The economic benefits of comprehensive immigration reform.

• Author: Hinojosa-Ojeda, Rail

The U.S. government has attempted for more than two decades to put a stop to unauthorized immigration from and through Mexico by implementing "enforcement-only" measures along the U.S.-Mexico border and at work sites across the country. These measures have failed to end unauthorized immigration and have placed downward pressure on wages in a broad swath of industries.

Comprehensive immigration reform that legalizes currently unauthorized immigrants and creates flexible legal limits on future immigration in the context of full labor fights would help American workers and the U.S. economy. However, the federal government's current policy is to step up its enforcement-only strategy without creating a path to legalization for the millions of undocumented immigrants currently living in the country.

Despite evidence that comprehensive reform would raise the "wage floor" for the entire U.S. economy, to the benefit of both immigrant and native-born workers, states such as Georgia, Alabama, mad South Carolina have responded to federal delay tactics by enacting laws that restrict the fights of immigrants and invite racial profiling by local law enforcement. The most well-known of these laws is S.B. 1070 in Arizona, which remains largely unenforced due to legal challenges to its constitutionality by the U.S. Department of Justice.

S.B. 1070 is specifically designed to trigger a mass exodus of undocumented immigrants from the state by making "attrition through enforcement the public policy of all state and local government agencies in Arizona" (State of Arizona 2010). Other states such as California, which attempted to take a similar path to Arizona's with its restrictive Proposition 187 in 1994, debate file merits of immigration reform while awaiting decisive action by the federal government.

The Arizona crackdown may play well politically for some local elected officials, but is it in the best economic interests of the state? The purpose of this article is to provide an answer to that basic question by presenting an economic analysis of the effect of different reform scenarios. If S.B. 1070-type laws accomplish the declared goal of driving out 'all undocumented immigrants, what effect will it actually have on national, state, and local economies? Conversely, what would be the impact on state economies if undocumented immigrants acquired legal status? The economic analysis in this article shows that the S.B. 1070 approach would have devastating economic consequences if its goals were accomplished.

The historical experience of legalization under the 1986 Immigration Reform and Control Act indicates that comprehensive immigration reform would raise wages, increase consumption, create jobs, and generate additional tax revenue. Even though IRCA was implemented during a period that included a recession and high unemployment (1990-91), it still helped raise wages and spurred increases in educational, home, and small business investments by newly legalized immigrants. Taking the experience of IRCA as a starting point, we estimate that comprehensive immigration reform would yield at least $1.5 trillion in added U.S. gross domestic product (GDP) over 10 years. (1) This is a compelling economic reason to move away from the current "vicious cycle" where enforcement-only policies perpetuate unauthorized migration and exert downward pressure on already low wages, and toward a "virtuous cycle" of worker empowerment in which legal status and labor rights exert upward pressure on wages.

In this article, I use a computable general equilibrium (CGE) model to estimate the economic ramifications of three different scenarios: (1) comprehensive immigration reform that creates a pathway to legal status for unauthorized immigrants in the United States and establishes flexible limits on permanent and temporary immigration that respond to changes in U.S. labor demand in file future; (2) a program for temporary workers only that does not include a pathway to permanent status or more flexible legal limits on permanent immigration in the future; and (3) mass deportation to expel all unauthorized immigrants and effectively seal the U.S.-Mexico border. In addition to the national-level analysis, I look at the effect of the two extremes of immigration reform (scenarios I and 3) on Arizona and California, the former because mass depletion of the immigrant workforce is a real threat in light of S.B. 1070, and the latter because it is home to more immigrants than any other state. Within California, I focus on Los Angeles County to see the effects of the different reform scenarios at the local level.

The CGE model shows that comprehensive immigration reform produces the greatest economic benefits:

* Comprehensive immigration reform generates an annual increase in U.S. GDP of at least 0.84 percent. This amounts to $1.5 trillion in additional GDP over 10 years. It also boosts wages for both native-born and newly legalized immigrant workers. The effects would generate a $5.3 billion increase in California, a $1.0 billion increase in Los Angeles County, and a $1.68 billion increase in Arizona.

* The temporary worker program generates an annual increase in U.S. GDP of 0.44 percent. This amounts to $792 billion of additional GDP over 10 years. Moreover, wages decline for both native-born and newly legalized immigrant workers.

* Mass deportation reduces U.S. GDP by 1.46 percent annually. This amounts to $2.6 trillion in lost GDP over 10 years, not including the actual cost of deportation. (2) Wages would rise for less-skilled native-born workers, but would decline for higher-skilled natives, and would lead to widespread job loss. California would lose 3.6 million jobs under this scenario and its economy would shrink $302 billion. Los Angeles County would suffer 1.3 million job losses at a cost of $106 billion to the county economy. In Arizona, mass deportation would amount to 581,000 lost jobs and a $48.8 billion contraction of the state economy.

America's current approach to immigration policy, exemplified by Arizona's S.B. 1070, is economically self-destructive. A more forward-looking approach that puts all workers on a legal, even footing offers opportunity for a costless stimulus to local economies that improves fiscal balances in the short term and lays the foundation for robust, just, and widespread growth.

Enforcement-Only Policies Are Costly, Ineffective, and Counterproductive

In March 2006, Michael Chertoff, then secretary of Homeland Security, stated: "When you try to fight economic reality, it is at best an expensive and very, very difficult process and almost always doomed to failure" (Mden 2006). The current enforcement-only approach to unauthorized immigration is not cost-effective and has not deterred unauthorized migrants from coming to the United States when jobs are available. Rather, enforcement-only policies have wasted billions of taxpayer dollars while pushing unauthorized migration further underground. These policies have produced a host of unintended consequences: more deaths among border crossers, greater demand for people smugglers, less "circular migration" in favor of more "permanent settlement" among unauthorized immigrants, and further depressing of wages in low-wage labor markets. To date, significant declines in unauthorized immigration have occurred only during downturns in the U.S. economy when labor demand is dampened. Ironically, demographic trends in Mexico will likely accomplish what tens of billions of dollars in border enforcement clearly have not: a decline in the supply of migrants from Mexico who are available for jobs in the United States.

High Costs and No Benefits

The number of unauthorized immigrants in the United States has increased dramatically since the early 1990s despite equally dramatic increases in the amount of money the federal government spends on immigration enforcement. Since 1992, the year before the current era of concentrated immigration enforcement along the U.S.-Mexico border, the annual budget of the U.S. Border Patrol has increased by 714 percent, from $326 million in Fiscal Year 1992 to $2.7 billion in FY 2009 (DHS 2009). The cost ratio of Border Patrol expenditures to apprehensions has increased by 1,041 percent, from $272 per apprehension in FY 1992 to $3,102 in FY 2008. At the same time, the number of Border Patrol agents stationed 'along the southwest border has grown by 390 percent, from 3,555 in FY 1992 to 17,415 in FY 2009 (DHS 2004, 2008, 2009).

The budget for U.S. Customs and Border Protection, the Border Patrol's parent agency within the Department of Homeland Security, has increased by 92 percent from $6.0 billion in FY 2003 to $11.3 billion in FY 2009. The budget of Immigration and Customs Enforcement (ICE), the DHS's interior-enforcement counterpart to CBP, has increased by 82 percent, from $3.3 billion in FY 2003 to $5.9 billion in FY 2009 (DHS 2011). Yet the unauthorized immigrant population of the United States has roughly tripled in size over the past two decades, from an estimated 3.5 million in 1990 to 11.9 million in 2008. The number of unauthorized immigrants in the country appears to have declined slightly since 2007 in response to the recession which began at the end of that year (Passel and Cohn 2009: 1; Hoefer, Rytina, and Baker 2009: 1-2; U.S. Immigration and Naturalization Service 2003: 10).

The fact is that nearly 'all unauthorized migrants still eventually succeed in entering the United States despite tens of billions of dollars of immigration-enforcement spending since the early 1990s. Wayne Cornelius and his colleagues at the University of California, San Diego, have conducted a long-term study of unauthorized migration and found that the vast majority of unauthorized immigrants (92 to 98 percent) keep trying to cross the border until they make it (Passel and Cohn 2008: 1; Hoeer, Rytina, and Baker 2009: 1). Cornelius has concluded that "tightened...