The Impact of Immigrants in Recession and Economic Expansion

Over the past decade, a broad consensus has developed that the long-term impact of immigration on the average income of Americans is small but positive, improving employment, productivity, and income. In the short term, however, immigration may slightly reduce native employment and average income because the economic adjustment process is not immediate. During economic slowdowns, such as the 2007-09 recession, the more pressing concerns about short-term effects take center stage. This report provides an analysis of both short- and long-run impacts of immigration on average and over the business cycle.

The report finds that when the economy is growing, immigration creates jobs in sufficient numbers to leave native employment unharmed. During downturns, however, the economy does not appear to respond as quickly. Therefore, the United States would benefit most from immigration that adjusts to economic conditions. While immigration (particularly illegal immigration) already responds to some extent to the economic cycle, the current immigration system makes legal immigrant inflows relatively unresponsive. The report recommends a redesigned system to allow employers’ demand for work visas to play a stronger role in determining the number of visas issued, as well as to allocate a share of visas to less-skilled workers to help reduce their incentive to come to the United States illegally.