The Price of Doing Nothing: Lack of Immigration Reform and the Economy

In January of this year, it looked hopeful that the Republican Leadership in Congress was open to bring to the floor a series of bills that would address the broken U.S. immigration system. It appears doubtful that Congress will take up the issue this year. It is now February and any hope of immigration reform this year is doubtful. Conservative Republicans were never really on board and now republican leadership says President Obama cannot be trusted to enforce new rules. Democrats, citing that it’s an election year, say that Republicans do not want give any victory to the president.

But some say that these shortsighted lawmakers are missing the bigger picture that this is not a political issue but an economic one. According to the Obama Administration, the number of undocumented immigrants in the United States has remained fairly stable at 11.5 million as of January 2011, slightly down from 11.6 million in 2010.

But what effect would legalizing the status of all these undocumented immigrants have on wages in the United States? According to a paper released in March 2012, by the Federal Reserve Bank of Atlanta, undocumented workers have a “negligible impact” on the wages of documented workers who work at the same firm. Documented workers at firms that also employ undocumented workers earn 15% – or $56 – less per year on average than they would if they worked at a firm that does not employ undocumented workers, according to the study.

Recently, Guillermo Cantor, a senior analyst at the Immigration Policy Center, has said that Congress should act, not only because it is the humane thing to do, keeping families together, but that “it would result in enormous economic benefits for this country.”

But critics of immigration reform cite a study from the Congressional Budget Office passing an immigration reform bill would reduce wages in the United States for 12 years.  But critics are half right because the same report also states that reforms would reduce average wages one-tenth of one percent (0.1 percent) by 2023 but that’s because the estimate included wages from lower-skilled workers who would become legal residents. The report goes on to further state that after 10 years, wages would rise about half of a percent, more than they would without having immigration reforms in place.

“Legalization is probably going to help the U.S. economy.  It’s also going to bring more people into the tax system, so it probably has a net fiscal benefit of people paying more taxes. In the long run however, unauthorized immigrants who become legal will also be eligible for additional services, so the fiscal impact has pluses and minuses,” Marc Rosenberg of the Migration Policy Institute said.

It is obvious that the pros and cons have to be weighed when it comes to the effects that Immigration Reform would have on the economy, but the majority of economists agree that reforms would expand the U.S. economy. Opponents of fixing the broken immigration system say that it would be a heavy price to pay if we were to legalize the status of undocumented immigrants. Proponents say that doing nothing would be worse. It is safe to say that 2014 is proving to be the year that nothing will be done but things could change around Election Day when the people are asked to weigh in.