Neither President Obama, whose executive decision in June ended most deportations of children of illegal immigrants, nor Mitt Romney, who generally opposes amnesty for illegal immigrants, has focused on the economics of immigration. Though complex, the economic realities help to illuminate the potential path toward comprehensive immigration reform.
Economically speaking, legal and illegal immigrants could hardly be more different. Legal immigrants are more skilled than the typical American and divide roughly equally among Asians, Latinos and Europeans. Illegal immigrants are mostly low-skilled, earn low wages, and are mainly Latino.
Immigrants, both legal and illegal, do share one trait, however: They gain economically by migrating to America. Legal immigrants, on average, earn $16,000 more per year in the United States than they would in their home countries — a $300,000 lifetime bonus. The undocumented also earn more in the United States than back home, which is why they risk so much to come.
Some contend that, because of a common border, the prevalence of the Spanish language, or an unwillingness to assimilate, U.S.-born children and grandchildren of Latino immigrants have not enjoyed the spectacular generational advances achieved by descendants of earlier European immigrants. That is not true. Education advances of Latinos across generations have been larger than for Europeans. The successes of previous immigrant generations, however, happened largely because America's public schools did an excellent job of educating both immigrant children and their native-born classmates. If the schools are not working as well for today's children of immigrants — and there are ample reasons for concern — then the successes of future generations are being imperiled.
What about benefits to native-born Americans? Immigrants, legal and illegal, bring benefits to the U.S. economy of more than $10 billion a year, not a small bit of change but small relative to the national economy. These benefits accrue because immigrants, legal and illegal, keep wages lower than they otherwise would be. If immigration does not depress wages, prices cannot fall, leaving no economic benefit. Although all Americans benefit on average, not everyone gains.
What about taxpayer effects? The effects of immigration on taxes are generally positive at the federal level, but they are negative at the state and local levels in places where there are lots of low-skilled immigrants. This is primarily because schooling is financed at the state and local levels.
When combining the taxpayer effects across all levels of government, there is still a positive overall taxpayer effect of legal immigrants whose incomes are high. In contrast, the combined taxpayer effect is typically negative for illegal immigrants, largely due to school financing and their low incomes. According to a 1997 National Academy of Science study I led, native-born taxpayers in California paid $1,178 more in taxes than they received in benefits because immigrants received more in benefits than they paid in taxes.
These California numbers are surely higher today. Health care costs are not an important part of the equation, primarily because immigrants are healthier than their American-born counterparts.
Largely because of the different taxpayer effects, the economic argument favors high-skilled legal immigrants compared with low-skilled undocumented immigrants. Adherence to the principle that America is a nation of laws reinforces the argument in favor of legal immigrants.
The policy dilemma, however, is that we in America are in the midst of a muddle, with 12 million or more undocumented immigrants already here, many for some time. They are now our neighbors and friends, and, to be honest, we have been complicit in their staying.
Is there a way out of the dilemma? I think there is: a simultaneous combination of a pathway to citizenship for most undocumented immigrants already here and a serious commitment to enforce the law without ambiguity in the future so that any additional undocumented migrants must leave immediately. To unite as Americans, we must agree to both parts of this bargain at the beginning of a new American immigration policy.
James P. Smith holds the distinguished chair in labor markets and demographic studies at the nonprofit, nonpartisan RAND Corp. This op-ed is adapted from an essay that first appeared in RAND Review.
This commentary originally appeared in The Orange County Register on October 31, 2012.