While immigration
is back on the docket in Washington, the topic has yet to capture much
attention on Wall Street, taking a back seat to European troubles and the Dow
rally. The inattention seems warranted, as immigration
is typically cast as a simply societal issue – but I urge you to reconsider its
economic importance. The reality is that immigration, and any reform thereto,
has real, visible impacts on the US economy at both the micro and macro levels,
from GDP to job growth:GDP is first and foremost a product of
population growth and productivity – and immigration plays a role in both. Population growth
in particular is attributable almost exclusively to immigration, as
fertility rates among native-born citizens fall. In fact, from 2003 to
2010, 20% (4,071,000) of the more than 21 million person increase in the
population was in the foreign-born population, bringing their share of the
entire population from 11.9% to 12.4%.
GDP is first and foremost a product of population
growth and productivity – and immigration plays a role in both. Population
growth in particular is attributable almost exclusively to immigration, as
fertility rates among native-born citizens fall. In fact, from 2003 to 2010,
20% (4,071,000) of the more than 21 million person increase in the population
was in the foreign-born population, bringing their share of the entire
population from 11.9% to 12.4%.
Immigration is also crucial to the health of the
housing market. The foreign-born make up 14% of homeowners in
the US, and more than half of them own their homes outright, according to Census figures. Naturalized
citizens are more likely to own than rent, but the 16 million naturalized and
non-citizen households – a number that is growing every year with the immigrant
population – fuels a good portion of the new and existing sales we see every
month.
Foreign-born workers are essential to job market health
as well. Not only are immigration statistics good proxies
for job market strength (i.e., more immigrants likely means a stronger labor
market), but both high- and low-skill immigrants help to fill unwanted
positions among native-born workers.
High-skill immigration in particular is key to growing
a tech-centric economy: Washington has already recognized that the US is
increasingly dependent on keeping bright minds in the country after college
graduation. Patents, breakthroughs, and sheer innovation are
what keep the economy moving along – and immigrants can and do help with that
momentum.
As you can see,
the labor market, housing, GDP, and even tax revenues are influenced by
immigration – and, consequently, by changes to immigration law. Ideally, any
changes made to the legislation would be favorable to the US economy – hence
the focus on creating an easier path for high-skill labor immigration and paths
to citizenship for current illegal residents. But in order to understand the
kind of impact any changes may have on the US economy, first we have to look at
where things stand now.
With that in mind,
we’ve compiled a short list of more economically-oriented facts about
immigration, presented below in “10 Things You May Not Know about US
Immigration”. They aren’t all splashy attention getters;
some are pretty deep in the weeds, actually. But all of them highlight
some point we think hasn’t gotten enough attention in this ongoing debate over
immigration in America.
1. The Border Patrol’s budget
increased 149% from FY 2002 to FY 2012: $1.4 to $3.5 billion. In fact, of all the agencies within the Department of Homeland
Security, “Customs and Border Protection” has the largest budget with $10.4
billion, and it saw the biggest budget increase in 2012. Yep, those are
billions… Thanks to the sequester, the budget decreased by about $500 million –
but the DHS is requesting just under $12 billion for FY 2013, $3.6 billion of
which will go to Border Patrol.
Border Patrol staff has also more than doubled over the past 10 years,
growing 113% from FY02 to FY12. What’s
most interesting here, though, is that the biggest staff increase has been at
Northern points of entry (POEs), which include Buffalo, NY, Spokane, WA, and
Grand Forks, ND. Staff here has grown 312%, from 492 to 2,026.
Bottom line: Enforcing
the current system isn’t cheap. A billion here and a billion there, and
pretty soon you’re talking real money.
2. And yet, despite increased
budgets and staff, apprehensions are down -62% since FY02, and have fallen -78%
since their peak in FY 2000. The FY12 total stood
at 364,768: the last time apprehensions were this low was 1972. There are two
easy explanations for the slowdown, though neither is particularly optimistic:
either Border Patrol is doing a poor job, or no one is trying to cross the
border. The latter point is corroborated by Mexican emigration estimates, and
as we’ve said in prior notes the slowdown points to a still-moribund job market
in the US.
Bottom line: Illegal immigration
is about economics. When people don’t particularly want to sneak into
your country (or even try) you know you’ve got one weak economy.
3. Based on these budget figures,
we know that each apprehension at the border cost us $9,680, up from only
$1,483 in FY02. A 553% increase in
just 10 years. And each BP officer made only about 6 apprehensions in FY12,
down from about 95 in FY02. The total cost of arresting, detaining, and
deporting each person from the US comes in at $12,500, according to Immigration
and Customs Enforcement (ICE), though some estimates put the number as high as
$23,482 (including court proceedings, etc.). With fewer crossings, the higher
budget and larger staff don’t seem warranted – but there they are.
Bottom line: The system also seems
to be inefficient – as well as expensive. So unless we rethink and reform
apprehension, detaining, and deporting, we’re probably going to be stuck with a
Border Patrol with what business analysts would call ‘Very high per unit costs.”
4. The majority of the drug trade
comes through the Southwest POEs, though each region appears to have its own
drug “specialty”. Most marijuana comes
through the Southwest, with 2.3 million pounds seized in FY12 – about 160
pounds per seizure. The “Coastal” border (Miami, New Orleans, etc.) is the
primary seizure point for cocaine (5,962 pounds seized in 2012, 23 pounds per
seizure), while most ecstasy is funneled through the Northern border (199
pounds in 2012).
671 firearms and 128,000 rounds of ammunition were seized at POEs
across the country in FY12, along with $7.6 million dollars in cash. The money is not all in USD, though, and it all goes to an “asset
forfeiture” account controlled by the Treasury. Almost 10,000 vehicles
(“conveyances”, in CBP terms) were also seized, the majority of them at the
Southwest border.
Bottom line: Immigration
isn’t just about people – it is about border security as well.
5. The largest immigrant groups in
the US by country of origin are Mexico, China, Philippines, and the Dominican
Republic. But while Mexican
nationals make up the majority of immigrants into the US, net migration from the
country has fallen to zero – and has perhaps even gone negative, according to
the Pew Hispanic Center. As we’ve explored in prior notes, this trend is a
pessimistic sign for the US labor market as it implies declining economic
opportunity for lower-skill workers. Immigration from China and the
Philippines, though, is up.
Bottom line: The stereotypical
immigration flow is no longer accurate: immigration into the US has globalized
and, consequently, any reforms must address a much more complicated system.
6. Less than 1.2% of green card
applicants were approved in 2011 (latest data available), with a cap of 140,000
cards to be allotted each year. More
than 12.1 million applied in 2011. No single country can receive more than 7%
of the green cards available, and some countries – most of which are major
emigration points to the US – are excluded from the lottery each year. Mexico,
for example, is excluded, but the country is also granted special “border
crossing cards”: 1.5 million were issued in 2012.
Naturalization – separate from green cards and visas – is perhaps an
even more rigorous process, as the required US residence period required varies
by region.According to the Office for
Immigration Statistics, immigrants born in Africa spend the least time in
“legal immigrant status” with only 5 years’ waiting period. Immigrants from
Asia and South America take 6 years, Europe 7, Oceania 8, and North America 10
years.
Bottom line: The US immigration
structure is incredibly complicated. A more streamlined approach – even if it
does turn out to be stricter – would save a lot of time (and, most likely,
money).
7. The majority of immigrant visas
(separate from green cards) were granted to relatives or “family sponsored”
persons in 2012. The State Department
tries to keep the number of immigrant visas granted about the same each year,
with only 482,300 issued in 2012. According to the State Department’s
documentation, 75% of these went to family members (siblings, spouses, and
children mostly), while only 4% went to “Employment-based preference” visas.
Making a change here seems to be one of the focal points of immigration reform
in Washington; the current proposal cuts down on familial visa grants in favor
of high-skill employment visas.
Bottom line: The US immigration
reform is putting first priorities first. While families will almost definitely
remain important in any new legislation, high-skill immigrants – and their
perceived value to the US economy – will have the priority.
8. According to the Census Bureau’s
Current Population Survey, the average foreign-born non-citizen in the US has
an income of $27,000, is between 25-34 years old, married, lives in California,
and did not graduate from high school.The person is also much more likely to rent their home than to own. For
comparison’s sake, native families average about $47k in income, while
documented immigrants make $48k.
But while the majority of immigrant persons are older, an estimated 4.5
million children (citizens) have parents who are unauthorized to live in the
US, and 1 million are estimated to be unauthorized themselves. 31,029 juveniles were apprehended at the border in 2012,
including 24,481 unaccompanied children.
Bottom line: Non-citizens are, on
many counts, distinct from native-born US citizens; but foreign-born persons as
a whole are more or less “just like us”. More importantly though, not all
immigrants (and particularly illegal immigrants) are young, single men looking
for work: women and children are also an important part of the demographic
9. The Congressional Budget Office
estimates that at least half of undocumented immigrants file income papers each
year, and pay local, state, and federal taxes. Based on the Institute for Taxation and Economic Policy,
moreover, undocumented immigrants paid about $11.2 billion in taxes in 2010 –
about $1,000 per estimated illegal alien living in the US.
Bottom line: Illegal immigration
isn’t an absolute drain on tax revenue. Undoubtedly some persons do not pay
federal, state, or local taxes, but many do.
10. Finally, the Center for American Progress estimates
that undocumented immigrations could contribute an additional $1.4 trillion to
GDP between 2013 and 2022 if they are all granted citizenship by the end of
this year. Granted, this is a
major ‘Progressive’ think tank, but in this case the theory is sound.
More people on the books without all the red tape lowers costs and increases
tax revenue. Additionally, the Center says Americans overall would see a
$791 billion increase in personal income, and tax revenue would go up $184
billion - $116 at the federal and $68 at the state level.
Bottom line: Immigration reform
could add an extra couple points to GDP growth over the coming years. And
increase tax revenues.
All of these
points are worth considering as lawmakers push for immigration reform down in
Washington. It will not be easy to come to agreements on
paths to citizenship for illegal immigrants, caps on border crossings, and
especially, money to spend on the process, for sure, but the change is
necessary – and the benefits could potentially outweigh the costs. While a
positive housing market, labor market, and even GDP number are not entirely
dependent on immigration reform, some action could definitely push all of these
in the right direction: up.
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