How Immigration Impacts the Economy

Immigration has an impact on a country’s economy. Studies have shown that when people move to the U.S. from other countries, they add to the economic growth of the country. Immigration can help lead to increased innovation, education, economic productivity, and more.

Unfortunately, however, immigration in the U.S. is long-rooted in a past of the mistreatment of people and its impact on the nation’s economy is a topic that is still debated among lawmakers. Below, we’ll dive deeper into immigration in the U.S. and how it impacts the economy.

Immigration in the U.S.

Throughout history, people from all over the world moved to the U.S. However, not all people who immigrated to the U.S. chose to do so, nor have they been treated with the same respect and human rights. For example, prior to the Civil War, many people from Africa and other continents and countries were enslaved and brought to the U.S. to work in poor conditions without rights. During World War II, Japanese-Americans were forced into internment camps where the government required them to live and stay for months with little privacy or rights. And even in the 21st Century, some people who have come to the U.S. have been forced to enter detention centers where living conditions are inhumane and medical care is lacking.

In the fourth quarter of 2020 (October to December), 26,000 people received lawful permanent resident status after arriving in the U.S. from other countries. An additional 104,500 people already in the U.S. received lawful permanent resident status during that same quarter. This number does not include the 4,000 refugees who came to the U.S. in that time. The U.S. considers a refugee someone who has left their country of birth or citizenship and cannot return for fear of persecution based on their religion, race, nationality, opinions, or political memberships. The U.S. Citizenship and Immigration Services determines whether someone has “suffered past persecution or has a well-founded fear of future persecution based on race, religion, nationality, membership in a particular social group, or political opinion in their home country.”

The federal government also tracks the number of people who come to the U.S. seeking asylum. People who seek asylum are refugees who are already in the U.S. or at a port of entry and meet the criteria to be considered a refugee. If they have a “credible fear” of persecution or torture in their home country, they can apply for asylum to prevent deportation.

If approved for asylum, a refugee can stay in the U.S., receive authorization to work, and apply for a Social Security card. They can apply for Medicaid or Refugee Medical Assistance and petition to bring family members, who are fearing persecution, to the U.S.

Not all people who immigrate to the U.S. enter legally and thus they are not counted for in the nation’s immigrant population. It can be difficult to know how many people are undocumented in the U.S. at a given time, but the Department of Homeland Security last estimated that there were close to 11.4 million undocumented immigrants in 2018.

Immigration Laws in the U.S

Over the years, the federal government has passed immigration laws to allow for more or less people to enter the country. These laws are often tied to the needs of businesses, jobs, and employment in the U.S.

In January 2021, President Joe Biden proposed a new law on immigration, known as the U.S. Citizenship Act of 2021. This bill—which as of September 2021 is still seeking approval from the House of Representatives—outlines plans to help undocumented immigrants become legal U.S. citizens, as well as update border controls, improve immigration courts, and more. In the interim, the Biden administration has also reversed several immigration laws put in place by past presidents.

Prior to Biden taking office, President Donald Trump had a wall built along the border between the U.S. and Mexico. The Trump administration also detained and deported thousands of undocumented people who entered the U.S., and limited the number of refugees and asylum seekers looking to come to the U.S.

Back in the 1990s, there was the Immigration Act of 1990 which created visa priorities for immigrants who had "extraordinary abilities" in science, arts, education, business, or athletics. Professors and researchers were prioritized, as were executives, managers, and holders of advanced degrees.

In the mid-1980s, the U.S. was recovering from a recession, and unemployment was high. More workers were unnecessary and so President Ronald Reagan proposed the Immigration Reform and Control Act of 1986 which was eventually passed. Under the law, businesses were not allowed to knowingly hire undocumented immigrants, but it legalized any who had entered the country before 1982. Undocumented farmworkers who could validate 90 days of employment were granted lawful permanent residence status.

The Refugee Act of 1980 was another immigration law that was passed to encourage refugees from war-torn areas to enter the U.S. While the law encouraged refugees from conflicted and dangerous regions, entry specifically depended on employment and housing opportunities, available resources, and the likelihood of refugees becoming self-sufficient.

A few other notable immigration laws in the U.S. include the Immigration and Nationality Act, which eliminated quotas based on nationality and favored highly skilled immigrants or those joining families already in the U.S., and the Bracero Agreement of 1942 which allowed Mexicans to assist farmers during the World War II labor shortage.

How Immigration Affects the Economy

Studies have shown that immigration can have a positive effect on a country’s economic growth and productivity, innovation, education, and more.

In July 2019, there were approximately 44.9 million immigrant people in the U.S., making up 13.7% of the nation’s population at the time, according to data from the Census Bureau’s American Community Survey.

One common misconception is that immigrants take jobs away from native citizens of a country. Studies suggest that while some jobs are taken, the most likely scenario is that jobs are actually created. In a 2020 study, Azoulay et al. posit that immigrants are 80% more likely to become entrepreneurs and create jobs for people in the country. Most immigrants are of working age and they move to a new country to find (or create) jobs, thus having a positive impact on the labor force. An increasing number of immigrants have higher-level degrees, too, which can help increase innovation. Immigrant people make up 18% of the labor force that is 25 years and older; hold 26% of science, technology, engineering, and math (STEM) jobs; and hold 28% of high-quality patents.

Immigrants are good for a nation’s businesses, too. First and second generation immigrants have founded 43% of Fortune 500 companies in the U.S. and 28% of main street businesses were founded by immigrants.

According to the Bureau of Labor Statistics (BLS), immigrant people in the U.S. are also more likely to work in service occupations, natural resource jobs, construction, maintenance, transportation, production, and material moving roles. This helps ensure businesses can continue serving consumers.

Immigrant people who get a job after moving to the U.S. and pay taxes contribute to economic growth by spending money and consuming goods and services. The money paid in taxes also goes toward government employees, local and national projects, and more. If someone comes to the U.S. and does not have a Social Security number yet, they can use an Individual Taxpayer Identification Number (ITIN). According to the Institute on Taxation and Economic Policy, undocumented immigrants pay over $11 billion in taxes per year.

Both documented and undocumented immigrants pay into social programs via taxes, but those without documentation may not receive many of the benefits that come from paying taxes. For example, undocumented immigrants are not eligible for Medicaid or Medicare because of their immigration status, but Medicaid funds are given to hospitals to help cover the costs of undocumented immigrants who need medical care at their facilities. 

What Is the Future of Immigration in the U.S.?

According to the U.S. Census Bureau, increased immigration to the U.S. over the next 40 years would mean a “faster growing, diverse, and younger population in the country.” However, the population is aging and is expected to continue to do so until about 2060. Increased or decreased immigration during that time could help shift that timing, but it will all depend on how many people come to the U.S.

With an older population, the U.S. will need more young people to work and sustain economic growth, employment, and more in order to continue the path of economic growth the country has been on for decades. Immigrants, both documented and undocumented, will play an essential part in that. It is necessary to continue accepting working-age people into the U.S. (or giving them a path to legal permanent residence if they are undocumented) in order to continue the economic growth of the country.

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