Immigration reform: Will it help the economy?

Immigrants take the oath of allegiance to the United States during a ceremony at the district office of U.S. Citizenship and Immigration Services (USCIS) on January 28, 2013 in Newark, N.J.

President Obama proposed a sweeping immigration reform proposal today at a speech in Las Vegas, calling the current immigration system “out of date and badly broken."

And of course the president isn't the only one with a new immigration plan -- after collectively dodging the issue for years, lawmakers have this week been engaging in serious discussions of immigration reform. 

The president welcomed the debate, saying current policies are “holding us back instead of helping us grow our economy and strengthen our middle class.”

That idea has become a central part of the immigration debate -- that more legal immigrants equals a better economy. 

But is it true?

Bertin Solis, a freshman at the University of California, Santa Barbara, thinks he knows what would happen to the economy -- at least his family’s economy -- if illegal immigrants living here now had the chance to get legal status.  He thinks his dad would get a raise, and a promotion.

His father crossed the border from Mexico illegally more than a decade ago, Solis says, and now works for a landscaping company  making minimum wage.

“He still makes the same thing that he's made since he's been there -- for seven years,” Solis says. “Without papers, you really can't have a higher position. You're always staying at the same level.”

Solis' take on the situation is pretty right on, according to Giovanni Peri, an economist at the University of California, Davis. Peri’s research suggests that illegal workers would get between a 5 percent and 10 percent bump in wages in the first few years after legalization.

In the long term, “if they show high productivity and a willingness to work, this worker will have finally the possibility of having a career,” Peri says.

The effects of that career can ripple. “This person will earn more,” Peri says, and in turn “will consume more, will generate more economic activity in the area wherever he or she lives.”

Creating more pathways for legal immigrant workers in the U.S. wouldn't just affect low-wage industries like landscaping. Vivek Wadhwa is a tech entrepreneur who teaches at Stanford University, who points to himself as an example.  He came to the U.S. from India in 1980, and became a citizen about a decade later.

“And then I started my first company which employed 1,000 workers,” Wadhwa says.

Wadwha says 52 percent of Silicon Valley start ups have similar stories of foreign born founders. Think Sergei Brin -- the Russian-born co-founder of Google.

The question of how having more legal immigrants in the U.S. will impact the U.S. economy is a bit like the question of how climate change will impact the environment.  Most experts agree about the long term effects -- and in the case of increased legal immigration, the effects are mostly good.  The debate lies in the short-term impacts.  

Ira Mehlman, with the Federation for American Immigration Reform, which advocates for tighter restrictions on immigration, warns that legalizing unauthorized immigrants in the U.S. would mean more competition with native-born citizens for jobs across the American economy.

“There’s  still the matter of the 22 million or so Americans who are either unemployed or underemployed. It would put them at even a greater disadvantage than they find themselves now,” says Mehlman.

But Wadhwa, the tech entrepreneur, disagrees.

“There are a lot of people who have been displaced by foreign workers, and they're very bitter,” he says. “But if you look at all the research on this, what happens is that immigrants make the pie bigger, they make the economy more vibrant, and they create more jobs for Americans.”

As immigration policy stands now, says Wadhwa, we're creating a brain drain in the U.S. He says he doesn’t encourage the foreign students he teaches now at Stanford to follow in his footsteps, and start a business in the U.S. after they graduate.   

“I agonize about losing all these brilliant people,” he says. “But I tell them look, don’t waste your time. Go abroad.”

About the author

Krissy Clark is the senior reporter for Marketplace’s Wealth & Poverty Desk.

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