This article originally appeared on Marketwatch.com.
With House Majority Leader Eric Cantor's primary loss to Tea Party candidate David Brat, immigration reform looks dead. But the Tea Party should favor sensible immigration reform with border controls. It would result in additional economic growth, allowing the government to cut spending and lower taxes -- key Tea Party demands.
Immigrants increase gross domestic product growth. Immigration expands the American workforce and encourages more business startups. In 2013 the labor-force participation of foreign-born workers was higher than native-born workers (66.4% vs. 62.7%). Their unemployment rate was lower (6.9%, compared with 7.5% for native-born Americans). If people want to come and work, that adds to our economy.
The myth that "they take away our jobs" assumes a fixed economic pie. France has famously limited weekly work hours to 35 hours a week so that there would be enough work to go around. But more people add up to more consumers, more producers, more savers, more investors. New York City and Charleston, S.C, were equal in stature in the late 18th century. Now New York is a major urban center, primarily due to immigration.
Here are five reasons the Tea Party should support immigration reform.
Immigrants bring in more tax revenue. The nonpartisan Congressional Budget Office analyzed the budgetary and economic effects of the immigration bill that passed the Senate in June 2013. If signed into law, it would expand the number of legal visas available. CBO found the reforms in the legislation would raise tax revenue and lower federal spending, causing an $897 billion reduction in the federal budget deficit over the next 20 years.
Technology Policy Institute scholar Arlene Holen, using CBO methodology, has estimated that if no green card or H-1B visa constraints had existed in the period 2003--07, an additional 182,000 foreign graduates in science, technology, engineering, and mathematics fields would have remained in the United States. Their contribution to GDP would have been $14 billion in 2008, including $2.7 billion to $3.6 billion in tax payments. Three hundred thousand H-1B visa holders would also have remained in the U.S. labor force, earning $23 billion in 2008 and reducing the budget deficit by $34 billion to $47 billion in tax revenue over the next decade.
Immigrants have skills that complement those of native-born Americans, making the economy more efficient. Immigrants make the economy more efficient by reducing bottlenecks caused by labor shortages, both in the high-skill and low-skill areas, and allowing businesses to expand, creating jobs for native-born Americans.
The educational backgrounds of immigrants and native-born Americans differ. Many Americans have high school diplomas and some college education, but relatively few adults lack high school diplomas and even fewer have Ph.D.s in math and science. Their skills are in a bell-shaped curve. In contrast, immigrants' skills are distributed in a U-shaped curve, with disproportionate shares of adults without high school diplomas who seek manual work and others with Ph.D.s in math and science.
The economy needs these low-skill and high-skill workers. Americans rarely want to make a career out of cleaning hotel rooms or picking fruit, but these jobs need to be done, and low-skill immigrants want to come and do them. At the other end of the skill scale, a percentage point increase in immigrant scientists and engineers raises the number of patents by 18%, concluded Jennifer Hunt of Rutgers and Marjolaine Gauthier-Loiselle of Princeton.
Immigrants raise wages of native-born Americans. Research found that increasing legal immigration, regardless of education or occupation, would improve job prospects for American workers.
Immigrants in STEM fields have been responsible for higher wages among American workers, according to a May 2014 National Bureau of Economic Analysis working paper by economists Giovanni Peri, Chad Sparber, and Kevin Shih. They looked at 219 U.S. cities from 1990 to 2010, the number of H-1B STEM workers in a city, and the effect on wages, employment, and productivity for college- and non-college-educated native workers.
They found that a 1 percentage point increase in foreign STEM workers' share of total employment raised the wage growth of native-born Americans with a college degree by seven to eight percentage points. The wages of Americans without a college degree rose by three to four percentage points. This translates into tens of thousands of dollars in additional earnings over the span of a career. The authors say a one percentage point increase in foreign STEM workers' share of total employment reflects the change over the period 1990 to 2010.
Peri and his coauthors conclude that "foreign STEM growth can explain between a third and a half of the average productivity growth in the period 1990-2010."
Immigrants are responsible for a substantial share of startups. Immigrants are disproportionately entrepreneurial, which in turn yields tax revenue and more jobs for Americans. Brookings economist Robert Litan has estimated that the U.S. economy now generates about 15 new companies a year that are likely to grow to have a billion dollars or more in annual revenue. Immigration reform could increase that number, potentially raising GDP growth by a more than a full percentage point.
Startups lead to economic growth, and immigrants found new companies in America at greater rates than do the native-born, according to a study by University of California professor Robert Fairlie. However, the share of immigrant-founded Silicon Valley companies has declined from 52 percent between 1995 and 2005 to 44 percent between 2006 and 2012. By making it difficult for high-skill workers to come to America, Congress is dissipating the value America receives from private and federal investments in research.
Immigrants could help revive blighted areas, such as Detroit. Let's face it, Detroit does not look attractive to many Americans. But it is more attractive than dangerous places such as Venezuela and Afghanistan, where people fear for their lives and the lives of their children.
Republican Gov. Rick Snyder has requested 50,000 special federal immigration visas over five years to attract foreign professionals to Detroit. The city has lost over 1 million residents in the past 60 years, and 50,000 STEM immigrants would boost the struggling city's population, wages, and productivity, all without harming locals. To date, the federal government has not granted Snyder's request.
Tea Party activists are right to take a stand against illegal immigration. But America needs more legal immigration, paired with border security that also guards against those who overstay their visas. It is likely that Cantor's loss to Brat will reduce the chance of immigration bills passing Congress. That would harm all Americans, including those whom the Tea Party purports to represent.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.
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