The Economics and Policy of Illegal Immigration in the United States

Illegal immigration benefits employers and unauthorized immigrants while it puts downward pressure on U.S. wages. However, according to this report by University of California, San Diego Professor of Economics Gordon Hanson, illegal immigration’s overall impact on the U.S. economy is small. The modest net gain that remains after subtracting U.S. workers’ losses from U.S. employers’ gains is tiny; and if one accounts for the small fiscal burden that unauthorized immigrants impose, the overall economic benefit is close enough to zero to be essentially a wash.

A substantial increase in spending on border and interior enforcement could easily cost far more than the tax savings generated from reducing illegal immigration in the United States. The report offers that a more constructive immigration policy, in terms of aggregate economic return, would convert existing inflows of unauthorized immigrants into legal inflows. Hanson suggests that maximum productivity gains to the U.S. economy can be generated by adopting a policy that: allows inflows to fluctuate yearly in response to macroeconomic conditions, provides legal channels of entry to low-skilled workers, creates incentives for both employers and immigrants to play by the rules, and imposes a fee for legal entry or a tax for employers who hire foreign workers.