Wednesday, October 30, 2013

Why Does Business Support Immigration Reform

Cheap Labor

CBO: Economic Impact of S. 744

The Senate Immigration Reform Bill will:

Increase the size of the labor pool
Increase Unemployment
Decrease Wages
Boost Capital Investment
Raise Productivity
Increase Interest Rates

"new immigrants of working age would participate in the labor force at a higher rate, on average, than other people in that age range in the United States."

Translation: new immigrants will replace or exclude native citizens in the labor pool.

" 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. 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"

Translation: Give up your job in construction, hope you enjoy working at McDonalds.

" the wages of lower and higher-skilled workers would tend to be pushed downward"

"The increase in the average wage would not occur for a dozen years."

"For roughly the first decade, the increase in the size of the labor force would make capital relatively scarce"

Translation: Good for Investors, Bad for Borrowers

"an increase in average wages of 12 percent for unauthorized workers who attain legal residency."

Translation: An increase in tax revenue

"Because the bill would increase the rate of growth of the labor force, average wages would be held down in the first decade after enactment by a reduction in the ratio of capital to labor, which would make workers less productive—and therefore lower their wages"

"Although the average wage would be lower than under current law over the first dozen years, the minimum wage would keep the wages of some less skilled workers from falling, dampening businesses’ demand for those workers"

Long Term Effects

Of course, I've cherry-picked the short term effects for the above section.  Long term, greater than 20 years there will be marginal economic improvement on the order of tenths of a percent, e.g. a 0.2% increase in GDP by 2033.

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