Table 1

Why America Needs Immigration

Immigrant entrepreneurship is an awesome job engine.  A research report by the  National Foundation for American Policy (NFAP), a non-profit research group based in Arlington, Virginia, titled Immigrant Founders and Key Personnel in America’s 50 Top Venture-Funded Companies, shows that immigrant entrepreneurs have founded nearly half of America’s top venture-backed companies. Yet, America’s immigration policies are hopelessly outdated and damaging to innovation.

For one thing, the U.S. birth rate has plunged and so the U.S. has been relying on immigration to maintain population growth, which is a necessity for boosting innovation and economic growth.

While these facts are fairly uncontested, did you know that The DREAM Act, which would provide a path to citizenship for undocumented immigrants, would also create jobs for native-born Americans? The Huffington Post highlights an important study on this subject.

A Dream Deferred

The DREAM Act (Development, Relief, and Education for Alien Minors Act) was proposed to provide a path to citizenship for the children of undocumented immigrants who finish high school and some college or military service.   President Barack Obama supported the Act which was passed by the House of Representatives before Senate Republicans killed the bill in 2010. However, the Obama administration unilaterally stopped deporting young undocumented immigrants in June.

Why the controversy?

Critics of the DREAM Act fear that this would take jobs away from native-born Americans. However, according to a rigorous analysis from the Center for American Progress (CAP), a progressive think tank, these fears are not only unfounded, but the Act would stimulate the economy and create millions of jobs.

Research Methodology

The research was carried out by Juan Carlos Guzmán is a monitoring and evaluation specialist at the Initiative for Global Development. Raúl C. Jara is a research associate at the University of Notre Dame’s Institute for Latino Studies. It rigorously examined the economic impact of providing to legal status to an estimated 2.1 million eligible youth in America by making projections based on American Community Survey data from 2006 to 2010 to calculate the number of eligible unauthorized youth that would qualify for the DREAM Act, then entering the data into a model of the likely educational and job attainment potential of eligible DREAMers to estimate their likely future earnings. The model takes into account factors including educational level, age, sex, race and ethnicity, using a methodology similar to that used by education economist Luis Crouch and others in the field.

The researchers then used the IMPLAN system of input-output matrices to detail the induced effects of passage of the DREAM Act on the U.S. economy. The IMPLAN model is used by the U.S. government—including the Bureau of Economic Analysis and the Department of Defense—as well as a variety of departments in 39 different states and private industry to estimate the induced effects of legislative and other changes that impact the inputs in an economy. The forward-looking analysis begins in the year 2010, the last year in which detailed economic and demographic baselines are available, and runs through 2030, at which point a significant portion of eligible DREAMers would have completed their schooling and entered the workforce.

Since the data sets used were taken from 2006 to 2010 to include the height of the recession in generating expected performance, the findings  likely understate the actual economic impact of the DREAM Act.

Findings: Economic Windfall

The research found that children of undocumented immigrants acquire more education in the path to citizenship, and would become qualified for better-paying jobs, which would stimulate the economy. As educated, productive naturalized citizens buy more goods and services, this would  boost the incomes of the workers that produce those goods and services.  The report estimates that the economic effect would be:

  • The creation of 1.4 million jobs.
  • The addition of $329 billion to the U.S. economy by 2030.

The researchers conclude:

We find in this report that enabling these 2.1 million eager-to-be-Americans to contribute to building the American Dream would deliver a double boost to our economy.

First, enacting the law would provide an incentive for their further education because for most of those who would be eligible the legalization provisions can only be attained through completion of high school and some college. Receiving more education opens access to higher-paying jobs, enabling these undocumented youth to become much more productive members of our society.

Second, gaining legal status itself translates into higher earnings for these youth since legal status allows DREAMers to apply to a broader range of high-paying jobs rather than having to resort to low-wage jobs from employers who are willing to pay them under the table.

Overall, our research finds that by 2030 the eligible DREAMer population will earn 19 percent more in earnings than without passage of the DREAM Act, in turn increasing their consumption and contributing more in the way of tax revenue to the federal government.

It is important to note that the benefits would not simply be a one-time addition but instead unfold over time, with the economic benefits growing larger as time goes on. This upward trajectory comes because eligible DREAMers will have a staggered entrance into the workforce, with many eligible youth still in elementary or secondary school at the time of passage.

History of the DREAM Act

What About the Costs?

But won’t they put other Americans out of work?  What would be the costs? The authors acknowledge that this study looks solely at the economic benefits from passing the DREAM Act, and not costs that may be incurred. Still, they believe future costs from the DREAM Act will be limited since immigrants’ skills tend to complement rather than supplant them the skills of the native-born Americans.  According to the authors:

  • Public Benefits Costs: DREAMers will be subject to the same ineligibility for most public benefits as other legal immigrants, and only allowed to receive most non-emergency federal benefits after five years of lawful permanent residence through holding a green card, or becoming a citizen through naturalization. Moreover, the DREAM Act contains an additional cost measure: “recipients must wait a 10-year conditional period, by which time we assume the DREAM Act population as a whole will be contributing significantly to the economy.”
  • Displacement of Native-Born Citizens: The authors address this in 3 parts:

First, many economists find that immigrants tend to complement the skills of native workers rather than compete with them, especially as immigrants move up the education and skills chain. Increasing the education of immigrant workers would therefore decrease the competition between DREAMers and the native-born.

Second, research shows that an increase in college-educated immigrants directly increases U.S. gross domestic product—the largest measure of economic growth—which correlates to more jobs for American workers. In the 1990s, for example, the increase in college-educated immigrants was found to be responsible for a 1.4% to 2.4% increase in U.S. GDP.

Finally, by giving legal status to DREAMers, fewer employers would be able to pay workers under the table and more would have to abide by a system that is fair to all workers.

This study’s findings clearly show that passage of the DREAM Act would improve the American economy and contribute to the economic recovery and our future economic stability.  It is worth noting that the bill was cosponsored by representatives of both parties. After the election, let’s hope that the polarized political climate will give way to common sense, and the bill will finally be passed.