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:
Download ReportTranscript 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:
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; they do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System. Overview Immigration Population, labor force growth Changing characteristics of foreign born Reasons for coming: Cyclical, regional effects U.S. workers Taxpayers Policy U.S. Immigrants: How many are there? The foreign-born population is larger than ever before Percent 16 Millions 40 35 14 30 12 25 10 20 8 Number 15 6 10 4 5 2 0 0 1850 Source: Census Bureau 1870 1890 1910 1930 1950 1970 1990 2006 And foreign-born share of population headed to historic peak Percent 16 Millions 40 Percent of total population 35 14 30 12 25 10 20 8 Number 15 6 10 4 5 2 0 0 1850 Source: Census Bureau 1870 1890 1910 1930 1950 1970 1990 2006 U.S. Immigrants: What do they do? Foreign-born share of employment growth substantial Total 0 20 40 60 80 100 Percent 2003-2006 Source: BLS Foreign-born share of employment growth by selected occupations Architecture and engineering Computer and mathematical Construction and extraction Healthcare support Total Protective service Legal 0 20 40 60 80 100 Percent 2003-2006 Source: BLS U.S. Immigration: How has it changed? Increasingly bimodal education distribution of foreign-born workers Percent 35 1980 2004 30 25 20 15 10 5 0 0 to 11 Years 12 Years (High School Grads) Source: Ottaviano & Peri, 2005 13 to 15 Years 16 Years (College Grads) Master, Professional Degree Doctorate Illegal inflows rival legal Legal Perm Legal Temp Undoc Thousands 1600 1400 1200 1000 800 600 400 200 0 1990 1992 1994 1996 1998 Source: Jeffrey Passel and Roberto Suro, Pew Hispanic Center (2005) 2000 2002 2004 Three out of ten foreign-born are undocumented Legal temporary residents 3% Undocumented immigrants 30% Legal permanent residents 32% Source: Pew Hispanic Center (2005) Naturalized citizens 35% U.S. Immigrants: Why do they come? Why do they come? Economic conditions Destination Origin Family reunification Social or political conditions War Persecution Real-time migration, U.S. and Mexican business cycles Thousands, SA 200 180 160 Migrant apprehensions 140 120 100 80 60 40 20 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: CBP, Department of Homeland Security Apprehensions a function of labor demand (Detrended employment, apprehensions lagged 6m) Thousands, SA 200 Employment Thousands, SA 1500 180 1000 160 140 500 120 100 0 80 -500 60 40 Apprehensions 20 0 -1000 -1500 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: BLS, DHS Among Mexican immigrants, illegals more mobile than legals Percent 25 20 Legal Illegal 15 10 5 0 State-to-State Source: Bean et al, 2007 International U.S. Immigrants: Where do they go? Growth in the foreign-born population 1990-2006 Legend United States Percent FB_Pop 0 - 99 100-- 199 100 199 200-- 299 200 299 Source: Census, ACS 300 434 300-- 434 State GDP growth drives foreignborn population growth Legend United States FB_Pop FB growth + GSP + FB growth + GSP FB growth – GSP + FB growth – GSP Source: Census, ACS, BEA U.S. immigration: How are natives affected? Effects of immigration on natives Immigration has effects similar to trade 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) Effects of immigration on natives Who loses? Wage effects Low-skilled native workers Prior immigrants Fiscal effects Certain taxpayers Wages of less-skilled workers in long-run stagnation Real median weekly earnings by education level $/week 1100 BA degree & higher 1000 900 Some college, Associate degree 800 700 600 High school diploma, no college 500 400 Less than high school diploma 300 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: BLS Wages of less-skilled workers in long-run stagnation Real median weekly earnings by education level $/week 1100 BA degree & higher 1000 900 Some college, Associate degree 800 700 600 High school diploma, no college 500 400 Less than high school diploma 300 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: BLS Wage Effects of Immigration Models with large adverse effects (Borjas 2003) Assume perfect substitutability, no change in capital 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 Native-born labor force change, by education College grad 7428 Some college High school grad 3231 Native -655 Less than high -1787 school -3000 -1000 Source: 1996-2006; BLS, Haver Analytics 1000 3000 5000 7000 9000 Thousands Native and foreign-born labor force change, by education 2904 College grad 7428 1020 Some college High school grad 3231 -655 Less than high -1787 school -3000 Foreign-born Native 1983 2151 -1000 Source: 1996-2006; BLS, Haver Analytics 1000 3000 5000 7000 9000 Thousands 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 Fiscal impact of immigration Fiscal impact Tax contributions minus transfer payments and cost of public services received, expressed in 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 NRC: Immigrants have positive fiscal impact when including their descendants 1996 Dollars, NPV 250000 200000 150000 100000 50000 0 Overall < High School High School > High School -50000 Source: National Research Council, The New Americans (1997) Level of Education NRC: But immigrants have a negative fiscal impact in their lifetime 1996 Dollars, NPV 150,000 100,000 50,000 0 Level of Education -50,000 -100,000 < High School High School Source: National Research Council, The New Americans (1997) > High School U.S. immigration policy: Where are we headed? Walls on the Southern border not new Where is policy headed? More interior enforcement No-match program, Real ID Act, worksite raids, higher employer fines E-verify: immigration status verification Local, state enforcement of immigration laws Local, state ordinances reg. illegal immigrants Worksite enforcement jumps in ‘06, ‘07 4000 Criminal Arrests 3500 Administrative Arrests 3000 2500 2000 1500 1000 500 0 2002 2003 2004 2005 2006 2007 No-match letter program: forthcoming safe harbor guidelines could have big impact SSA sends no-match letters to employers with workers whose SS numbers don’t match names Under original proposed rules, employers have to fire workers within 90 days If caught, employers assumed to have ‘constructive knowledge’ and may face stiff penalties If implemented without comprehensive reforms, no-match could impact millions of workers & grow shadow economy Where do we go from here? Implications of no-match, interior enforcemnt Relative demand for illegal workers falls Segmented labor markets More employment off-the-books; Decline in tax receipts Lower wages, worse working conditions for illegals Turnover, lost benefit coverage Move from large to small employers Greater inequality; slower assimilation Reallocation of workers across states, localities Less illegal immigration, all other things same Conclusion Foreign-born important role in economic growth Benefits of immigration extensive Labor market impacts limited; fiscal impact sizable Current policies & unintended consequences Where undocumented immigrants live New York 4% Arizona Georgia 3% 3% Florida 6% Texas 10% Other 57% California 17% Source: Pew Hispanic Center (2005)