Immigration Boosts U.S. Economy Even as Low-Skilled Wages Dented

(Bloomberg) -- Immigration provides a net long-term benefit to the U.S. economy, even though foreign-born workers depress wages for some low-skilled Americans and weigh on state and local budgets.

A study released Thursday by the National Academies of Sciences analyzed the fiscal impacts of immigration on the $18 trillion U.S. economy. It concluded that immigrants will power the U.S. economy by replacing aging Baby Boomers in the workforce, lifting housing demand and influencing the rate of innovation and entrepreneurship.

At the same time, high-school dropouts see negative effects on their wages and teenagers with jobs get reduced hours. Workers in industries with high concentrations of new immigrants also could suffer.

“Immigrants are disproportionately concentrated among the working-age population,” said Francine Blau, an economics professor at Cornell University and chairwoman of the Panel on the Economic and Fiscal Consequences of Immigration, which was funded by The John D. and Catherine T. MacArthur Foundation. “What is in a sense keeping the labor force growing is the infusion of immigrants and the children of immigrants.”

Immigrants are twice as likely to obtain patents compared with natives, according to the report. They also tend to be more entrepreneurial, from opening small retail shops to being over-represented in Silicon Valley startups, and have a higher capacity for innovation and technological change. Finally, the panel found that an influx of immigrants may reduce prices of some consumer goods and “immigrant-intensive services,” such as childcare, landscaping, taxi rides and construction.

Immigration is one of the most divisive issues in this year’s presidential race. Republican Donald Trump has blamed Mexicans for “taking our jobs” and driving down wages of American workers, and has advocated deporting the 11 million undocumented immigrants living in the U.S. Democrat Hillary Clinton has said she will push for comprehensive reform while at the same time helping legalize those in the country without documentation.

While the impact of immigration over the next 75 years at the federal level is expected to be “generally positive”, according to the report, it will be negative for states. That’s because states bear the brunt of the cost of public education, although that doesn’t account for the prospect that those expenses can be an investment in future productivity, Blau said.

Doug Holtz-Eakin, president of the American Action Forum, a pro-immigration think tank, said states “benefit enormously” from immigrants.

“They’re a net positive for economic growth –- they work more, they retire later and they start more businesses,” he said. ‘It’s a question of how have you structured your finances and can you manage a risk of the influx of a population.”