Right-wing media outlets cherry-picked data from a Congressional Budget Office (CBO) report on the Senate's immigration reform proposal to incorrectly claim that the bill would hurt American workers. In fact, the CBO report found that the Senate immigration reform bill would have temporary and small negative effects but over the long term would greatly benefit both American workers and the economy, which is reinforced by past studies.
Right-Wing Media Twist CBO Report To Claim That Immigration Reform Would Hurt American Workers
Breitbart Claimed CBO Report Predicted Immigration Bill “Would Drive Down The Wages Of American Workers.” Breitbart's Matthew Boyle selectively quoted the CBO report to claim that the Senate immigration bill “would drive down American workers' wages”:
On page seven of the analysis, the CBO and [Joint Committee on Taxation] conclude that the “Gang of Eight” bill would drive down American workers' wages. “Taking into account all of those flows of new immigrants, CBO and JCT expect that a greater number of immigrants with lower skills than with higher skills would be added to the workforce, slightly pushing down the average wage for the labor force as a whole, other things being equal,” the report reads. [Breitbart, 6/18/13]
Washington Examiner: “Schumer-Rubio Will Also Make Unemployment Worse Too.” The Washington Examiner's Conn Carroll claimed the CBO report found that the immigration reform bill would raise the unemployment rate:
In addition to not ending illegal immigration, CBO estimates that Schumer-Rubio will also make unemployment worse too. “Employment would increase as the labor force expanded, because the additional population would add to demand for goods and services and, in turn, to the demand for labor,” the report reads. “However, temporary imbalances in the skills and occupations demanded and supplied in the labor market, as well as other factors, would cause the unemployment rate to be slightly higher for several years than projected under current law.” [Washington Examiner, 6/19/13]
Ingraham: CBO Report “Is Devastating.” On her radio show, Fox News contributor Laura Ingraham characterized the CBO report as “devastating” to immigration reform and went on to depict the report's economic conclusions as negative, claiming, “we find out that wages go down over twelve years” and “that per capita GNP declines over the next twelve years.” [Courtside Entertainment Group, The Laura Ingraham Show, 6/19/13, via Media Matters]
In Fact, CBO Report Finds That Many Negative Effects Of Legislation Are Temporary And Unlikely To Affect American Workers
CBO: Wages Would Be “Slightly Lower” Over The First Decade But Higher By Next Decade. According to the CBO, the rapid increase in the numbers of workers would temporarily decrease wages but those wages would increase in the second decade of the legislation:
CBO's central estimates also show that average wages for the entire labor force would be 0.1 percent lower in 2023 and 0.5 percent higher in 2033 under the legislation than under current law. Average wages would be slightly lower than under current law through 2024, primarily because the amount of capital available to workers would not increase as rapidly as the number of workers and because the new workers would be less skilled and have lower wages, on average, than the labor force under current law. However, the rate of return on capital would be higher under the legislation than under current law throughout the next two decades. [Congressional Budget Office, June 2013]
Real GNP Would Rise Overall By 2.4 Percent In 2023 And 4.5 Percent In 2033. According to the CBO report, real Gross National Product (GNP) could increase by as much as 4.8 percent in 2033 but would be greater by 2.4 percent in 2023 and 4.5 percent in 2033:
The effects of the legislation on real GNP would be slightly smaller because increases in the rate of return on capital and in interest rates would imply greater flows of profits and interest to foreigners. According to CBO's central estimates, real GNP would be greater by 2.4 percent in 2023 and by 4.5 percent in 2033. Under the full range of estimates, the bill could boost GNP by an amount between 4.1 percent and 4.8 percent in 2033. [Congressional Budget Office, June 2013]
CBO: Per Capita GNP Would Decrease Due To Increase In Population. According to the CBO, the per capita GNP would decrease temporarily over the next decade, even though Gross Domestic Product (GDP) would increase by 5.4 percent by 2033 due to the increased population growth associated with immigration reform, and GNP is expected to rise again by 2033:
Taking account of all economic effects (including those reflected in the cost estimate), the bill would increase real (inflation adjusted) GDP relative to the amount CBO projects under current law by 3.3 percent in 2023 and by 5.4 percent in 2033, according to CBO's central estimates. Compared with GDP, gross national product (GNP) per capita accounts for the effect on incomes of international capital flows and adjusts for the number of people in the country. Relative to what would occur under current law, S. 744 would lower per capita GNP by 0.7 percent in 2023 and raise it by 0.2 percent in 2033, according to CBO's central estimates. Per capita GNP would be less than 1 percent lower than under current law through 2031 because the increase in the population would be greater, proportionately, than the increase in output; after 2031, however, the opposite would be true. [Congressional Budget Office, June 2013]
CBO: Temporary Reductions In Wages And Per Capita GNP “Do Not Imply That Current U.S. Residents Would Be Worse Off.” The estimated reduction in average wage and per capita GNP include immigrants who would be newly legalized who would earn lower wages, on average, than other residents, but that does not mean current U.S. residents will be worse off than under current law:
The estimated reductions in average wages and per capita GNP for much of the next two decades do not necessarily imply that current U.S. residents would be worse off, on average, under the legislation than they would be under current law. Both of those figures represent differences between the averages for all U.S. residents under the legislation--including both the people who would be residents under current law and the additional people who would come to the country under the legislation--and the averages under current law for people who would be residents in the absence of the legislation.
As noted, the additional people who would become residents under the legislation would earn lower wages, on average, than other residents, which would pull down the average wage and per capita GNP; at the same time, the income earned by capital would increase. [emphasis added] [Congressional Budget Office, June 2013]
Unemployment Would Increase By 0.1 Percentage Point Over The Next Five Years. According to the CBO report, enacting the immigration reform bill would increase the unemployment rate by 0.1 percent over the next five years:
As a result, enacting S. 744 would raise the unemployment rate over the next five years by up to roughly 0.1 percentage point relative to projections under current law; the rate would remain slightly elevated through 2020, CBO estimates. [Congressional Budget Office, June 2013]
Short-Term Increase In Unemployment Rate Due In Part To Immigration Reform Is Due To Expanding Workforce And Lack Of Occupations Available To Workers. According to the CBO report, the short-term increase in the unemployment rate would be in part due to the arrival of new immigrants who would not be able to fill the jobs demanded. Some workers would be forced to move into new fields in order to restore equilibrium which causes short-term unemployment. [Congressional Budget Office, June 2013]
CBO: Legislation Would Have “No Effect On Unemployment After 2020.” According to the CBO report, the immigration reform bill would have no effect on the unemployment rate after the year 2020. [Congressional Budget Office, June 2013]
CBO: Over Long Term, “There Would Be Little Effect On The Unemployment Rate.” According to the CBO report, the long-term unemployment rate would be “comparable, on average, to that of the current population”:
In the long run, the actual unemployment rate in the economy tends to be close to its natural rate. The natural rate of unemployment of the additional immigrants would be comparable, on average, to that of the current population, CBO expects, so there would be little effect on the unemployment rate in the long run. Thus, in the long run, the number of employed people would increase by the same percentage as the growth in the labor force--by about 3½ percent in 2023 and by about 5 percent in 2033, CBO estimates. [Congressional Budget Office, June 2013]
Actual, Long-Term Effects Of Legislation Would Be Positive For American Workers And Economy
Over 2014-2023 Period, U.S. Could See A Net Savings Of $175 Billion. According to a summary of the CBO's report, the United States would see the federal budget deficit decrease by $197 billion between 2014 to 2023. Combined with increased discretionary outlays of $22 billion over the same time period, the net savings for the U.S. would be $175 billion. [Congressional Budget Office, 6/18/13]
Over 2024-2033 Period, U.S. Could See A Net Savings Of $700 Billion. According to the CBO, changes in direct spending and revenues would decrease federal budget deficits by approximately $700 billion over the second decade following the bill's enactment:
The additional amount of federal direct spending stemming from enactment of S. 744 would grow after 2023 as more people became eligible for federal benefits as a result of the bill. The additional amount of federal revenues owing to the legislation also would increase after 2023 as the labor force continued to increase. On balance, CBO and JCT estimate that those changes in direct spending and revenues would decrease federal budget deficits by about $700 billion (or 0.2 percent of total output) over the 2024-2033 period. In addition, the legislation would have a net discretionary cost of $20 billion to $25 billion over the 2024-2033 period, assuming appropriation of the necessary amounts. According to CBO's central estimates (within a range that reflects the uncertainty about two key economic relationships in CBO's analysis), the economic impacts not included in the cost estimate would further reduce deficits (relative to the effects reported in the cost estimate) by about $300 billion over the 2024-2033 period. [Congressional Budget Office, 6/18/13]
Relative To Current Law, Immigration Bill Would Increase Average Wages, Boost Capital Investment And Raise Productivity Of Labor And Capital Over Long Term. According to a summary by the CBO, long-term benefits to the U.S. economy include increases in employment, wages, capital investment, and productivity of labor and capital. [Congressional Budget Office, 6/18/13]
CBO Findings Supported By Various Studies
Center For American Progress: “The Positive Economic Impacts” Of Providing Immigrants Legal Status “Likely To Be Very Large.” In a comprehensive report titled, “The Economic Effects of Granting Legal Status and Citizenship to Undocumented Immigrants,” the Center for American Progress found that immigration reform that includes legal status and a pathway to citizenship yields significant economic benefits:
The positive economic impacts on the nation and on undocumented immigrants of granting them legal status and a road map to citizenship are likely to be very large. The nation as a whole would benefit from a sizable increase in GDP and income and a modest increase in jobs. The earnings of unauthorized immigrants would rise significantly, and the taxes they would pay would increase dramatically. Given that the full benefits would phase in over a number of years, the sooner we grant legal status and provide a road map to citizenship to unauthorized immigrants, the sooner Americans will be able to reap these benefits. It is also clear that legalization and a road map to citizenship bestow greater gains on the American people and the U.S. economy than legalization alone. [Center for American Progress, 3/20/13]
Cato Institute: Immigration Reform Would “Lay The Foundation For Robust, Just, And Widespread Economic Growth.” The Cato Institute made the case for immigration reform in a 2012 study, which concluded that immigration reform will benefit both undocumented immigrants and the U.S. economy:
The experience of IRCA and the results of our modeling both indicate that legalizing currently unauthorized immigrants and creating flexible legal limits on future immigration in the context of full labor rights would raise wages, increase consumption, create jobs, and generate additional tax revenue--particularly in those sectors of the U.S. economy now characterized by the lowest wages. This is a compelling economic reason to move away from the current “vicious cycle” where enforcement-only policies perpetuate unauthorized migration and exert downward pressure on already-low wages, and toward a “virtuous cycle” of worker empowerment in which legal status and labor rights exert upward pressure on wages.
Legalization of the nation's unauthorized workers and new legal limits on immigration that rise and fall with U.S. labor demand would help lay the foundation for robust, just, and widespread economic growth. Moving unauthorized workers out of a vulnerable underground status strengthens all working families' ability to become more productive and creates higher levels of job-generating consumption, thereby laying a foundation for long-term community revitalization, middle-class growth, and a stronger, more equitable national economy. [The Cato Journal, Winter 2012]
Manhattan Institute: “Embracing A More Flexible Legal Immigration System Can Dramatically Improve” Economy. A Manhattan Institute issue brief linked increased immigration with economic growth and touted “the need for policy change”:
America's economic growth is hovering around 2 percent, public debt is $16 trillion and rising, and job creation and labor market participation remain low. Embracing a more flexible legal immigration system can dramatically improve this situation. This paper describes the link between economic growth and immigration, the need for policy change, the misguided history of America's political opposition to immigration, and a rational immigration policy.
Immigrants increase economic efficiency by reducing labor shortages in low- and high-skilled markets because their educational backgrounds fill holes in the native-born labor market. However, the share of immigrants in the U.S. workforce has declined since its 1991 peak. Increased immigration would expand the American work-force, and encourage more business start-ups. Businesses ranging from Apple Corporation to apple growers would be able to find the workers they need in America.
Current law has inhibited such positive developments. [The Manhattan Institute, 2/18/13]