The RAISE Act, and How to Analyze the Impact of Immigration Proposals

I was having a conversation with a ReConsider Cabinet member about the RAISE Act, which is the proposal by a few Republican Senators (now backed by Trump) to change how we do immigration. Here's what I think is a pretty good summary. But the big changes are:

  • Fewer than half of the current number of green cards (permanent residence cards) would be given out per year: down to 500k from over 1 million over the next 10 years
  • Prioritization for who gets the green cards would shift from family members to those who score well in a points system, very similar to what Australia and Canada use now
  • It also eliminates the diversity lottery (50k/year randomly drawn from countries that don't send many people) and reduces the number of refugee green cards from 110k to 50k per year
  • There are other details you can read in the summary

The pitch is that it would shift the US immigration system to better serve the US economy and improve the quality and quantity of employment.

In this post I'll help you break some of that down, and how to frame your analysis of any immigration proposal in front of you.

How does Immigration Affect the US Economy & Employment?

Here's the big debate: should immigration go up, down, or stay the same? Gallup tells us Americans are (surprise!) split: 38% want more, 35% want less, and 24% want the level of immigration to stay the same.

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But how does a change in immigration actually affect the economy?

The American Enterprise Institute assembled a few studies and did their own. Methodologies on these things differ. Both methodologies showed that the net effect in wages for US-born workers was positive. However, one methodology showed a substantial decrease in wages for those without a high school diploma, which reflects concerns that people of both parties have had in the past. They also found that total employment for native-born workers goes up.

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If the immigrant has an advanced degree, the impact is much clearer. If 100 immigrants come with advanced degrees, they create 144 total jobs. If they have advanced STEM degrees, they create 362 total jobs. 

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These studies suggest that more immigration is neutral or good for employment and wages. If the immigrants are highly educated, the effect is more decisively positive. The mechanism is not always clear, but for advanced degrees it may be this: advanced degree jobs create new innovations and opportunities for businesses, which must be filled by additional labor.

Such analyses can be helpful for doing your own analysis of any particular immigration reform you see, at least at an economic level.

Interestingly, this study is from the American Enterprise Institute, a "right leaning" economic think-tank. This is a good ReConsider moment to show you that just because something is proposed by a party (in this case the GOP) it does not mean it represents the beliefs of everyone that is in the "right wing." (Is it also possible that some people in the "left wing" want less immigration because it seems to hurt the wages of those without high school diplomas?)

Are There Limits?

The AEI study suggests that more immigrants help the economy, but cites an article by two Harvard professors (sadly the link is broken and I can't find the article) which suggests that in the short term, unskilled labor hurts wages by increasing labor supply without creating a subsequent increase in demand.

We can either focus on purely advanced degree immigrants, or on immigrants as a whole, depending whether you want to lean towards the idea that immigrants as a whole help.

The study suggests there is a linear relationship between 100 new immigrants and the number of jobs created. Is that always true, or is that only true for the current level of immigration? If immigration (in this case, permanent residencies) were to increase by one hundred fold, and 100 million new people showed up next year, what might happen? Unclear, but I like thinking about "limit cases" (usually "absurdly high" versus "absurdly low") to consider how things start to look when you make really big changes.

How Does the RAISE Act Score?

The RAISE act reduces total green cards by more than half, but it prioritizes those who have higher degrees, incomes, and English skill. The above analysis suggests that the prioritization might lead to greater economic benefits for American workers (and the Washington Post says "many economists and business leaders endorse the skilled-based approach), but that fewer immigrants overall may hurt American workers and wages. 

CATO, another right-wing / libertarian think tank, cites a historical economic analysis which showed that past legal contractions of immigration did not help American wages, and slowed economic growth. A letter signed by about 1400 economists--including hundreds of professors and many advisers for past presidents of both parties--said that the restriction would hurt the economy. The Washington Post interviewed 18 economists that made a series of points supporting increasing total immigration, saying that reducing it will have a negative economic impact. 

In short, the studies and economic opinions I've seen predict that while prioritizing more skills-based immigration would have a positive impact on the economy, reducing total immigration would have a negative impact on the economy. 

Canada: A Sloppy Case Study

We can look at Canada as a very rough case study about how different levels of immigration might impact an economy. I say "very rough" because the economies of the United States and Canada are quite different, so it would be irresponsible to claim that the outcomes are only due to differences in immigration. Canada does use a points-based system, and it allows 300,000 immigrants per year. Canada's population is 36 million, compared to 323 million in the United States, so that's 11%. Canada's immigration levels are 30% that of the United States. Therefore Canada allows about 3x as many migrants per resident as the United States.

According to the OECD, Canada's unemployment rate in 2016 was 6.9%, compared to the US's 4.7%. In both countries, the unemployment rate among foreign-born people is very slightly higher. However, Canada's total employment rate is higher than that of the United States--73% to 70%. This can be due to more retirees, stay-at-home family, students, or people no longer looking for work in the US compared to Canada. 

Canadian and American GDP growth have been nearly equal for years

This very roughly, vaguely, and unscientifically suggests that if there is a substantial positive or negative impact of higher immigration in Canada versus the US, we would need to look much more deeply at the nitty-gritty economic data that's probably beyond my abilities.

(Note also Australia's immigration rate is about 2x that of the United States)

Coda: My Journey

Having studied immigration a bit--and being familiar with the AEI study--I initially assumed that an economic analysis would predict that the RAISE act would improve wages and employment for Americans. I stuck to this for quite a while and realized I have a strong bias towards preferring the Canadian and Australian systems.

This cabinet member of mine pushed me to do my research, and in doing so I learned that most economic analyses said that the total impact would be negative. 

I learned that people have many different priorities when it comes to immigration, but economy is a big priority for me (as is the case for many Americans), so it's what I focused on. I want to acknowledge that there are other potential impacts of the RAISE act and that not discussing them here isn't meant to trivialize them.

--Erik

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Erik Fogg

We do politics, but we don't do the thinking for you.