Economics, Morality and Policy:Immigration Reform in America

Immigration reform has been one of several hot topic issues that frequently appears in news media, social media and political discourse.  On both sides of the debate are those who vehemently express their opinions, using the appeals of economic reasoning quantified through data and moral rationale expressed through the lenses of empathy and sympathy.  A group of eight legislators is currently in the process of creating a bipartisan immigration bill designed to address the nation's estimated 11 million illegal immigrants.  The word "amnesty" is likely the best single word one could choose to describe ongoing obstruction in this legislation's implementation.  While compulsively reading news feeds and intermittently checking Facebook on any given day I have noticed that it is rare to find an examination of facts that even pretends to attempt an unbiased view of the implications of immigration reform.  Within social media, the moral argument pervades a majority of posts occasionally accompanied by loosely reiterated rhetoric or numbers.  "The fact is that they broke the law by entering illegally" and "the vast majority of Americans were immigrants once, we were founded on the principle of acceptance" are likely arguments that we have all heard repeatedly in some form from each camp.  News articles perform more strongly by quoting numerous experts and officially compiled reports but generally follow a very clearly liberal or conservative origin of thought.

A post shared on Facebook by an acquaintance of mine earlier today linked this article about the negative fiscal impact of granting amnesty to the illegal immigrant population residing in America.  The article predicts that the net federal fiscal cost of these people, that is the total estimated amount of taxes paid minus the estimated costs of social benefits received will grow from over $10 billion measured in 2002 up to almost $29 billion.  An influx of unskilled, legal labor adds to the federal  budget burden because low-skilled labor is the most likely to utilize social programs while contributing a relatively low amount in the way of taxes.  Another argument is the direct effect of greater numbers of workers on the wages of the already poor, low-skill American labor force.  This is basic supply and demand. 

Contrastingly, an article I came across a few weeks ago on Google News, examining the economics of immigration addresses some economic reasoning explaining some of the benefits and seemingly counter-intuitive effects of granting amnesty.  One of the greatest social benefit costs in the United States is Social Security which is designed almost entirely for support of the elderly.  Immigrants typically are young, often very hard-working individuals who don't use this service and who pay taxes, whether legally or not.  So those who pay taxes using fake Social Security numbers create "pure profit for the Treasury."  It is also possible that more workers entering the states will lower the wages of American-born citizens, which can also lower the costs of doing business, leading to lower prices on goods which can lead to a higher relative wage.  Granting amnesty will also encourage more legal immigration.

International trade theory states that a country with an open economy will specialize in whatever goods it can make more efficiently than other countries.  Labor abundance is a factor that contributes to a country's ability to do so.  When a country first transitions from a less open economy to a more open one, labor essentially receives less income due to greater supply while owners of capital (rich people) receive higher returns due to the scarcity of capital relative to the amount of workers.  As the country realizes its comparative advantage in labor however, industry requiring intensive labor moves in until the demand for labor rises higher than its previous levels in that country.  To summarize, when people have the ability to move across borders to work, at first everyone's wages within that country drop but will eventually rise past their initial levels. 

This seems like a great argument for amnesty; put everyone on paper, make it official, encourage immigration, ensure that their children receive education(human capital investment) and can contribute to society.  But what about the debated effects on the welfare burden?  What about those who lose in the short run?  A generation of Americans may lose in order for the following generation to gain?  What about the fact that these illegal immigrants are human beings who deserve a chance to provide for their families? What if one or any of the points of either side is completely exaggerated, unfounded in evidence or completely wrong? 

Someone once said that it is a mistake to judge policy by its intent, rather than its outcomes.  This post hopefully created more questions than it answered.  I am at a point where I feel a little tired of hearing the opinions of people who choose their point of view, their political team, and subsequently gather information to support it.  In the democracy of the (ostensibly) most powerful nation on Earth, where public opinion literally can change the world it is imperative that we as voters and scholars examine every bit of information we can, read between the lines, and use logic over emotion to make our decisions.