Immigration boosts economy, widens wealth gaps, analysis finds

Neil Munro White House Correspondent
Font Size:

Large-scale immigration transfers wealth from poor Americans to wealthy Americans, even as it also makes immigrants wealthier and the nation’s economy larger, says a new analysis by George Borjas, a Harvard economist frequently cited by opponents of low-skill immigration.

Borjas’ analysis was published the same day that a business-backed group predicted that large-scale immigration would raise per-capita income by $1,700 after 10 years.

“Rapid overall population growth would generate more rapid GDP growth, which would in turn raise productivity growth … [and then raise] GDP per capita, or the standard of living,” said the American Action Forum study, authored by Douglas Holtz-Eakin, president of the AAF.

The AAF shares many board members with the American Action Network, which is an advocacy group. Both were founded by Fred Malek, a businessman and a hotel owner.

The faster growth-rate would provide a cumulative $2.5 trillion increase in tax revenue for the federal government, concluded Holtz-Eakin, who is an economist, a libertarian and the former chief economic policy adviser to Sen. John McCain’s presidential campaign.

In contrast, Borjas’ report was promoted by the Center for Immigration Studies, which wants to halve the annual inflow of roughly 1 million immigrants and 700,000 visa workers.

The competing reports will be used as ammunition in the emerging fight over the legalization and guest-worker bill being drafted in secret by eight senators.

Under the complex deal, the GOP’s business wing would get roughly 1 million low-wage foreign workers each year, in exchange for a large conditional amnesty that will later boost the Democratic Party’s ballot-box scores.

“If we’re reasonable with 11 million, if we all give them a pathway to citizenship … then the Democratic Party has to give us the guest worker program to help our economy,” Republican Sen. Lindsey Graham, said April 7 on NBC’s “Meet The Press.”

In the closed-door drafting sessions, “that’s what we’re arguing over,” said Graham said. (RELATED: Immigration bill would import 1 million workers per year)

Roughly 20 million Americans are unemployed or underemployed.

The two reports, however, don’t necessarily clash.

Borjas’ report, for example, says legal and illegal immigrants have boosted the economy’s size since 1990 by roughly 11 percent, or $1.6 trillion.

But where Holtz-Eakin divides the resulting wealth increase evenly across the population by predicting a $1,700 per-capita increase in wages, Borjas examined how that extra wealth is distributed.

On average, Borjas estimates, immigration costs American-born workers roughly $1,396 per year.

Nearly all of the $1.6 trillion extra value created by immigration is kept by immigrants, not Americans, Borjas reports. Illegal immigrants hold roughly a quarter of that increase, or about $430 billion, he estimates.

But the immigrants’ willingness to work for low wages also means that American employers can pay their Americans workers much less, he says.

The resulting wage-shift annually converts $402 billion in wages for blue-collar workers — and increasingly, former white-collar professionals — into greater profits and wages for very high-skill employees, employers and stock-holders, Borjas says.

Of that $402 billion loss by American workers, roughly one-quarter is caused by illegal immigrants’ willingness to work long hours for low wages, he argues.

That means marketplace competition from illegal immigration effectively transfers roughly $118 billion from low-income Americans to high-income Americans, who get to hire cheaper cooks, gardeners, maids, laborers, waiters, painters, drivers and mechanics.

High-end American workers, employers and investors get the $402 billion windfall plus a tiny slice of the immigrants’ direct $1.6 trillion boost to the nation’s economy, Borjas says.

The tiny slice, estimated at $35 billion, adds to the $402 billion, to provide upper-income people with a $437 billion windfall from large-scale immigration, Borjas reports.

Borjas argues that low-skilled Americans are hit hardest by immigration.

For example, African-Americans’ income is cut by 10 percent when they face a 5 percent increase in similarly skilled immigrants, he argues.

Follow Neil on Twitter