billions over 10 years)
1,500.0
1,000.0
Billions of 2008 dollars
500.0
0.0
Deportation
Neo-Bracero
-500.0
Series1
-1,000.0
-1,500.0
-2,000.0
-2,500.0
Legalization
Alternative Scenarios
Figure 29:Migration and Remittances
1000.000
40
30
500.000
20
0.000
DWAM
-500.000
Neo-Bracero
Legalization
10
0
-10
-1000.000
Axis Title
-20
Mexico - Unskilled
-1500.000
-30
Skilled
Remittances to MX
-40
-2000.000
-50
-2500.000
-3000.000
-60
-70
-80
-3500.000
-90
-4000.000
-100
Figure 30: Wages of Native and Immigrant Workers
6000
5000
4000
US (native)
3000
US (Mexican migrant)
Mexico
2000
1000
0
DWAM
Neo-Bracero
Legalization
Unskilled
-1000
DWAM
Neo-Bracero
Skilled
Legalization
Figure 32: Real Return to Mexico Productive Assets
14
12
10
8
6
Mexico - Capital
Land
Natural Resources
4
2
0
DWAM
-2
-4
Neo-Bracero
Legalization
Figure 31: Real Return to U.S. Assets
4
3
2
1
0
DWAM
Neo-Bracero
Legalization
US - Capital
-1
Land
Natural Resources
-2
-3
-4
-5
-6