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The Price of Inaction on Immigration Reform Is Too High

Immigration reform

SOURCE: AP/Alex Brandon

DREAMers listen to speakers during a "United We Dream" rally on Capitol Hill in Washington, Wednesday, July 10, 2013. If the House of Representatives fails to pass immigration reform, the American economy will miss out on significant gains.

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As the House of Representatives mulls over whether to move forward on immigration reform legislation, one point should be front and center in the debate: Maintaining the status quo is not cost neutral. Every day that Congress fails to pass immigration reform that enables the 11 million undocumented immigrants to earn legal status and citizenship is both a lost economic opportunity and a cost to all Americans.

Last month the Senate passed immigration reform legislation by a bipartisan vote of 68-32. Numerous studies and the nonpartisan Congressional Budget Office found that the Senate’s bill would lead to significant economic growth as immigrants fully enter into our society and economy. Over the next 10 years, the Border Security, Economic Opportunity, and Immigration Modernization Act, S. 744, would increase our gross domestic product, or GDP, by 3.3 percent and would raise the wages of all Americans by a cumulative $470 billion, while creating on average 121,000 jobs each year.

In other words, if the House of Representatives fails to pass immigration reform, our country will forgo significant gains to our economy. Not only would it leave these gains behind, but the House also would guarantee that the United States continues to experience significant financial losses each year as a result of a broken immigration system. When these funds are lost, it is a loss to our local communities, our children’s education, and the retirement benefits of American retirees.

Two examples of the financial losses that result from maintaining the status quo are the underground labor force and diminished demand and consumption in the housing market.

The underground labor force

Throughout the debate over immigration reform, many people have described the undocumented population as “aspiring Americans living in the shadows.” This phrasing is not only poetic, but it also describes this population’s fear of deportation and accurately describes how these immigrants are marginalized from the formal economy. Our current broken immigration system creates shadow economies where millions of people live and work.

There are currently an estimated 8 million undocumented immigrants working in the United States, which is more than 5 percent of the American workforce. With no means to work legally under current law, it is no surprise that the Social Security Administration estimates that close to two-thirds of these immigrants work in an underground labor market where neither they nor their employers are able to legally declare their earnings or pay their payroll taxes. With only one-third of unauthorized immigrants working in the formal economy and contributing about $12 billion in payroll taxes each year, we estimate that the United States loses around $20 billion in payroll tax revenue each year. Given that the Social Security Administration already pays out more in retirement benefits than it receives in taxes, this lost revenue would go a long way toward funding the retirement benefits of Americans across the country.

The housing market

In addition to pushing immigrants into an underground economy, our broken immigration system has kept millions of people from fully participating in their local communities and economies. This is perhaps most evident in the context of the housing market.

Research by the Pew Hispanic Center found that just 35 percent of unauthorized immigrant households owned their own homes, compared to the 66 percent of naturalized-citizen homeowners. This low rate of homeownership among undocumented immigrants is not surprising, given that 18 percent of them move each year either out of fear of deportation or an inability to find stable jobs because of their lack of status, compared to just 10 percent of immigrants with legal status.

Over the past two decades, immigrants have contributed significantly to the health of our country’s housing market. Between 2000 and 2010 immigrants accounted for 40 percent of the growth in homeownership, and this trend is projected to continue through the next decade. But local communities stand to benefit significantly more if the purchasing power of undocumented immigrants is unleashed through reform that normalizes their immigration status. Simply put, our broken immigration system stifles immigrants’ natural tendency to purchase homes and contribute to our economy.

Rebounding housing markets—specifically, increased homeownership—is crucial to local communities’ recovery from the Great Recession. At the most basic level, homebuyers spur economic growth through all of the transactions and consumption associated with their purchases. The National Association of Realtors estimates that an average of $60,000 is spent in associated purchases—for example, the cost of movers—when a home is bought. In addition to the consumption associated with buying a home, research has found that immigrant homeownership increases the property values of all homeowners and subsequently leads to greater property tax revenues for communities. All homeowners win when home prices rise.

If undocumented immigrants were provided legal status and were able to become full members of our society, many of them would decide to purchase homes, similar to their legal counterparts. This would mean that immigrants would settle down in communities all across the country, buy homes, and invest in their communities, contributing greatly to local economies.

Conclusion

Last month the Senate took a giant step toward reaping the economic benefits of immigration reform. The potential to add billions of dollars to our economy should in and of itself be sufficient motivation to spur the House of Representatives to act. But if not, the House at a minimum must understand that a vote for the status quo is a vote for continuing the financial losses that burden our country.

Marshall Fitz is Director of Immigration Policy and Patrick Oakford is a Research Assistant with the Economic and Immigration Policy teams at the Center for American Progress.

To speak with our experts on this topic, please contact:

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Print: Crystal Patterson (immigration)
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