Center for American Progress

The Economic and Fiscal Benefits of Deferred Action

The Economic and Fiscal Benefits of Deferred Action

The president’s announced executive actions on immigration will bring big economic benefits to the nation, raising wages for all workers, creating jobs, increasing tax revenue, growing gross domestic product, and reducing the deficit.

President Barack Obama announces executive actions on immigration during a nationally televised address from the White House in Washington, Thursday, November 20, 2014. (AP/Jim Bourg)
President Barack Obama announces executive actions on immigration during a nationally televised address from the White House in Washington, Thursday, November 20, 2014. (AP/Jim Bourg)

Last night, after 17 months of inaction by House Republicans on any form of immigration reform legislation, President Barack Obama took the first step toward fixing our nation’s broken immigration system through a smart and sensible set of executive actions. Only Congress can provide a permanent and durable solution, but the president took actions that are within his authority to protect close to 5 million unauthorized immigrants from deportation, and, critically, to grant them temporary legal status and a three-year, renewable work permit. The president also announced a slew of other reforms, including increased border security; new enforcement priorities that will focus our resources on serious criminals, not their family members; and changes for entrepreneurial immigrants, foreign students, and high-skilled workers. Taken together, these actions will strengthen our economy, raise new tax revenue, and create jobs.

Deferred action means higher wages and more tax revenue

Let’s start with the basics. Roughly 5 million people will benefit and get work permits under this executive action. When immigrants are able to work legally, they can better shield themselves from workplace abuses and move freely across the labor market. Combined, this will increase wages by an average of 8.5 percent. Today, just more than one-third of undocumented workers and employers are paying payroll taxes. The Center for American Progress has estimated that executive action will raise an additional $3 billion in payroll taxes in the first year alone, and $22.6 billion over five years, as workers and employers get on the books and begin paying taxes for the first time. Across the United States, individual states will experience similar tax gains as undocumented immigrants begin to work legally and file taxes.

Benefits to every American

But the economic benefits from executive action go beyond just increased taxes, affecting every part of the economy. As the Council of Economic Advisers has found, over the next decade, the range of executive actions announced by the president will:

  • Increase our gross domestic product, or GDP, by up to 0.9 percent, or an additional $210 billion
  • Reduce the federal deficit by $25 billion through increased economic growth
  • Raise the average wages for all U.S. workers by 0.3 percent

The reason these gains will occur is simple: These executive actions on immigration will increase the productivity of our workforce, as individuals—from undocumented immigrants to spouses of highly skilled H-1B visa holders—are able to join the formal economy and secure jobs that utilize all of their skills.

As the Council of Economic Advisers points out, these large economic benefits pale in comparison to those that would have accrued had Congress passed the Senate’s bipartisan immigration plan, the Border Security, Economic Opportunity, and Immigration Modernization Act. That bill would have raised the GDP by more than 5.4 percent over the next 20 years and reduced the deficit by $832 billion. President Obama recognized this exact fact during his speech Thursday night, when he told congressional critics of his program that he “want[s] to work with both parties to pass a more permanent legislative solution.” The ball is now in Congress’ court. In the meantime, the nation will reap the economic benefits of this action.

Patrick Oakford is a Policy Analyst in the Economic and Immigration Policy departments at the Center for American Progress. Philip E. Wolgin is Senior Policy Analyst for Immigration at the Center.

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Patrick Oakford

Senior Policy Analyst

 (Phil Wolgin)

Philip E. Wolgin

Former Managing Director, Immigration Policy