Estimating the Economic Impact of Presidential Administrative Action & Comprehensive Immigration Reform

Dr. Raul Hinojosa-Ojeda
University of California Los Angeles (UCLA) Associate Professor
Department of Cesar E. Chavez of Chicana & Chicano Studies
Executive Director and Founder of UCLA NAID Center

with Maksim Wynn
University of California Los Angeles (UCLA) Research Analyst
Associate of the North American Integration and Development (NAID) Center

"There has been ample opportunity for Congress to pass a bipartisan immigration bill that would strengthen our borders, improve the legal immigration system, lift millions of people out of the shadows so they are paying taxes and getting right by the law .... I indicated to Speaker Boehner several months ago that if, in fact, Congress failed to act, I would use all the lawful authority that I possess to try to make the system work better. And that’s going to happen."

President Barack Obama, Burma, November 13, 2014

Introduction & Executive Summary

President Obama and the Congress stand at a historic crossroad that could significantly change decades of undocumented status for millions of immigrant workers, while also providing significant increases in output, employment, earnings and taxes, benefiting the U.S. economy as a whole. Acting within his legal and constitutional authority, President Obama can act to broaden the scope of temporary beneficiaries through expanding programs such as DACA (Deferred Action for Childhood Arrivals) instituted in 2012 and renewed in 2014. Such Presidential action would not impede Congress from voting on more permanent and comprehensive immigration reform (CIR) legislation, which in fact would generate an even greater positive impact for the U.S. economy.

In anticipation of such momentous actions, it is important that policy makers and the general public understand the dimensions of the economic impact of alternative scenarios of action open to the President and Congress. Towards these ends, this paper will provide estimates based on a variety of methodologies for the following policy alternatives:

The DACA program’s economic impact, compared to the impact of Congressional passage of the Dream Act.
Presidential administrative action alternative scenarios, including scaling up the benefited population and quantifying the potential economic outcomes.
Compare the economic impact of these administrative action scenarios to those of a CIR bill.

1) In the two years since the President created DACA through administrative action, the program has had and will continue to have a positive economic impact on its recipients as well as the economy as a whole. However, we find that these positive outcomes are less than what would have been experienced had congress enacted the DREAM act, which was the legislative equivalent of DACA.[1] Our key findings related to DACA are:

The DACA program of 2012-2014 appears to have spurred extraordinary growth in the earnings of DACA beneficiaries. According to the results of two recent surveys, this wage growth surpassed 240%, a number that far exceeds the expectations in the literature.
Using much more conservative earnings growth assumptions we estimate that legalizing and educating all eligible DACA applicants (1.23 million) would generate $1.7 trillion in cumulative earnings over forty years (the average length of a professional career).
Expanding the pool of DACA beneficiaries to individuals who are currently too young to enroll in the program, but meet all of the other requirements (for a total population of 1.7 million), would result in cumulative earnings of $2.4 trillion over 40 years.

Congressional passage of the DREAM would allow for the inclusion of 2.15 million potential beneficiaries who would earn an estimated income of $3.7 trillion over the course of 40 years.

2) The President has the legal authority to build upon DACA’s success and institute a variety of deferred action programs that would affect the earning potential[2] of millions of undocumented immigrants who are already working in the U.S. Our key findings[3] related to expanding deferred action indicate that:

All scenarios for increasing the scope of potential beneficiaries would generate significant economic growth, benefiting not only immigrants, but also the U.S. economy as a whole. These positive economic outcomes increase in proportion to the number and characteristics of immigrants to whom deferred action is extended.
If deferred action were extended to the between 500,000 and one million undocumented immigrants who are parents or legal guardians of DACA recipients, it would generate a $1.39 billion increase in labor income; 32,000 jobs through an increase in direct, indirect and induced employment; and $511 million in new tax revenue (estimated as a two year short term impact). The $42 billion in GDP that these undocumented workers add to the economy would also be formalized, ending the technical illegality of the value they currently add to U.S. economy.
If deferred action were extended to the 3.7 million undocumented immigrants who are parents or legal guardians of minors that are U.S. citizens, legal permanent residents (LPRs), or are DACA eligible, it would generate a short term $6.8 billion increase in labor income, more than 160,000 jobs and $2.5 billion in new tax revenue. It would also formalize the $210.2 billion in value that this population adds to the economy, thus ending the technical illegality of their employment and production.
If deferred action were extended to the 6.6 million undocumented immigrants who have been present in the U.S. for at least ten years, it would generate a short-term $12.3 billion increase in labor income, more than 289,000 jobs and $4.5 billion in new tax revenue. $379 billion of GDP would also be legalized and formalized as a result of granting deferred action to this population.
If deferred action were extended to the 9.7 million undocumented immigrants who have been present in the U.S. for at least five years, it would generate a short-term $18 billion increase in labor income, more than 422,900 jobs and $6.6 billion in new tax revenue. This would also formalize $553.8 billion dollars in GDP, bringing it out of the shadows of technical illegality.

3) While, the potential economic benefits of deferred action are significant, they can be enhanced though the passing of a permanent comprehensive immigration reform bill. Our key findings[4] related to the economic impact of CIR are:

The CIR legislation passed by the senate, SB 744, has two key components that determine its economic impact. First, how the bill addresses the undocumented population that is currently living in the US. Second, the legal framework that it creates to absorb future immigration flows.
A CIR bill that grants legal status to all current immigrants would generate a short term $63.19 billion increase in labor income, more than 1.4 million jobs and $23.2 billion in new tax revenue.
A CIR bill would also create legal avenues for new immigrants projected to be needed by the U.S. economy and would generate over $1.5 trillion in additional GDP growth over the next ten years.

This report will first review the available data for comparing the size and economic contributions of the undocumented populations that would be affected by various immigration reform policy alternatives, including the DACA program, a series of proposed administrative action scenarios and comprehensive immigration reform. Second, we will review the methodological approaches used to analyze the impact of DACA (dynamic human capital growth modeling), alternative administrative actions (short term input-output IMPLAN modeling) and CIR (long term CGE modeling and short term input-output IMPLAN modeling). Third, the report will estimate and compare the economic impact of administrative action that President Obama has already taken (DACA), the alternative forms that future administrative action might take, as well as the projected economic impact of future comprehensive immigration reform scenarios.

It is critically important that policy makers and the general public understand the positive economic impact of administrative action, while also recognizing that these benefits are dwarfed by the potential impact of comprehensive immigration reform, and especially by a reform bill that includes a path to citizenship. Drawing on this analysis we can discern what lessons can be learned from this policy comparison, and provide policy recommendations for maximizing the effectiveness of administrative action going forward.

SOURCES

[1] Raul Hinojosa, Paule Cruz Takash, and et al., No DREAMers Left Behind: The Economic Potential of DREAM Act Beneficiaries (Los Angeles: UCLA NAID Center, 2010).
[2] Throughout this report we use the alternative administrative action eligible population estimates of Randy Capps, Marc R. Rosenblum, and James D. Bachmeier, Executive Action for Unauthorized Immigrants: Estimates of the Populations That Could Receive Relief (Washington DC: Migration Policy Institute, September 2014). For estimates of undocumented employment by sector we use Passel, Jeffrey, and D’vera Cohn. A Portrait of Unauthorized Immigrants in the United States (Washington, DC: Pew Research Center, 2009).
[3]Analysis of the economic impact of administrative action scenarios is based upon the methodology used in Raul Hinojosa and Marshall Fitz. Revitalizing the Golden State: What Legalization over Deportation Could Mean to California and Los Angeles County. (Washington, DC: Center for American Progress, April 2011).
[4] These findings are based upon: Raul Hinojosa, Raising the Floor for American Workers: The Economic Benefits of Comprehensive Immigration Reform (Center for American Progress and Immigration Policy Center, January 2010). Raul Hinojosa, The Economic Benefits of Comprehensive Immigration Reform (CATO Institute, Winter 2012). These findings closely align with the methodology and conclusions of: Congressional Budget Office, The Economic Impact of S. 744, the Border Security, Economic Opportunity, and Immigration Modernization Act (Washington, DC: June 18, 2013)