s Congress restarts conversations about the federal budget and deficit reduction, the immigration reform debate is still front and center for many. As that debate unfolds, it is important to put some hard facts on the table. What are the costs and benefits of reform? What impact will reform have on economic growth and wages? How will immigration reform affect the federal budget?
The Hill reported that a
Unlike other efforts, this study was not a political exercise seeking to justify a pre-determined outcome. Instead, it was a serious, scholarly attempt to understand the true economic implications of immigration reform.
The first step in any modeling exercise is to develop a “reference case” against which alternative scenarios, or “sensitivity analyses,” can be compared. This assessment chose to utilize the Senate-passed immigration bill as the “reference case,” not because we endorse it, but because it is the most recent reform package to have moved through either chamber of Congress, not because the study or its authors support the Senate bill.
Under the reference case, the study concludes that, over the next 20 years, immigration reform would cause the U.S. economy to grow an additional 4.8 percent, expand the labor force by 8.3 million people, contribute to higher average overall wages, and reduce the federal budget deficit by nearly $1.2 trillion.
Notably, the study shows that immigration reform would jump-start the housing market by increasing spending on residential construction by an average of $68 billion annually over the 20-year period. To put this $68 billion figure in perspective, as of August 2013, the annual rate of spending on residential construction was $340 billion. So immigration reform would provide a substantial and immediate boost to investment in new single-family and multifamily homes..
During the past four decades, the contribution of housing to national GDP through both residential fixed investment and consumption of housing-related services has averaged between 17 and 19 percent. Today, housing’s contribution stands at just 15.6 percent, largely because of a significant decline in home construction and remodeling. This decline is a major reason why the recession and its damaging effects have lingered for so long. Immigration reform can play a significant role in helping to restore the housing sector to its traditional position as an engine of economic growth.
A major finding of the study is that immigration reform would inject vitality into the nation’s workforce. While enactment of reform would add an estimated 13.7 million people to the U.S. population over the next twenty years, only six percent of these individuals would be aged 65 or older. Most would be very young compared to the rest of the U.S. population.
The addition of millions of new, younger workers would increase the ratio of workers to retirees and help our country respond to the fiscal challenges associated with an aging population. It would also spur demand for new housing as these workers form their own households and start families.
To verify these positive results, the study also examines five alternative reform scenarios. The first four scenarios change key assumptions in the reference case – for example, by making adjustments in the expected level of future unauthorized immigration and the utilization of family-based and employment-based green cards once immigration reform was enacted. The fifth scenario takes the most restrictive approach by assuming that all current unauthorized immigrants would be deported and there would be no future unauthorized immigration into the United States in a post-reform setting.
Under the first four scenarios, immigration reform has a positive impact on the overall economy, including the housing market. The fifth scenario, reflecting the most restrictive approach, would have devastating effects by, among other things, significantly reducing GDP growth and dramatically reducing residential construction spending.
The bottom line is that immigration reform can be a powerful instrument of economic revitalization. It can inject new, much-needed demand into a housing market that has been slow to recover. To get our economy back on track, it’s time for Congress to make passing immigration reform an immediate priority.