Immigration reform: Will it help the economy?

Marketplace Contributor Jan 29, 2013

Immigration reform: Will it help the economy?

Marketplace Contributor Jan 29, 2013

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a sweeping immigration reform proposal today at a speech in Las Vegas, calling the current immigration system “out of date and badly broken.”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

According to Giovanni Peri, an economist at the University of California, Davis, 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.”

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