While immigration was pretty far down on the priority list at this time last year, recently the topic has taken a front seat in lawmakers’ chambers down in Washington. ConvergEs's Nick Colas notes that policymakers on both sides of ideological spectrum are establishing positions and recommendations for reform, and are familiarizing themselves with some of the lesser-known facts about immigration. In a nutshell, he explains: immigration is not all about border crossings from Mexico and undocumented workers. There are many more figures – and costs – associated with immigration, most of which have palpable and measurable impacts on the US economy. From GDP growth to the health of the housing market, immigration’s influences may not be widely known, but should be in order for policymakers and investors to make informed decisions.
Via Nick Colas, ConvergEx
Note from Nick: Immigration is often couched as a social issue, especially in American politics. And while that may be the ‘Red meat’ both parties use to energize their respective bases, the truth is that the current debate on the topic has important economic ramifications as well. Sarah picks it up from here, with data points all the way from the Federal budget to GDP math.
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%.
- 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 [11]. 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.