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Implementing Alabama’s extreme immigration law (HB 56) would be incredibly expensive. That is the bottom line of a new report by University of Alabama economist Samuel Addy entitled A Cost-Benefit Analysis of the New Alabama Immigration Law. According to the report, the law could cost Alabama up to $11 billion in GDP and nearly $265 million in state income and sales tax. The loss includes 1) implementation, enforcement, and litigation expenditures; 2) increased costs and inconveniences for citizens and legal residents and businesses; 3) reduced economic development opportunities because it creates a poor business climate; and 4) the economic impact of reduced aggregate demand due to some unauthorized immigrants leaving and therefore not earning and spending income in the state.

Addy creates an estimate of the costs of HB 56 by using a model that assumes that unauthorized workers vacate jobs in agriculture, construction, accommodation, and food service and that between 40,000 and 80,000 workers earning between $15,000 and $35,000 leave the state. Different estimates are provided for losses of 40,000; 60,000; and 80,000 workers. He concludes that the law would result in:

• A reduction of 70,000 to 140,000 jobs;
• A reduction of $2.3-$10.8 billion in Alabama’s Gross Domestic Product (GDP) or 1.3-6.2 percent of the stat’s 2010 GDP;
• A reduction of between $56.7 and $264.5 million in state income and sales tax collections;
• A reduction of $20 to $93.1 million in local sales tax collections.

Although HB56’s proponents often claim the bill will bring potential benefits to the state, Addy does not find significant state savings from decreased benefits for unauthorized immigrants. He concludes that unauthorized immigrants pay taxes and are not a drain on the economy. Furthermore, he does not see increased public safety as a likely outcome because unauthorized immigrants are not responsible for disproportionately high crime rates.

Addy also responds to arguments that the new immigration law is responsible for decreased unemployment in the state. Contrary to what proponents of the law are claiming, it does not appear that legal residents and citizens are filling jobs previously held by unauthorized immigrants. Also, in the four sectors that most often employ unauthorized workers (agriculture, construction, lodging and eating establishments), unemployment is not falling.

The report concludes that the costs of the new law are large and certain, while any potential benefits are unclear. “From an economist’s perspective, the question Alabama and its legislature have to ponder is this: Are the benefits of the new immigration law worth the costs.” Based on the work of Addy and others, the answer has to be a resounding “no.”

Photo by Willamor Media.

Continue reading »]]> BY MARCIA HOHN, IMMIGRANT LEARNING CENTER

At last night’s State of the Union Address, two immigrant entrepreneurs were among the President’s guests—Japan-born Dr. Hiroyuki Fujita, founder, president and chief executive officer of Quality Electrodynamics (QED) in Cleveland, Ohio and Brazil-born Mike Krieger, co-founder of Instagram, a fast growing social mobile startup. Dr. Fijuita and Mike Krieger were rightfully recognized for their entrepreneurial drive and hard-earned success (both businesses are now worth millions of dollars), but they are just two examples of immigrants who came to this country and started businesses. There are many more unsung immigrant entrepreneurs whose U.S. businesses continue to create jobs for Americans and strengthen the U.S. economy.

Many are aware of the giants among immigrant entrepreneurs such as Sergey Brin of Google or Jerry Yang of Yahoo. But there is little recognition of the role important immigrant businesses play in neighborhood revitalization, growth businesses, and transnational businesses. A new report, Immigrant Entrepreneurs: Creating Jobs and Strengthening the Economy, released today by the Immigrant Learning Center, U.S. Chamber of Commerce and Immigration Policy Center highlights the vital role immigrant entrepreneurs play across the U.S. economy.

The report focuses on small businesses such as neighborhood storefronts—grocery stores, restaurants, gift shops and real estate firms—which make up the fabric of many neighborhoods. Immigrants are often attracted by low rents available in neighborhoods that have been blighted by economic decline. The arrival of their businesses revives commerce in these areas and provides needed goods and services for residents. As one immigrant storefront owner in Boston said:

Of course my business makes the neighborhood better. It makes this neighborhood more beautiful. The community ignored this neighborhood before. People did not want to move here because it was desolate and unsafe. Now, people want to come here.

The report also mentions growth businesses which, like many small businesses, often hatch from a living room or kitchen. The result of ambition, hard work and vision, these immigrant growth businesses have a strong presence in food and food distribution, transportation, leisure and hospitality as well as building services. One Boston-based entrepreneur, Jill Cheng, had a vision to bring Asia to the world. She began with a small collection of books in Chinese and Japanese, but with the explosion of business with China, her company (Cheng & Tsui Publishers) is now a multi-million dollar business.

Technology and science companies continue to be founded by immigrants at unprecedented numbers—leaping to 46% in venture-backed companies—as documented in a very recent study by the National Foundation for America Policy. These companies are keeping America on the cutting edge of innovation in technology and improving human health—as well as keeping America internationally competitive. Not only do these immigrant founders bring talent and skill but are also likely to have  qualities such as a willingness to take risks, a deep appreciation for the opportunities that America gives them and perseverance. Sonny Vu from Vietnam and Sridhar Iyengar, 2^nd generation from India, are convinced it was their immigrant backgrounds that made it possible for them to take an idea born in a cramped Boston apartment to a $20 million American company called AgaMatrix that manufactures mobile health monitoring devices.

Immigrant-run transnational businesses are also keeping the U.S. globally competitive. These are businesses that have a “foot in both worlds” and have a variety of business relationships here in the U.S. and their homelands that provide import-export, transfer of goods and remittances across countries or special goods for specific communities groups here and abroad. Transnational businesses also help America companies understand how to do business in other countries, build bridges of communication and bring diversity to the goods and services available in America.

Countless economists and business experts have highlighted the economic contributions of immigrant entrepreneurs to the U.S. economy. Now, it’s Congresses turn. National immigration policies must reflect the economic and social contributions of immigrant businesses and—equally important—that immigrant entrepreneurs come from all backgrounds. 

Continue reading »]]> A new report issued this month by the Greater Houston Partnership (GHP), a business advocacy organization, confirms that legalization of unauthorized workers would result in those workers earning higher wages and paying more taxes. Potential Tax Revenues from Unauthorized Workers in Houston’s Economy uses data from the Pew Hispanic Center to estimate the number of unauthorized immigrant workers, by industry, in the Houston area. Then, assuming that legalized workers would earn the prevailing wage in their industry, GHP estimates their projected incomes to which it applies the standard tax rate.

GHP estimates that, if all unauthorized workers in the Houston region were legalized and they and their employers paid Social Security, Medicare, unemployment insurance, and federal income taxes, additional tax revenues would exceed $1.4 billion. The report also demonstrates that even with less than 100% legalization, there are still significant potential revenues. For example, if only 25% acquire legal status, an additional $356.1 million in tax revenues would be generated.

This study examines an important question about what legalizing the currently undocumented would do. However, it does have a few problems stemming from some of the assumptions made about the undocumented population.

The report assumes unauthorized workers and their employers are not currently paying any taxes and that only legalization would require them to pay taxes. However, we know that many undocumented workers and their employers already pay Social Security, Medicare, unemployment, and federal income taxes. Once legalized, many would likely get better jobs with higher wages, not the prevailing wage, meaning they would pay even more in taxes than the report estimates.

The report should also include sales and property taxes which are already paid by unauthorized immigrants right now. The gains from these taxes would also likely increase because legalized workers making higher incomes would spend more on consumption and pay more tax.

Despite those concerns, the new GHP report adds to the literature that legalization is an economic plus for our communities.

Hopefully, this report will encourage more people to look at what immigration brings to an economy as opposed to the usual discussion over how much unauthorized immigrants cost—discussions which often cite dubious sources. Conveniently absent from many of those discussions is the fact that these immigrants are workers, taxpayers, and consumers who benefit the economy in significant ways. More importantly, in contrast to spending billions of dollars on mass deportation, legalization would lead to higher tax revenues and higher consumption which boosts the economy.

Photo by arielp.

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Immigration creates jobs for native-born Americans. That is the fundamental finding of a new study from the American Enterprise Institute and the Partnership For A New American Economy, entitled Immigration and American Jobs. The study—authored by Madeline Zavodny, a professor of economics at Agnes Scott College—reinforces the findings of numerous other studies which have demonstrated that there is no correlation between immigration and unemployment. Specifically, Zavodny analyzes Census data with the aim of answering one pivotal question: “In states with more immigrants, are US natives more or less likely to have a job?” Zavodny focuses on two groups in particular: immigrants with advanced degrees, and immigrants of any skill level who are in the country on temporary visas.

The four principal conclusions of Zavodny’s study are unequivocal:

1. Immigrants who hold advanced degrees create jobs for native-born workers. The biggest job boost comes from those immigrants with advanced degrees from U.S. universities who work in the science, technology, engineering, and mathematics (STEM) fields. According to Zavodny, “data comparing employment among the fifty states and the District of Columbia show that from 2000 to 2007, an additional 100 foreign-born workers in STEM fields with advanced degrees from US universities is associated with an additional 262 jobs among US natives.”

2. Both highly skilled and less-skilled temporary workers create U.S. jobs. Zavodny finds “that states with greater numbers of temporary workers in the H-1B program for skilled workers and H-2B program for less-skilled nonagricultural workers had higher employment among US natives.” Specifically, the addition of 100 H-1B workers was associated with an additional 183 jobs for native-born workers, while the addition of 100 H-2B workers was associated with an additional 464 jobs for native-born workers.

3. Immigrants don’t take jobs away from native-born workers. According to Zavodny, there is “no evidence that foreign-born workers, taken in the aggregate, hurt US employment. Even under the current immigration pattern—which is not designed to maximize job creation, has at least eight million unauthorized workers, and prioritizes family reunification—there is no statistically significant effect, either positive or negative, on the employment rate among US natives.”

4. The taxes paid by highly educated immigrants more than cover the cost of the benefits they receive. Zavodny finds that “in 2009, the average foreign-born adult with an advanced degree paid over $22,500 in federal, state, and Federal Insurance Contributions Act (FICA, or Social Security and Medicare) taxes, while their families received benefits one-tenth that size through government transfer programs like cash welfare, unemployment benefits, and Medicaid.”

According to Zavodny, the findings of her study suggest three reforms to the U.S. immigration system which would benefit the U.S. economy and native-born workers. First, she calls for a reorientation of permanent and temporary immigration policies to favor immigrants with advanced degrees from U.S. universities in STEM fields. Second, she advocates an increase in the number of “green cards” (permanent visas) available to highly educated immigrant workers. And third, she recommends an increase in the number of temporary visas for both highly skilled and less-skilled immigrant workers. Zavodny notes that these reforms would create new jobs while requiring “neither new taxes nor new spending cuts.”

Zavodny concludes that “immigration policy can, and should, be a significant component of America’s economic recovery.” Yet the reality is that even the most basic of immigration reforms are deadlocked in the U.S. Congress. And, while the United States dawdles, “the rest of the world competes for talent.” According to Zavodny, “every major developed country is more focused than the United States on admitting immigrants to meet economic needs.” In other words, whether they realize it or not, opponents of immigration reform are needlessly undermining the U.S. economy.

Photo by thekevinchang.