Restricting New Less-Skilled Immigration Will Benefit Current Less-Skilled Immigrants

by Reihan Salam

In the president’s new fiscal year 2015 budget, comprehensive immigration reform is included as a key strategy for growing the economy and reducing the size of the deficit. This is a new development in the annals of budgeting, which might reflect the fact that the deterioration of medium-term economic forecasts by the Congressional Budget Office has left the Office of Management and Budget in a bind. Had the CBO been right about its 2010 economic forecasts, when it assumed that the economy would grow at something close to its post-1950 historical average, the White House would have a much easier time convincing the American public that its policies could help the federal government achieve fiscal balance in the coming decade. Yet the CBO has downgraded its assessment of America’s medium-term growth potential in light of the sluggish recovery in the years since, creating a problem for the Obama administration.

(I happen to agree that the CBO is understating U.S. growth potential, but that’s because I’m operating under the perhaps overly optimistic assumption that many Obama-era policies will be reversed in the years to come, and that America’s underlying economic strengths will come to the fore.)

Since the president is relying so heavily on immigration reform to make his budget proposal work, I thought I’d make note of a short piece I wrote for the last issue of National Review, in which I address the comprehensive immigration reform debate. My basic points are as follows:

(1) It is more likely than not that we will at some point in the foreseeable future grant legal status to a large share of the current unauthorized immigrant population. This population is extremely poor, and even if we assume that legalization will tend to increase the market wages of its working adult members by a substantial margin, that will continue to be the case. (It’s worth noting male labor force participation in this population is relatively high while female labor force participation is relatively low, and that the children of unauthorized immigrants are concentrated in the poorest households.)

(2) Though less-skilled immigration does not appear to depress the wages of less-skilled natives, there is strong evidence that it tends to depress the wages of less-skilled immigrants currently residing in the United States. The basic reason is that while a new less-skilled immigrant might prove complementary to a less-skilled native – e.g., because the less-skilled native has stronger English language skills than the less-skilled immigrant – a new less-skilled immigrant is more likely to compete with rather than to complement an old less-skilled immigrant.

(3) If we accept the notion that granting legal status to less-skilled unauthorized immigrants means that we as a society are taking some collective responsibility for their well-being, and for that of their children, this is salient information. If less-skilled immigrants have higher earning potential, they will be somewhat more likely to successfully integrate into the social networks that facilitate upward mobility, and their children will be somewhat more likely to succeed in school. We could try to address this concern by increasing transfers to all immigrants, both old and new. Yet it’s not obvious that this should be our first recourse, particularly if we have the alternative of restricting less-skilled immigration while welcoming skilled immigrants who will make larger net fiscal contributions over the course of their lives. This would help increase our fiscal capacity to provide current less-skilled immigrants, as well as less-skilled natives, with the transfers and services we deem necessary.

(4) Moreover, there is reason to believe that while a large-scale less-skilled influx won’t necessarily harm the economic interests of U.S. natives, a more selective, skills-based immigration policy would prove more beneficial to their economic interests, and to those of existing less-skilled immigrants.

If we care about the economic integration and cultural assimilation of the large number of less-skilled immigrants in the U.S., many but certainly not all of whom are currently unauthorized immigrants, we ought to favor restrictions on future less-skilled immigration and an increase in future skilled immigration.

Granted, there is good reason to believe that most less-skilled immigrants living in the U.S. favor a less restrictive policy towards less-skilled immigration, for reasons ranging from the personal (a desire to bring relatives and friends into the country) to the more abstract (a recognition that the U.S. labor market creates enormous opportunities for absolute upward mobility for poor immigrants). Some see this as a good reason to allow for an increase in less-skilled immigration. Of course, many members of high-income households oppose having their taxes raised, and our left-of-center friends nevertheless insist that high earners should face somewhat higher taxes — not out of envy or spite, but because a more steeply progressive tax code would, in their view, serve the common good. I’d suggest that a similar logic ought to apply to the immigration debate.

So by all means, let’s use immigration reform as a strategy for addressing our medium- and long-term fiscal challenges (and for increasing growth in GDP per capita). If that’s what we have in mind, however, we ought to embrace immigration reform that protects the interests of current less-skilled immigrants and that selects immigrants who will pay far more (not slightly more) in taxes than they will receive in benefits over the course of their lives.