Immigration Boosts U.S. economy

In a recent report, the Congressional Budget Office (CBO) projected that the surge in immigration will have a profound positive impact on the U.S. economy, contributing approximately $7 trillion over the next decade. This surge is expected to enhance the labor force, increase demand for goods and services, and ultimately result in stronger economic growth.

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The CBO’s non-partisan analysis indicates that the economic benefits will extend to the federal government, lifting revenues by an estimated $1 trillion more than initially anticipated over the same period. However, the report notes that wage growth may be more gradual, partly due to the influx of lower-skilled workers.

“Increases in the population boost the demand for goods, services, and housing. They also expand the productive capacity of the economy by increasing the size of the labor force,” states the CBO in its budget and economic outlook for the next decade.

The rise in migration primarily stems from individuals entering the U.S. illegally and those released by Customs and Border Protection officials, often with humanitarian parole or a notice to appear before an immigration judge. While the report acknowledges a temporary lag, many of these migrants eventually join the labor force, contributing to economic growth.

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The CBO’s findings come amidst a heated political debate in Washington surrounding the surge of migration at the U.S.-Mexico border. Despite differing opinions on how to control it, the CBO report underscores the economic advantages associated with increased immigration.

Federal Reserve Chairman Jerome Powell echoed these sentiments in a recent CBS News 60 Minutes interview, emphasizing that the U.S. economy has historically benefited from immigration. The CBO projects that the rise in immigration will result in an average annual increase of 0.2 percentage points in inflation-adjusted gross domestic product from 2024 to 2034, making it roughly 2% larger in 2034 than it would be otherwise.

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DIFFERENCE BETWEEN ADJUSTMENT AND CHANGE OF STATUS

The report also revised the CBO’s estimate of the labor force in 2033, anticipating an increase of 5.2 million people, primarily due to higher net inflows from outside the country. While this expanded workforce may exert downward pressure on average inflation-adjusted wages, the CBO anticipates a partial reversal after 2027, though wages are still projected to be slightly lower in 2034.

The CBO emphasizes the uncertainty of its population projections, especially in later years, assuming that the surge in immigration observed since 2022 will continue through 2026 and then gradually subside. The report did not consider the additional costs that states and localities may face due to the surge in migration, as those factors fall outside the agency’s purview.

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