The Economic and Fiscal Consequences of Immigration (2017) / Chapter Skim
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Pages 1-14
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From page 1... ...
Recent refugee crises further highlight the complexity of immigration and add to the urgency of understanding the resultant economic and societal impacts. One set of headline questions concerns the economy, specifically jobs and wages: To what extent do the skills brought to market by immigrants complement those of native-born workers, thereby improving their prospects; and to what extent do immigrants displace native workers in the 1 The United States is about in the middle of the range for OECD countries in terms of the percentage of its population that is foreign born.
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each year; after the 1990 Immigration Act took effect, legal admissions increased to just under 800,000 per 2 This report uses the term "immigrant" synonymously with the term "foreign-born." This follows common practice of referring to the foreign-born population counted in a census or estimated by a survey as "immigrants," even though technically this population often includes foreign students, temporary workers on H-1B and other visas, and migrants who entered the country surreptitiously or overstayed legal visas. 3 The full text of the panel's charge is reproduced in Chapter 1.
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Macroeconomic conditions have also changed: • The New Americans was released during a prolonged period of economic expansion; annual real gross domestic product (GDP) growth was between 2.7 and 4.8 percent in 1992-2000.
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LABOR MARKET AND OTHER ECONOMIC IMPACTS Economic theory provides insights into the mechanisms whereby immigration may impact wages and employment in a receiving country. By increasing the supply of labor, an episode of immigration is predicted to reduce the wages of workers already in the labor market who are most similar to the new arrivals; the incomes of others may increase, either because immigrants' skills complement their own or because the returns on capital increase as a result of changes to the labor force.
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Evidence suggests that immigrants locate in areas with relatively high labor demand and wages for the skills they possess and that immigrants are more willing than natives to relocate in response to changes in labor market conditions. If immigrants predominantly settle in areas that experience the highest wage growth, the observed wage growth (or dampened wage decline)
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From page 6... ...
Moreover, new arrivals and their descendants are a source of demand in key sectors such as housing, which benefits residential real estate markets. To the extent that immigrants flow disproportionately to where wages are rising and local labor demand is strongest, they help equalize wage growth geographically, making labor markets more efficient and reducing slack.
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By contrast, dynamic projection models can be used to compute the net present value of tax contributions and government expenditures attributable to immigrants and, in some analyses, their descendants projected over their life cycles. Such analyses involve modeling the impact of an additional immigrant on future public budgets.
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From page 8... ...
data on the first and second generations analyzed by the panel reveal numerous insights about the fiscal impacts of immigrants at the national level: • Immigrant and native-born populations have historically been and remain very different in terms of their age structure. For the 1994 2013 analysis period, the first generation was heavily concentrated in working ages.
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From page 9... ...
• Examining the per capita fiscal impact in an alternative way that reflects the age structure of each generational group as it actu ally existed in each year during the 1994-2013 analysis period produces a different perspective on the data. For this analysis, the panel included net fiscal costs of dependent children as part of the calculations for their parent's generation.
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From page 10... ...
When a marginal cost allocation of public goods is assumed instead of the average cost allocation used in the fis cal impact numbers reported above, the total net fiscal impact of the first generation group accounts for less than 4 percent of the total deficit, while still accounting for 17.6 percent of the sample population. 6 Again, in this analysis, dependent children are included in the generational group of the parent to which they are assigned.
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From page 11... ...
, the fiscal impacts of immigrants are generally positive at the federal level and negative at the state and local levels. State and local governments bear the burden of providing education benefits to young immigrants and to the children of immigrants, but their methods of taxation recoup relatively little of the later contribu tions from the resulting educated taxpayers.
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These estimates imply that the total annual fiscal impact of first generation adults and their dependents, averaged across 2011-2013, is a cost of $57.4 billion, while second and third-plus generation adults create a benefit of $30.5 billion and $223.8 billion, respectively. By the second generation, descendants of immigrants are a net positive for the states as a whole, in large part because they have fewer children on average than do first generation adults and contribute more in tax revenues than they cost in terms of program expenditures.
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From page 13... ...
, achieve different occupational outcomes, and generate at least slightly different fiscal impacts compared with the general population. Perhaps the most important of the data recommendations for advancing research on immigration identified in this report -- and also recommended in our sister panel's report (National Academies of Sciences, Engineering, and Medicine, 2015)
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