The Economics and Policy of Illegal Immigration in the United States
Highlights
The net economic impact of illegal immigration is close to zero, evidence shows. Converting unauthorized flows to legal ones delivers stronger gains than enforcement alone.
- Unauthorized immigrants make up a large share of the low-skilled U.S. labor force, respond to labor market conditions in ways legal immigration cannot, and generate a small net economic gain for the United States overall.
- The overall fiscal and economic impact of illegal immigration is close to a wash: employers gain, some low-skilled U.S. workers lose, and the small net fiscal burden of unauthorized immigrants largely offsets modest aggregate gains.
- Increased spending on border and interior enforcement is likely to cost far more than the tax savings generated by reducing illegal immigration, making enforcement-only strategies economically inefficient.
- The author, a leading economist, recommends converting unauthorized inflows to legal ones, with annual limits that fluctuate with economic conditions, legal channels for low-skilled workers, and employer fees or taxes.
Illegal immigration benefits employers and unauthorized immigrants while it puts downward pressure on U.S. wages. However, according to this report by University of California, San Diego Professor of Economics Gordon Hanson, illegal immigration’s overall impact on the U.S. economy is small. The modest net gain that remains after subtracting U.S. workers’ losses from U.S. employers’ gains is tiny; and if one accounts for the small fiscal burden that unauthorized immigrants impose, the overall economic benefit is close enough to zero to be essentially a wash.
A substantial increase in spending on border and interior enforcement could easily cost far more than the tax savings generated from reducing illegal immigration in the United States. The report offers that a more constructive immigration policy, in terms of aggregate economic return, would convert existing inflows of unauthorized immigrants into legal inflows. Hanson suggests that maximum productivity gains to the U.S. economy can be generated by adopting a policy that: allows inflows to fluctuate yearly in response to macroeconomic conditions, provides legal channels of entry to low-skilled workers, creates incentives for both employers and immigrants to play by the rules, and imposes a fee for legal entry or a tax for employers who hire foreign workers.
Table of Contents
I. Introduction
II. The Economics and Policy of Illegal Immigration
1. Unauthorized Immigrants Are a Large Part of the Low-Skilled U.S. Labor Force
2. Illegal Immigration Responds to Market Conditions in Ways that Legal Immigration Presently Cannot
3. The Overall Impact of Illegal Immigration on the US Economy Is Small
4. Enforcement against Illegal Immigration Is Expensive (Relative to the Potential Gains from Eliminating Illegal Entry)
III. Final Remark
About the U.S. Immigration Policy Program
The U.S. Immigration Policy Program provides analysis of U.S. immigration pathways, the impacts of enforcement and other policies, and the characteristics of immigrant populations.
Labor Markets Initiative
This concluded initiative, active from 2009-2013, produced detailed recommendations on ways to make U.S. immigration policy a more effective tool for economic growth.
