immigrants in the u.s. economy: a host country perspective
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Immigrants in the U.S. Economy: A Host Country Perspective. Pia Orrenius, Ph.D. Federal Reserve Bank of Dallas. Sam Houston State University Huntsville, Texas April 12, 2008. Disclaimer: The views expressed herein are those of the presenter; - PowerPoint PPT PresentationTRANSCRIPT
Immigrants in the U.S. Economy: Immigrants in the U.S. Economy: A Host Country PerspectiveA Host Country Perspective
Pia Orrenius, Ph.D.Pia Orrenius, Ph.D.
Federal Reserve Bank of DallasFederal Reserve Bank of Dallas
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.
Sam Houston State UniversityHuntsville, Texas
April 12, 2008
OverviewOverview
ImmigrationImmigration Population, labor force growthPopulation, labor force growth
Changing characteristics of foreign bornChanging characteristics of foreign born
Reasons for coming: Cyclical, regional effectsReasons for coming: Cyclical, regional effects
U.S. workersU.S. workers
TaxpayersTaxpayers
PolicyPolicy
U.S. Immigrants:U.S. Immigrants:How many are there? How many are there?
The foreign-born population isThe foreign-born population islarger than ever beforelarger 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
And foreign-born share of And foreign-born share of population headed to historic peakpopulation headed to 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
U.S. Immigrants:U.S. Immigrants:What do they do? What do they do?
0 20 40 60 80 100
Total
Percent
Foreign-born share of employment growth substantial
2003-2006 Source: BLS
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 occupations
2003-2006 Source: BLS
U.S. Immigration: U.S. Immigration: How has it changed?How has it changed?
Increasingly bimodal education distribution Increasingly bimodal education distribution of foreign-born workersof 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
Illegal inflows rival legalIllegal 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
Three out of ten foreign-born Three out of ten foreign-born are undocumentedare undocumented
Legal permanent residents
32%
Undocumented immigrants30%
Naturalized citizens35%
Legal temporary residents
3%
Source: Pew Hispanic Center (2005)
U.S. Immigrants: U.S. Immigrants: Why do they come?Why do they come?
Why do they come?Why do they come?
Economic conditionsEconomic conditions DestinationDestination OriginOrigin
Family reunification Family reunification
Social or political conditionsSocial or political conditions WarWar PersecutionPersecution
Real-time migration, U.S. and Real-time migration, U.S. and Mexican business cycles Mexican business cycles
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
Source: CBP, Department of Homeland Security
Migrant apprehensions
Apprehensions a function of labor demandApprehensions a function of labor demand(Detrended employment, apprehensions lagged 6m)(Detrended employment, apprehensions lagged 6m)
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 2007-1500
-1000
-500
0
500
1000
1500
Apprehensions
EmploymentThousands, SA Thousands, SA
Source: BLS, DHS
Among Mexican immigrants, Among Mexican immigrants, illegals more mobile than legalsillegals more mobile than legals
0
5
10
15
20
25
State-to-State International
LegalIllegal
Percent
Source: Bean et al, 2007
U.S. Immigrants: U.S. Immigrants: Where do they go?Where do they go?
Legend
United States
FB_Pop
0 - 99
100 - 199
200 - 299
300 - 434
Growth in the foreign-born population 1990-2006
Percent
Source: Census, ACS
0 - 99
100- 199
200- 299
300- 434
FB growth + GSP +
FB growth + GSP -
FB growth – GSP +
FB growth – GSP -
Legend
United States
FB_Pop
Source: Census, ACS, BEA
State GDP growth drives foreign-State GDP growth drives foreign-born population growthborn population growth
U.S. immigration:U.S. immigration:How are natives How are natives affected? affected?
Effects of immigration on nativesEffects of immigration on natives
Immigration has effects similar to tradeImmigration has effects similar to trade GDP rises, GDP per capita risesGDP rises, GDP per capita rises
Who benefits?Who benefits? ImmigrantsImmigrants
Bulk of GDP increase goes to themBulk of GDP increase goes to them
Natives get $30 to $60 billionNatives get $30 to $60 billion ConsumersConsumers
Prices of certain goods and services fallPrices of certain goods and services fall Capitalists (investors, producers, homeowners)Capitalists (investors, producers, homeowners)
Effects of immigration on Effects of immigration on nativesnatives
Who loses?Who loses? Wage effectsWage effects
Low-skilled native workersLow-skilled native workers
Prior immigrantsPrior immigrants Fiscal effectsFiscal effects
Certain taxpayersCertain taxpayers
300
400
500
600
700
800
900
1000
1100
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
BA degree & higher$/week
Some college, Associate degree
Less than high school diploma
Source: BLS
Wages of less-skilled workers Wages of less-skilled workers in long-run stagnationin long-run stagnation
Real median weekly earnings by education level
High school diploma, no college
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 Wages of less-skilled workers in long-run stagnationin long-run stagnation
Real median weekly earnings by education level
High school diploma, no college
Wage Effects of ImmigrationWage Effects of Immigration
Models with large adverse effects (Borjas Models with large adverse effects (Borjas 2003)2003) Assume perfect substitutability, no change in Assume perfect substitutability, no change in
capitalcapital 3% drop in native earnings on average3% drop in native earnings on average 9% drop for natives who are low-skilled9% drop for natives who are low-skilled
Other models (Ottaviano & Peri 2006)Other models (Ottaviano & Peri 2006) Allow imperfect substitutability, change in KAllow imperfect substitutability, change in K
Native-born labor force change, Native-born labor force change, by educationby 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
Native and foreign-born labor Native and foreign-born labor force change, by educationforce 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
Wage Effects of ImmigrationWage Effects of Immigration
Models with large adverse effects (Borjas Models with large adverse effects (Borjas 2003)2003) Assume perfect substitutability;no change in KAssume perfect substitutability;no change in K 3% drop in native earnings on average3% drop in native earnings on average 9% drop for natives who are low-skilled9% drop for natives who are low-skilled
Other models (Ottaviano & Peri 2006)Other models (Ottaviano & Peri 2006) Allow imperfect substitutability, change in KAllow imperfect substitutability, change in K 2% rise in native earnings on average2% rise in native earnings on average 1% drop for low-skilled natives1% drop for low-skilled natives Big declines for prior immigrantsBig declines for prior immigrants
Fiscal impact of immigrationFiscal impact of immigration
Fiscal impactFiscal impact Tax contributions minus transfer payments and cost of Tax contributions minus transfer payments and cost of
public services received, expressed in net present value public services received, expressed in net present value
Tax contributions includeTax contributions include Payroll, income, sales, property taxesPayroll, income, sales, property taxes
Majority of illegal immigrants have payroll taxes withheldMajority of illegal immigrants have payroll taxes withheld
Public transfers and services includePublic transfers and services include Education, health care, welfare (EITC, TANF), police and Education, health care, welfare (EITC, TANF), police and
firefire
EstimatesEstimates Gold standard: National Research Council (1997)Gold standard: National Research Council (1997) Recent work: Robert Rector’s piece for HeritageRecent work: Robert Rector’s piece for Heritage
Household-level analysisHousehold-level analysis
NRC: Immigrants have positive fiscal impact NRC: Immigrants have positive fiscal impact when including their descendantswhen 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)
-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 NRC: But immigrants have a negative fiscal impact in their lifetimefiscal impact in their lifetime
1996 Dollars, NPV
Source: National Research Council, The New Americans (1997)
U.S. immigration U.S. immigration policy: Where are we policy: Where are we headed?headed?
Walls on the Southern border not newWalls on the Southern border not new
Where is policy headed? Where is policy headed?
More interior enforcementMore interior enforcement No-match program, Real ID Act, worksite raids, No-match program, Real ID Act, worksite raids,
higher employer fineshigher employer fines E-verify: immigration status verificationE-verify: immigration status verification Local, state enforcement of immigration lawsLocal, state enforcement of immigration laws Local, state ordinances reg. illegal immigrantsLocal, state ordinances reg. illegal immigrants
0
500
1000
1500
2000
2500
3000
3500
4000
2002 2003 2004 2005 2006 2007
Criminal Arrests
AdministrativeArrests
Worksite enforcement jumps in ‘06, ‘07
No-match letter program: forthcoming safe No-match letter program: forthcoming safe harbor guidelines could have big impactharbor guidelines could have big impact
SSA sends no-match letters to employers with SSA sends no-match letters to employers with workers whose SS numbers don’t match namesworkers whose SS numbers don’t match namesUnder original proposed rules, employers have Under original proposed rules, employers have to fire workers within 90 daysto fire workers within 90 daysIf caught, employers assumed to have If caught, employers assumed to have ‘constructive knowledge’ and may face stiff ‘constructive knowledge’ and may face stiff penaltiespenaltiesIf implemented without comprehensive reforms, If implemented without comprehensive reforms, no-match could impact millions of workers & no-match could impact millions of workers & grow shadow economygrow shadow economy
Where do we go from here? Where do we go from here?
Implications of no-match, interior Implications of no-match, interior enforcemntenforcemnt Relative demand for illegal workers fallsRelative demand for illegal workers falls
Segmented labor marketsSegmented labor markets More employment off-the-books; Decline in tax receiptsMore employment off-the-books; Decline in tax receipts
Lower wages, worse working conditions for illegalsLower wages, worse working conditions for illegals Turnover, lost benefit coverageTurnover, lost benefit coverage Move from large to small employersMove from large to small employers
Greater inequality; slower assimilationGreater inequality; slower assimilation Reallocation of workers across states, localitiesReallocation of workers across states, localities Less illegal immigration, all other things sameLess illegal immigration, all other things same
ConclusionConclusionForeign-born important Foreign-born important role in economic role in economic growthgrowthBenefits of immigration Benefits of immigration extensiveextensiveLabor market impacts Labor market impacts limited; fiscal impact limited; fiscal impact sizablesizableCurrent policies & Current policies & unintended unintended consequencesconsequences
Where undocumented Where undocumented immigrants liveimmigrants live
Other57%
California17%
Florida6%
New York4%
Georgia3%
Texas10%
Arizona 3%
Source: Pew Hispanic
Center (2005)