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Immigration’s economics

One of the oft-used arguments against immigration reform-that it will flood the labor market with low-wage workers and fuel a race to the bottom-took a hard blow this week. In fact, it might be down for the count.
 
A new analysis of the likely economic impact of the Border Security, Economic Opportunity and Immigration Modernization Act of 2013 found that passage would boost the long-term economy–while also reducing the federal deficit.
 
The bipartisan Congressional Budget Office report says immigration reform "would boost economic output." Relative to current law, the bill would increase inflation-adjusted GDP "by 3.3 percent in 2023 and by 5.4 percent in 2033."
 
On the budget side, CBO researchers found that "changes in direct spending and revenues under the legislation would decrease federal budget deficits by $197 billion over the 2014-2023 period and by roughly $700 billion over the 2024-2033 period."
 
Ezra Klein, who pens Wonkblog for the Washington Post, wrote that "they’re basically saying immigration reform is a free lunch: It cuts the deficit by growing the economy. It makes Americans better off and it makes immigrants better off."
 
The full picture is not quite that simple, as he acknowledged. The CBO projects a 0.1 decline in average wages for U.S. workers in the first decade after passage. But that reflects an influx of new immigrants earning less than the average wage–and, importantly, not a worsening of earnings for current U.S. residents.
 
By the second decade, however, average wages will rise. The impact on unemployment would be similar.
 
Those who oppose immigration reform quickly scoffed at the CBO findings, saying they had no basis in fact and likely would be proved wrong. But where is their own thorough research proving the opposite?
 
As noted here before, immigrants’ share of U.S. business startups-companies like Intel, Yahoo and Google-is more than twice their portion of the nation’s population. The CBO researchers make a similar point, noting the technological advancements developed by highly skilled immigrants.
 
When the opportunity arises to do what’s fair and what’s good for the economy, it should not be wasted.

6/21/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.
 

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