How Immigrants Boost U.S. Economic Growth
Policy + Politics

How Immigrants Boost U.S. Economic Growth

The questions of how many legal immigrants should be admitted to the United States, and what level of skills these immigrants should have, are among the most divisive issues in the current U.S. domestic policy landscape. Much of the controversy that they spark can be traced to a single issue: do immigrants help or harm the economy?

As Congress decides whether to take up immigration reform, the answer to this question is crucial. Today the Manhattan Institute will release my Issue Brief on the subject, entitled Does Immigration Increase Economic Growth? For those without the time to read the paper, the answer is yes.

Related: Facts You Should Know About Illegal Immigration [INFOGRAPHIC]

The academic economic literature finds that in the aggregate both high-skill and low-skill immigration leads to increased economic growth. But the existence of these benefits does not mean that a president should bypass Congress and implement immigration reform through executive order, as President Obama did last month.

Obama's executive order does not solve the problems of those who supposedly benefit by the grant of legal status. The legal status is temporary. Even if the Obama executive order survives a court challenge, an uncertain prospect, an executive order does not have the comprehensive and permanent power of a law. A new president taking office in January 2017 could write an executive order rescinding the Obama executive order and possibly taking even punitive actions as well.

Individuals protected by a law have a permanent protection, even should a future Congress write a different law; individuals protected by an executive order have little certainty beyond the next Inauguration Day.

Those whose immigration status benefits from Obama's executive order will incur the envy of would-be immigrants who do not share the benefit, and the enmity of millions of Americans who worked their way through the more challenging legal process, or who are now mired in immigration paperwork. Just last week two of my immigrant friends, who have been waiting almost a year for their green cards, said that if they had been here working here illegally they might have got legal status from the president.

Related: Compared to Real Reform, Obama’s Not Doing Much on Immigration

Immigration benefits America in at least two ways. First, increased immigration expands the American workforce and encourages more business start-ups. Second, immigrants increase economic efficiency by raising the supply of low- and high-skilled immigrants. In many cases immigrants' educational backgrounds complement, rather than displace, the skills of the native-born labor market.

For instance, on the low-skill end of the spectrum, 91 percent of native-born Americans hold high school diplomas or higher, whereas only 62 percent of noncitizens do. Immigrants account for about 16 percent of the U.S. labor force, with 24.3 percent of workers who are foreign-born and over the age of 25 not completing high school, compared with merely 4.8 percent of native-born workers. These immigrants work in the agriculture and leisure and hospitality sectors.

Immigrants provide much of the low-skill labor for these industries. Without the immigrant labor, prices consumers pay for hotels and restaurants would be substantially higher, and some agriculture might migrate offshore.

On the high-skill end of the spectrum, 56 percent of engineering doctoral degrees, 51 percent of computer science doctoral degrees, and 44 percent of physics doctoral degrees were awarded in 2011 to students who were neither U.S. citizens nor permanent residents. National Science Foundation data show that 163,000 foreign graduate students studied science and engineering in U.S. universities in 2010, up from 152,000 in 2008.

Immigrants benefit from, and disproportionately contribute to, U.S. research in science, technology, engineering, and mathematics (STEM). Many universities rely on graduate students for research assistance and technical expertise, with government research funding training graduate students in the latest technologies. Most research, moreover, does not require security clearances-and little, if any, research is restricted to American students.

Related: Americans Conflicted Over Obama’s Immigration Order

In 2011 (the most recent year for which data are available), the federal government spent over $58 billion on science and engineering research at American universities and research institutions. This funding helps finance Ph.D. programs, which are heavily populated by foreign students. (More than $31 billion of this research spending was dispensed by the Department of Health and Human Services; other funders include the Defense Department, at $6.6 billion; and the Department of Energy, at $6.8 billion).

The share of immigrants in the U.S. workforce has declined since its 1991 peak. H-1B temporary visas for new skilled immigrant workers, limited at 85,000 annually, do not meet demand. This quota represents just over one twentieth of one percent of the overall labor force. Acquiring permanent residency (a "green card") is a lengthy and potentially costly process. When immigrant talent, such as the 51 percent of engineering doctorate earners and the 41 percent of physical sciences doctorate earners who are foreign-born, are forced to leave the United States, private and taxpayer investment in research loses value.

Such limitations have been the result of opposition to more open immigration. While some arguments against more immigration are rooted in preserving American cultural norms, others are based on economics. Failure to account for the benefits of immigration, which outweigh the costs in the aggregate, is the reason behind economic arguments against immigration. A growth-oriented immigration policy would allow a greater number of immigrants to legally enter, stay, and work in the United States.

Legislation, not an executive order, is needed to expand the number of visas for both low-skill and high-skill immigrants and to begin to resolve the status of the estimated 11 million undocumented workers living in the United States. Labor markets are constantly changing, and U.S. immigration policy should emulate this flexibility. The data are clear, and they show that immigration encourages economic growth. Adopting more flexible immigration policies that spur growth would benefit all Americans, both native- and foreign-born.

This article originally appeared in RealClearMarkets

Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.

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