Title: The Effects of Immigration on the United States’ Economy — Penn Wharton Budget Model
Headings: The Effects of Immigration on the United States’ Economy
Key Points
The Effects of Immigration on the United States’ Economy
Introduction
Figure 1: Foreign-Born Share of U.S. Population, 1850-2013
Labor Market Competition
Figure 2: U.S. Log Capital-Labor Ratio, 1948-2013
Table 1. Distribution of the Population 25 Years and Over by Educational Attainment, 2012
Table 2. Estimates of the Long-Run Wage Impact of Immigration
Productivity
Fiscal Impact
Figure 3: Age Distribution of Natives and Non-Citizen Immigrants, 2012
Conclusion

Content: However, native-born residents of states with large concentrations of less-educated immigrants may face larger tax burdens, as these immigrants pay less in taxes and are more likely to send children to public schools. Labor Market Competition
A popular view is that immigrants are taking jobs from American citizens. However, although immigrants increase the supply of labor, they also spend their wages on homes, food, TVs and other goods and services and expand domestic economic demand. This increased demand, in turn, generates more jobs to build those homes, make and sell food, and transport TVs. Most empirical studies indicate long-term benefits for natives’ employment and wages from immigration, although some studies suggest that these gains come at the cost of short-term losses from lower wages and higher unemployment. 1 Standard economic theory implies that while higher labor supply from immigration may initially depress wages, over time firms increase investment to restore the amount of capital per worker, which then restores wages. Steady growth in the capital-labor ratio prevents workers’ average productivity, and therefore their average wages from declining over the long run. Figure 2 shows the pre-1980 trend in the capital-labor ratio extrapolated over the next few decades – the period when U.S. immigration accelerated. Consistent with the theory, the actual capital-labor ratio did not significantly or permanently deviate from that trend after 1980. 2
Figure 2: