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A report released recently suggests that two conservative senators are working on a plan to “dramatically scale back legal immigration,” reducing the one million immigrants who legally enter the country to about half that in ten years. These lawmakers argue “that being more deliberate about who we let into our country will raise working-class wages,” and will help the US economy.
But economic research time and again has shown that drastic cuts to legal immigration would be a lose-lose proposal for both the United States and global economy.
Director of Migration, Displacement, and Humanitarian Policy and Senior Fellow
Here’s what we know:
Again and again, advocates of slashing legal immigration have promised economic benefits. They did not deliver. Several times in history, vast cuts to legal immigration have won the day. In the 1880s, advocates of these cuts promised that barring Chinese immigrants would raise wages. In the 1920s, they promised that barring Italian and Jewish immigrants would raise wages. In the 1960s, they promised that barring authorized Mexican workers would raise wages. But economists have found that such promises have not been kept. In each case, employers adjusted to the missing workers in ways other than substantially bidding up wages, such as by shifting to production technologies that use less labor.
The economic consensus is that the effects of legal immigration on the economy are either negligible or positive. Last year the National Academy of Sciences brought together the leading economists who study immigration. They found that the overall effect of immigration, both unauthorized and authorized, on US wages has been roughly zero. They found that the fiscal benefits of second-generation immigrants offset any fiscal costs of the first generation of immigrants. They did not count—because it’s difficult to measure—the job creation and tax revenue generated by immigrants indirectly. This includes their effect on overall economic growth, most obvious in the 40 percent of the Fortune 500 companies that were founded by first or second-generation immigrants.
Immigration can and does affect the distribution of income. The number of native workers who compete directly with immigrants is very small, but not zero. However, there are dramatically more effective and less costly tools to assist those people, without sacrificing the gains. These include, as Lant Pritchett of Harvard University points out, the Earned Income Tax Credit and job training programs.
Less talked about is how slashing US immigration would be a loss not just for the US economy but for the world economy as well. Economists have shown that legal immigrants in the US spur overseas investment, trade, innovation, and even help spread democratic norms around the world. These types of interconnectedness bring direct economic benefits to US workers. And the United States benefits from a stable, prosperous, and more democratic developing world.
The latest proposals to massively restrict legal immigration are not new. They have arisen repeatedly in US history. They have always been sold to the public as a simple way for the government to create high-paying jobs for Americans. The consensus of economic research is that restrictions on legal migration are neither a simple nor effective policy for that purpose.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.