Immigration And The US Economy
We find out who are key beneficiaries of immigrants in the US economy.
According to recent studies and economic analyses, immigration has a largely positive impact on the U.S. economy, contributing to increased economic activity, tax revenue, and labor force growth. While the effects are complex and multifaceted, most economists agree that immigration generally leads to higher productivity, innovation, and overall economic growth in the long term.
Immigration's Role in Labor Shortages
Immigration plays a crucial role in addressing labor shortages in the United States. The country has been facing an acute labor shortage, with more job openings than available workers since 2018 [[1]]. This shortage has affected critical sectors such as agriculture, construction, hospitality, healthcare, and manufacturing[[1]]. Increasing immigration levels has been identified as a potential solution to this problem:
- Estimates suggest that higher immigration boosted payroll job growth by 70,000 jobs per month in 2022 and by 100,000 jobs per month in 2023 and early 2024[[2]].
- A one percent increase in employment attributable to immigration is associated with a 0.4-0.5 percent increase in income per worker in that state[[3]].
- Immigrants have a higher labor force participation rate (66.4%) compared to native-born workers (61.8%), contributing significantly to the overall labor force growth[[4]].
- The influx of immigrant workers has helped alleviate staffing shortages in certain industries, with every 1.0 percentage point increase in immigrant employment corresponding to a nearly 0.5 percentage point decline in job vacancy rates[[5]].
Economic Impact of Mass Deportation
Mass deportation of undocumented immigrants would likely have severe negative consequences for the U.S. economy. Studies estimate that such a policy could reduce GDP by 1.4% in the short term and up to 2.6% in the long term, with cumulative GDP losses of $4.7 trillion over 10 years[[6]]. Key economic impacts include:
- Significant labor shortages in industries like construction, agriculture, and hospitality, leading to reduced production and higher consumer prices[[7]][[8]]
- Decreased federal tax revenue of nearly $900 billion over 10 years[[6]]
- Potential job losses for U.S.-born workers, with an estimated 44,000 jobs lost for every 500,000 immigrants removed[[9]][[10]]
- Reduced household incomes in mixed-status families, potentially increasing poverty rates[[11]]
- Housing market disruption due to potential mortgage defaults[[11]]
Rather than boosting employment for U.S. citizens, mass deportations would likely slow economic growth, increase inflation, and negatively impact both immigrant and native-born workers across various sectors[[12]][[13]].
Immigrants in the Construction Industry
Immigrants play a crucial role in the U.S. construction industry, comprising a significant portion of the workforce and helping to address persistent labor shortages. As of 2023, immigrants make up 25.5% of the total construction workforce, with an even higher concentration of 31% among construction tradesmen[[14]] [[15]].
This reliance on immigrant labor is particularly evident in certain trades essential for home building:
- 64% of plasterers and stucco masons
- 52% of drywall/ceiling tile installers
- 48% of painters
- 47% of roofers
- 46% of carpet/floor/tile installers [[16]]
The construction industry's dependence on immigrant workers varies by state, with California and Texas having the highest concentration at around 40% of their construction workforce [[16]]. This influx of immigrant labor has helped ease labor shortages in the industry, which is crucial for addressing the nation's housing deficit, estimated at 1.5 million homes[[15]].
Immigration Economic Data
Immigration plays a significant role in shaping the U.S. economy, with various impacts across different sectors. Here are key datapoints and insights from the Bloomberg feature on how immigration affects the U.S. economy:
- Approximately one in four immigrants in the U.S. arrived in the country within the last decade as of 2022[[17]] .
- Immigrants comprise 14% of the U.S. population but represent nearly 18% of the workforce[[17]] [[18]].
- In 2022, immigrants contributed $1.6 trillion in economic activity and over $579 billion in taxes at all levels[[17]].
- Increased immigration could reduce the federal budget deficit by about $897 billion over the next decade, according to the Congressional Budget Office [[19]].
- Immigrants have a higher labor force participation rate (67%) compared to native-born workers (62%) [[20]]
- One in four construction workers nationwide was born outside the U.S., per Bureau of Labor Statistics data [[21]].
- In major housing markets, immigrants dominate construction jobs:
- 53% of construction jobs in New York City are held by foreign-born workers [[22]].
- Unauthorized immigrants make up about half of Texas's construction workforce[[17]].
- High-skilled immigrants drive innovation:
- Over half of billion-dollar startups were founded or co-founded by immigrants[[17]].
- Roughly 45% of Fortune 500 companies were founded by immigrants or their children[[17]].
Impact On Stock Market
Immigration policies have a significant impact on the stock market performance of companies in sectors that heavily rely on immigrant labor. Research has shown that pro-immigration legislation tends to boost stock prices in industries such as agriculture, construction, and manufacturing.
The positive stock market response aligns with broader economic research showing that immigration generally improves economic growth and productivity in host countries[[23]]. High-skilled immigration, in particular, has been linked to increased innovation and patenting, which contributes to productivity
growth[[24]].
These findings have implications for investors and policymakers. Investors may consider positioning their portfolios to benefit from pro-immigration policies, particularly in sectors like construction and manufacturing[[25]]. For policymakers, the stock market reactions provide additional evidence of the potential economic benefits of immigration, beyond direct labor market effects.
It's important to note that while the overall impact on these sectors is positive, the benefits are not evenly distributed. The immigration surplus primarily accrues to business owners, land owners, and investors, while some competing workers may experience short-term wage pressures[[26]]. However, the net effect on the economy and stock market performance in these key sectors appears to be positive.
[[1]]: https://www.bakerinstitute.org/research/leverage-immigration-address-us-labor-shortages
[[2]]: https://www.dallasfed.org/research/economics/2024/0702
[[3]]: https://www.nber.org/digest/mar10/effect-immigration-productivity-evidence-us-states
[[6]]: https://www.americanprogress.org/wp-content/uploads/sites/2/2016/10/massdeport1003-summary.pdf
[[8]]: https://unidosus.org/blog/2024/12/06/the-economic-costs-of-mass-deportations-of-long-time-residents/
[[10]]: https://foreignpolicy.com/2024/11/25/trump-us-mass-deportation-economic-impact-immigrants/
[[11]]: https://cmsny.org/publications/mass-deportations-impoverish-us-families-create-immense-costs/
[[12]]: https://news.northeastern.edu/2024/11/18/trump-mass-deportation-plan/
[[14]]: https://eyeonhousing.org/2024/11/immigrant-share-in-construction-sets-new-record/
[[18]]: https://www.cfr.org/in-brief/how-does-immigration-affect-us-economy
[[21]]: https://x.com/ConCotzias/status/1881661483475775584
[[22]]: https://www.dhs.gov/sites/default/files/2023-07/2023%20Annual%20Report%20to%20Congress_0.pdf
[[24]]: https://www.investopedia.com/financial-edge/0809/3-ways-immigration-helps-and-hurts-the-economy.aspx
[[25]]: https://digitalcommons.usu.edu/cgi/viewcontent.cgi?article=2387&context=gradreports
[[26]]: https://www.bushcenter.org/catalyst/north-american-century/benefits-of-immigration-outweigh-costs
