A User’s Guide to the 2016 NAS Immigration Report

The National Academy of Sciences (NAS) has just published a major report on The Economic and Fiscal Consequences of ImmigrationThe National Academy panel that prepared the report consisted of about 20 social scientists, including economists, sociologists, and demographers. The project was led by Francine Blau, a professor of economics at Cornell, and Christopher Mackie, who is a study director with the Committee on National Statistics at the NAS. Fran and Chris did an amazing job bringing this very complicated project to fruition over a three-year period. They were (very) patient, fair, professional, and made sure that all the work done by the members of the panel was somehow weaved into a cohesive whole–and that’s no small feat! And did I say they were very patient?

Full disclosure: I was a member of the NAS panel that prepared the report, but anything I say in this series of posts reflects only my take about what is in the report and what, I think, is important. These posts have not been read or vetted by anyone in the panel.

I think the report has four major conclusions. But it is near 300,000 words long with big chunks of it written in “technical-ese,” comprehensible only to trained economists and likely to appeal only to immigration geeks. So I’m going to write five posts that together make up “A User’s Guide.” The User’s Guide will link to the main tables and figures in the report that document those conclusions. (The entire User’s Guide is available as a pdf here).

Let me start by giving a brief outline of my User’s Guide. All quotes below are from the report’s summary:

  1. There has been a slowdown in assimilation during the immigrants’ lifetime (User’s Guide, 1). “As time spent in the United States lengthens, immigrants’ wages increase relative to those of natives and the initial wage gap narrows. However, this process of economic integration appears to have slowed somewhat in recent decades; the rate of relative wage growth and English language acquisition among the foreign-born is now slightly slower than it was for earlier immigrant waves.”
  2. Immigration has a harmful effect on the earnings of low-skill workers (User’s Guide, 2):”When measured over a period of 10 years or more, the impact of immigration on the wages of natives overall is very small. However, estimates for subgroups span a comparatively wider range, indicating a revised and somewhat more detailed understanding of the wage impact of immigration since the 1990s. To the extent that negative wage effects are found, prior immigrants—who are often the closest substitutes for new immigrants—are most likely to experience them, followed by native-born high-school dropouts, who share job qualifications similar to the large share of low-skilled workers among immigrants to the United States.”
  3. Immigrants and their dependent children create a fiscal burden (User’s Guide, 3; and User’s Guide, 4): “On average, individuals in the first generation are more costly to governments, mainly at the state and local levels, than are the native-born generations…For 2013, the total fiscal shortfall (i.e., the excess of government expenditures over taxes) was $279 billion for the first generation group…Viewed over a long time horizon (75 years in our estimates), the fiscal impacts of immigrants are generally positive at the federal level and negative at the state and local levels.” But these fiscal impact estimates are, rightly, stamped with a Consumer Warning label: “Assumptions play a central role in analyses of the fiscal impacts of immigration.”
  4. The bottom line (User’s Guide, 5): The NAS report does not conduct the final (and obvious) calculation that adds up the  economic gains and compares that number with the fiscal burden. But anyone with a pencil and a proverbial back-of-an-envelope can do so using the numbers in the report. The only time the NAS comes close to estimating the total gains is when it reports the “immigration surplus”–the increase in the aggregate wealth of natives resulting from the productive contributions of immigrants. Although much is left out when calculating this theory-based surplus, it seems evident (at least to me) that the bottom line is very simple: The economic impact of immigration is, at best, a net wash for the average native-born person. The gains accruing from the immigrants’ productive contributions are probably offset by the fiscal burden. But even though the mythical average person is unaffected, some groups gain a lot and some groups lose a lot.

Finally, let me re-emphasize that this User’s Guide focuses on topics that I personally find interesting and important. There’s much more in the report, including (long and dense) discussions of immigration, innovation, and economic growth, where the foundational research is still a work in progress. Nevertheless, they provide an excellent introduction to many research and policy questions.

Author: George Borjas

I am a Professor of Economics and Social Policy at the Harvard Kennedy School.