Central to immigration policy and debate in the United States is the difficult question of how to measure what value – or cost – immigrants offer the country. Proponents of relaxed immigration policy point to economic production as a basis for welcoming those from outside the country. Others, however, cite increased costs and government expenses of providing for immigrants, using those numbers to justify more exclusionary policies. New research suggests that the economic value of immigrants has been under-measured for years and may unquestionably weigh in favor of welcoming immigrants into the country.
Economist Exposes Fundamental Flaw in Current Fiscal Estimates
In a paper published by Economist Michael Clemens of University College London, the author explains that a critical and false assumption exists in current economic analyses of the effects of immigration. He notes the primary method in place “simply counts the direct fiscal flows to and from individual immigrants by education level” and “omits substantial indirect, dynamic effects of immigration.” According to Clemens, this is misguided.
To account for the indirect effects of immigration, Clemens calculates estimated tax revenue from capital income resulting from the participation of immigrants in the American economy. Put simply, an immigrant will, over the course of their lifetime, pay taxes to the U.S. government, thereby benefiting those who live in the United States. Specifically, Clemens notes that employers will necessarily spend additional revenue to provide basic resources for immigrant laborers, thereby further fueling the economy with every immigrant worker hired.
Through his calculations, Clemens estimates even immigrants without a high school degree will provide a lifetime positive net fiscal balance of $128,000, and when calculated to include expected children and grandchildren, that number increases to $326,000. These estimates plainly contradict the current leading academic research on the issue, which estimates a negative fiscal impact for an average immigrant without a high school degree. This data, which currently informs immigration-related economic policy in this country, needs re-examination.
Using the adjustments that Clemens proposes in his most recent paper, the impact of immigrant participation in the American economy is shown to be undoubtedly positive. Even when viewed through the impact of those least educated, the impact is clearly positive. Therefore, this shift in economic theory could disrupt current government assessments of the effects of immigrants on the economy and could inform new policies moving forward.
Impact on Ongoing Debate Over Immigration
Economic theories do not operate independently of reality. Rather, they can directly inform economic policy and fiscal estimates, creating tangible results. For instance, a Congressional Budget Office (CBO) report concluded, in July of 2022, that an amendment concerning the issuance of green cards would cost $1 billion over ten years. Accordingly, expansive employment-based immigration reform was excluded from the budget for next year.
The new studies call into question the calculations associated with these fiscal estimates. As the value added by immigrants has clearly been underestimated, it is appropriate to now question the justification for current policy.