The Economic Effects of Granting Legal Status and Citizenship to Undocumented Immigrants

This Center for American Progress report analyzes the potential economic boon of granting legal status and citizenship to undocumented immigrants. “Legal status and a road map to citizenship for the unauthorized will bring about significant economic gains in terms of growth, earnings, tax revenues, and jobs—all of which will not occur in the absence of immigration reform or with reform that creates a permanent sub-citizen class of residents.” Also important as immigration reform legislation makes its way through Congress, the study concludes that the sooner legal status is provided, the greater the economic gain for the nation.

By Robert Lynch and Patrick Oakford, Center for American Progress, March 20, 2013

Summary

The movement toward comprehensive immigration reform has accelerated significantly in recent months. A bipartisan “Gang of 8” in the Senate—a group of four Democratic senators and four Republican senators—released a framework for immigration reform on January 28, and the next day President Barack Obama gave a speech launching White House efforts to push for immigration reform. Both proposals contained strong language regarding the need to provide legal status for the 11 million undocumented immigrants living in the country, as well as a road map to full citizenship.

Some lawmakers, however, do not want to extend legal status—let alone citizenship—to the unauthorized. Others have expressed interest in stopping just short of providing full citizenship for the 11 million undocumented immigrants, instead calling for a so-called middle-ground option—to leave undocumented immigrants in a permanent subcitizen status. To be sure, the debate over immigration reform has important legal, moral, social, and political dimensions. Providing or denying legal status or citizenship to the undocumented has implications for getting immigrants in compliance with the law, affects whether or not immigrant families can stay in their country of choice, and determines whether they have the opportunity to become full and equal members of American society.

But legal status and citizenship are also about the economic health of the nation as a whole. As our study demonstrates, legal status and a road map to citizenship for the unauthorized will bring about significant economic gains in terms of growth, earnings, tax revenues, and jobs—all of which will not occur in the absence of immigration reform or with reform that creates a permanent sub-citizen class of residents. We also show that the timing of reform matters: The sooner we provide legal status and citizenship, the greater the economic benefits are for the nation.

The logic behind these economic gains is straightforward. As discussed below, legal status and citizenship enable undocumented immigrants to produce and earn significantly more than they do when they are on the economic sidelines. The resulting productivity and wage gains ripple through the economy because immigrants are not just workers—they are also consumers and taxpayers. They will spend their increased earnings on the purchase of food, clothing, housing, cars, and computers. That spending, in turn, will stimulate demand in the economy for more products and services, which creates jobs and expands the economy.

This paper analyzes the 10-year economic impact of immigration reform under three scenarios. The first scenario assumes that legal status and citizenship are both accorded to the undocumented in 2013. The second scenario assumes that the unauthorized are provided legal status in 2013 and are able to earn citizenship five years thereafter. The third scenario assumes that the unauthorized are granted legal status starting in 2013 but that they are not provided a means to earn citizenship—at least within the 10-year timeframe of our analysis.

Under the first scenario—in which undocumented immigrants are granted legal status and citizenship in 2013—U.S. gross domestic product, or GDP, would grow by an additional $1.4 trillion cumulatively over the 10 years between 2013 and 2022. What’s more, Americans would earn an additional $791 billion in personal income over the same time period—and the economy would create, on average, an additional 203,000 jobs per year. Within five years of the reform, unauthorized immigrants would be earning 25.1 percent more than they currently do and $659 billion more from 2013 to 2022. This means that they would also be contributing significantly more in federal, state, and local taxes. Over 10 years, that additional tax revenue would sum to $184 billion—$116 billion to the federal government and $68 billion to state and local governments.

Under the second scenario—in which undocumented immigrants are granted legal status in 2013 and citizenship five years thereafter—the 10-year cumulative increase in U.S. GDP would be $1.1 trillion, and the annual increases in the incomes of Americans would sum to $618 billion. On average over the 10 years, this immigration reform would create 159,000 jobs per year. Given the delay in acquiring citizenship relative to the first scenario, it would take 10 years instead of five for the incomes of the unauthorized to increase 25.1 percent. Over the 10-year period, they would earn $515 billion more and pay an additional $144 billion in taxes—$91 billion to the federal government and $53 billion to state and local governments.

Finally, under the third scenario—in which undocumented immigrants are granted legal status starting in 2013 but are not eligible for citizenship within 10 years—the cumulative gain in U.S. GDP between 2013 and 2022 would still be a significant—but comparatively more modest—$832 billion. The annual increases in the incomes of Americans would sum to $470 billion over the 10-year period, and the economy would add an average of 121,000 more jobs per year. The income of the unauthorized would be 15.1 percent higher within five years. Because of their increased earnings, undocumented immigrants would pay an additional $109 billion in taxes over the 10-year period—$69 billion to the federal government and $40 billion to state and local governments.

These immigration reform scenarios illustrate that unauthorized immigrants are currently earning far less than their potential, paying much less in taxes, and contributing significantly less to the U.S. economy than they potentially could. They also make clear that Americans stand to gain more from an immigration reform policy of legalization and citizenship than they do from one of legalization alone—or from no reform at all. Finally, the magnitude of potential economic gains depends significantly on how quickly reforms are implemented. The sooner that legal status and citizenship are granted to the unauthorized, the greater the gains will be for the U.S. economy.

Read the full report

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