immigration and the u.s. economy where do we go from here? pia orrenius, ph.d. federal reserve bank...
TRANSCRIPT
![Page 1: Immigration and the U.S. Economy Where do we go from here? Pia Orrenius, Ph.D. Federal Reserve Bank of Dallas The Houston Economics Club October 18, 2007](https://reader035.vdocuments.us/reader035/viewer/2022070408/56649e535503460f94b490c3/html5/thumbnails/1.jpg)
Immigration and the U.S. EconomyWhere do we go from here?
Pia Orrenius, Ph.D.
Federal Reserve Bank of Dallas
The Houston Economics Club October 18, 2007
Disclaimer: the views expressed herein are those of the presenter; they do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.
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Overview
• Immigration and
– Population, labor force growth
– Cyclical, regional effects
– U.S. workers
– Taxpayers
– Policy
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U.S. immigration, population, and labor force growth
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The foreign-born population islarger than ever before
Source: Census Bureau
0
5
10
15
20
25
30
35
40
1850 1870 1890 1910 1930 1950 1970 1990 20060
2
4
6
8
10
12
14
16Millions Percent
Number
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And foreign-born share of population headed toward historic peak
Source: Census Bureau
0
5
10
15
20
25
30
35
40
1850 1870 1890 1910 1930 1950 1970 1990 20060
2
4
6
8
10
12
14
16Millions Percent
Percent of total population
Number
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Three out of ten foreign-born are undocumented
Legal permanent residents
32%
Undocumented immigrants30%
Naturalized citizens35%
Legal temporary residents
3%
Source: Pew Hispanic Center (2005)
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Illegal inflows rival legal
Source: Jeffrey Passel and Roberto Suro, Pew Hispanic Center (2005)
0
200
400
600
800
1000
1200
1400
1600
1990 1992 1994 1996 1998 2000 2002 2004
Legal PermLegal TempUndoc
Thousands
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Increasingly bimodal education distribution of foreign-born workers
0
5
10
15
20
25
30
35
0 to 11 Years 12 Years(High School
Grads)
13 to 15Years
16 Years(CollegeGrads)
Master,Professional
Degree
Doctorate
19802004
Percent
Source: Ottaviano & Peri, 2005
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0 20 40 60 80 100
Legal
Protective service
Total
Healthcare support
Construction and extraction
Computer and mathematical
Architecture and engineering
Percent
Foreign-born share of employment growth by selected jobs
2003-2006 Source: BLS
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Share of workers who are undocumented by occupation
0
5
10
15
20
25
30
Farming Cleaning Construction Food Prep. Production Transport Other
Overall share
4.9
Percent
Source: Pew Hispanic Center (2005)
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Projected foreign-born contribution to labor force growth significant as baby boomers retire
Source: PEW Hispanic Center
05
101520253035404550
2010 2020 2030 2040 2050
Percent
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Foreign-born share of labor force growth by census division
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U.S. immigration, the business cycle and regional growth
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40
50
60
70
80
90
100
Undocumented Migrants Legal Immigrants Natives
Percent
Source: Pew Hispanic Center (2005)
Immigrants work moreLabor Force Participation: Men
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40
50
60
70
80
90
100
Undocumented Migrants Legal Immigrants Natives
Percent
Correction: male immigrants work moreLabor Force Participation: Women
Source: Pew Hispanic Center (2005)
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Unemployment rate of foreign-born, native-born very similar
3
4
5
6
7
8
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Percent
Foreign-born
Native born
Source: BLS
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Immigrants are more mobile, responsive to economic growth
• More likely come in good times, leave in bad times– Flexibility allows for faster economic growth, more
efficient use of resources – Lower unemployment
• Some immigrant groups are even more mobile once here– Move to where the jobs are
• Fewer regional discrepancies in growth– Lower unemployment, regional convergence
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Skilled flows pro-cyclical
0
50
100
150
200
250
92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06
Thousands
Source: Department of Homeland Security
H1-B petitions approved for initial employment
Peak
Post-recession
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“Real-time” immigration pro-cyclicalApprehensions along southwest border
Source: DHS
0
20
40
60
80
100
120
140
160
180
200
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Thousands, SA
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Apprehensions fall as demand in construction weakens
0
20
40
60
80
100
120
140
160
180
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-200
-150
-100
-50
0
50
100
150
200Apprehensions Construction Employment
Thousands, SA
Source: DHS; BLS
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Among less-educated, undocumented immigrants more mobile than natives
0
5
10
15
20
25
State-to-State International
US BornIllegals
Percent
Source: Bean et al, 2007
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Among Mexican immigrants, illegals more mobile than legals
0
5
10
15
20
25
State-to-State International
LegalIllegal
Percent
Source: Bean et al, 2007
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0
5
10
15
20
25
30
35
State-to-State International
LegalIllegal
Percent
Among Chinese immigrants, illegals more mobile than legals
Source: Bean et al, 2007
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U.S. immigration andthe effect on natives
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Effects of immigration on natives• Immigration has effects similar to trade
– Greater specialization, efficiency– More choice, innovation– GDP rises, GDP per capita rises
• Who benefits?– Immigrants
• Bulk of GDP increase goes to them• Natives get $30 to $60 billion
– Consumers• Prices of certain goods and services fall
– Capitalists (investors, producers, homeowners)
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Effects of immigration on natives
• Who loses?– Wage effects
• Low-skilled native workers
• Prior immigrants
– Fiscal effects• Taxpayers
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300
400
500
600
700
800
900
1000
1100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
BA degree & higher$/week
Some college, Associate degree
Less than high school diploma
Source: BLS
Wages of less-skilled workers in long-run stagnation
Real median weekly earnings by education level
High school diploma, no college
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300
400
500
600
700
800
900
1000
1100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
BA degree & higher$/week
Some college, Associate degree
Less than high school diploma
Source: BLS
Wages of less-skilled workers in long-run stagnation
Real median weekly earnings by education level
High school diploma, no college
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Wage Effects of Immigration
• Models with large adverse effects (Borjas 2003)– Assume perfect substitutability, no change in K– 3% drop in native earnings on average– 9% drop for natives who are low-skilled
• Other models (Ottaviano & Peri 2006)– Allow imperfect substitutability, change in K
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Native-born labor force change, by education
-1787
-655
3231
7428
-3000 -1000 1000 3000 5000 7000 9000
Less than highschool
High school grad
Some college
College grad
Native
Source: 1996-2006; BLS, Haver AnalyticsThousands
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Native and foreign-born labor force change, by education
-1787
-655
3231
7428
2151
1983
1020
2904
-3000 -1000 1000 3000 5000 7000 9000
Less than highschool
High school grad
Some college
College grad
Foreign-born
Native
Source: 1996-2006; BLS, Haver AnalyticsThousands
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Wage Effects of Immigration
• Models with large adverse effects (Borjas 2003)– Assume perfect substitutability, no change in K– 3% drop in native earnings on average– 9% drop for natives who are low-skilled
• Other models (Ottaviano & Peri 2006)– Allow imperfect substitutability, change in K– 2% rise in native earnings on average– 1% drop for low-skilled natives– Big declines for prior immigrants
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Fiscal impact of immigration
• Fiscal impact– Tax contributions minus transfer payments and cost of public services
received– Net present value
• Tax contributions include– Payroll, income, sales, property taxes
• Majority of illegal immigrants have payroll taxes withheld
• Public transfers and services include– Education, health care, welfare (EITC, TANF), police and fire
• Estimates– Gold standard: National Research Council (1997)– Recent work: Robert Rector’s piece for Heritage
• Household-level analysis
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NRC: Immigrants have positive fiscal impact when including their descendants
Level of Education
1996 Dollars, NPV
-50000
0
50000
100000
150000
200000
250000
Overall < High School High School > High School
Source: National Research Council, The New Americans (1997)
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-100,000
-50,000
0
50,000
100,000
150,000
< High School High School > High School
Level of Education
NRC: But immigrants have a negative fiscal impact in their lifetime
1996 Dollars, NPV
Source: National Research Council, The New Americans (1997)
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Immigrant households rely moreon public assistance
Percent
0
5
10
15
20
25
30
35
Native Immigrant
Household participation in public assistance programs
Source: Center for Immigration Studies, March 2005 Current Population Survey
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U.S. immigration policy
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Walls on the Southern border are not new…
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Where do we go from here?
• More enforcement– No-match program, Real ID Act, worksite raids– Local, state law enforcement cooperation w feds
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0
500
1000
1500
2000
2500
3000
3500
4000
2002 2003 2004 2005 2006 2007
Criminal ArrestsAdministrative Arrests
Worksite enforcement jumps in ‘06, ‘07
Source: DHS
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Where do we go from here?
• More enforcement– No-match program, Real ID Act, worksite raids– Local, state law enforcement cooperation w feds
• Less chance of reform– Issues need to be addressed
• H-2B, H-1B visas, green card quotas outdated, insufficient• Existing illegal immigrants, inflows
– Piecemeal reform?• Ag Jobs• DREAM Act
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No-match letter program: new safe harbor guidelines could have big impact
• SSA sends no-match letters to employers with workers whose SS numbers don’t match their names
• Under new rules, employers have to fire workers with unresolved no-matches within 90 days
• If caught, employers assumed to have ‘constructive knowledge’ and may face stiff penalties– Massive interior enforcement policy, could impact millions of
workers if enforced– Currently under preliminary injunction in U.S. District Court
• If implemented, no-match could substantially grow the shadow economy
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Shadow economy small in U.S.
0
5
10
15
20
25
30
Italy Spain Sweden Denmark Germany France UK USA Switzerland
Percent of GDP
Source: Schneider (2000)
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…partly due to relatively low tax burden
0
5
10
15
20
25
30
Italy Spain Sweden Denmark Germany France UK USA Switzerland0
10
20
30
40
50
60
70
80
90
Percent of GDPCumulative tax rate %
Source: Schneider (2000)
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Conclusion
• Foreign-born important role in economic growth
• Benefits of immigration extensive
• Labor market impacts limited; fiscal impact sizable
• More enforcement without reform will grow the shadow economy; worsen fiscal effects
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Where undocumented immigrants live
Other57%
California17%
Florida6%
New York4%
Georgia3%
Texas10%
Arizona 3%
Source: Pew Hispanic
Center (2005)
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Share undocumented immigrant workers by industry
0
5
10
15
20
25
Overall Proportion
4.9
Source: Pew Hispanic
Center (2005)
Priv. Households
Food mfg.
Ag. Furniture mfg.
Const. Textiles Food Svcs.
Admin & Support
Hotels Other mfg.
Percent
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Source: BLS (2006)
0 5 10 15 20 25 30 35 40
Legal occupations
Protective service occupations
Total
Food preparation and servingrelated occupations
Production occupations
Construction and extractionoccupations
Building and grounds cleaningand maintenance operations
Farming, fishing, and forestryoccupations
Percent
Foreign-born share of employment by sector
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Job-based green cards remain in short supply
0
100
200
300
400
500
600
700
800
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Temp Work VisasJob-Based Green Cards
Thousands
Source: Department of Homeland Security, Department of State
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Fiscal and wage impact of immigration: Take-Aways
• Fiscal impact depends on education level and time horizon– High school graduates or below impose net costs– Almost all costs are made up for by descendants
• Wage impact is among prior immigrants, less so natives– Market-driven selection of immigrants is key
• Complement native labor
– Flexibility is important in allowing K, L to adjust• Mitigates adverse effects
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By JOEL MILLMAN September 18, 2006