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BPC Study: Balanced Step-by-Step Immigration Reform Can Increase GDP, Reduce Budget Deficit

Thursday, May 21, 2015

Washington, D.C. – Step-by-step immigration reform can have a powerful positive effect on the economy if it addresses multiple aspects of the immigration system, according to a new study released today by the Bipartisan Policy Center (BPC). The study, Assembling the Pieces: The Economics of Step-by-Step Immigration Reform, finds that a combination of mandatory E-Verify, legalization, temporary worker programs, and expanded high-skill immigration could increase GDP by 0.5 percent and reduce the federal budget deficit by $570 billion over 20 years.

Conversely, focusing only on increased immigration enforcement by adopting mandatory E-Verify nationwide would reduce GDP by 1.5 percent and increase the budget deficit by $110 billion over the same 20-year period, according to the study. Mandatory E-Verify would decrease tax revenue by causing millions of unauthorized immigrants to leave the economy, particularly those who work in “above ground” jobs and pay federal taxes.

“Reforms that bring more workers into the American economy—and do so through legal pathways—create a greater boost to the economy than focusing solely on enforcement, which ultimately takes workers out of the economy,” said Theresa Cardinal Brown, BPC’s director of immigration policy. “This study shows that the right combination of policies can achieve immigration reform with a measure of fiscal responsibility.”

The study analyzes five scenarios in total, each with a different combination of one or more components of immigration reform: enforcement (through mandatory employment verification or E-Verify), legalization, temporary worker programs, and high-skill worker programs. Rather than promote specific policy prescriptions, the study allows readers to assess different approaches to immigration reform that could emerge from a step-by-step process, which some in Congress prefer to a single comprehensive bill.

In 2013, BPC analyzed the Senate’s comprehensive immigration reform bill and found that it would increase GDP by 4.8% and reduce the budget deficit by $1.2 trillion over 20 years.

“Compared with the Senate bill, the smaller economic impact of these reform scenarios  reflects their more limited scope,” said Brown. “But taking a balanced approach that combines stepped-up enforcement with new and expanded pathways to legal entry still creates a significant positive impact and addresses many of the major issues in immigration.”

Other findings of the new study include:

  • A combination of mandatory E-Verify, legalization, and temporary worker programs had a modest effect on the economy, lowering GDP by 0.3 percent but reducing the budget deficit by $170 billion over 20 years. In this case, legalization and temporary workers mitigated many of the negative economic effects of expanded enforcement, but did not fully counteract enforcement’s negative GDP effects.
  • Reforms to high-skilled immigration created a significant economic boost on their own, increasing GDP by 0.7 percent and reducing the deficit by $310 billion over 20 years. This impact is largely due to the fact that higher-skilled workers pay more in taxes due to their higher wages and generally use fewer government benefits than lesser-skilled workers.
  • Under none of the five scenarios did average wages change significantly. With enforcement only, average annual wages would be 0.3 percent lower than the baseline after 20 years; under the scenario combining all four policies, wages decreased by only 0.1 percent. 

KEYWORDS: 113TH CONGRESS, 114TH CONGRESS, E-VERIFY, ECONOMIC GROWTH, GROSS DOMESTIC PRODUCT