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June 1997, Volume 4, Number 6

NRC on Immigration

The National Research Council released on May 17, 1997 a 500-page, $800,000 report entitled "The New Americans: Economic, Demographic, and Fiscal Effects of Immigration." The report concluded that legal and illegal immigration adds $1 to $10 billion per year to US GDP and has little negative effect on job opportunities for most citizens.

The US economy produces goods and services worth $8 trillion annually. GDP increases by $200 billion per year at a growth rate of 2.5 percent, so $10 billion represents the difference between 2.5 and 2.6 percent annual growth.

Population. The NRC report concluded that immigration will account for two-thirds of US population growth between 1995 and 2050. Under current conditions--fertility of two, life expectancy rises from 76 to 82, and net immigration is 820,000 per year-- the US population is projected to increase from 263 million in 1995 to 387 million 2050, with 80 million or 64 percent of the 124 million gain due to immigrants and their US-born children and grandchildren. K-12 school enrollment, 37 million in 1995, is projected to increase to 54 million in 2050 if immigration continues at current levels.

The demographic projections suggest that the Asian and Hispanic shares of the growing US population will rise, assuming that inter-marriage rates remain at today's levels and that people born to parents of different ethnic backgrounds continue to identify themselves as they are doing today, the US population of non-Hispanic white population will fall from 75 percent to 50 percent of the US population in 2050; the Black population will rise from 12 to 14 percent of the total, the Hispanic population will increase from nine percent to 25 percent, and the Asian population will triple from three percent to eight percent.

Economy. The report assumes that the US economy has constant returns to scale (CRTS)--doubling the number of workers and the amount of capital doubles output--and thus concludes that immigration must expand the size of the US economy. The important issues are distributional, according to the report, such as who gains and who loses as a result of immigration, and how much.

The report concludes that immigration is a net economic gain for the US economy because the value of what they produce is more than their wages-- owners of capital and workers who are made more productive by the presence of immigrants gain. The report estimates both gains and losses, and concludes that the net gains are $1 billion to $10 billion. Because of the CRTS assumption, immigration cannot raise the growth rate of US-born persons.

US workers who compete with immigrant workers may have lower wages and higher unemployment. The NRC reviewed the research on the labor market effects of immigrants and concluded that it does not support the hypothesis that Blacks have been especially hurt by immigration or by competition with immigrants, largely because most Blacks do not live in places with large concentrations of immigrants: "All in all, the data suggest that the jobs of immigrant and native workers are different."

Immigrants on average earned 32 percent less than native workers in 1990. The report estimated that immigration was responsible for depressing the wages of native-born high-school dropouts about five percent since 1980, accounting for about half of the total drop in unskilled workers wages; newly-arrived immigrants also depress the wages of earlier arrivals.

The report emphasizes that the availability of immigrant labor helps to keep the US economy competitive by allowing many goods and services to be produced in the US cheaper than they otherwise could be.

In a separate but related report, the Hudson Institute's Workforce 2020 concluded that the US needs more flexible employment laws, increased immigration of skilled workers, and education reforms that encourage upward mobility. The Hudson report asserts that: "It is simply false that immigrants steal jobs from Americans at the higher ends of the job ladder. To the contrary, America's most dynamic, high-tech industries have come to depend on immigrants as well as US citizens, and they will continue to do so in the future."

The 1997 Hudson report emphasizes the size of the total labor force rather than net new workers, thus emphasizing that most US workers will continue to be non-Hispanic whites. White males and females were 76 percent of the labor force in 1995 and are projected to account for 68 percent of the labor force in 2020; Hispanics are projected to increase from nine to 14 percent in this period; and, African-Americans will remain 11 percent of the labor force.

Public Finance. The NRC report emphasizes that the gap between the average immigrant and the average native-born person is widening, as more immigrants arrive without high school education and few skills. Immigrant households generally have more school-age children and lower incomes, and thus pay lower state and local taxes and receive more state-financed social services than households of native-born Americans.

According to the study, newly-arrived immigrants with little education consume more state and local public services such as education than they pay in taxes. For example, California taxpayers pay about $1,178 each year in state and local taxes to cover services used by immigrants that immigrants' state and local taxes do not cover. [In California, the average household income was $50,518 for the native-born and $30,012 for Latin American immigrants, but the amount spent per household to educate children in households headed by Latin American immigrants was twice that spent on children in the native-born households]. Immigrants are concentrated in six states, so that taxpayers in these states bear the integration costs of immigrants.

In one table, the NRC report computes the net present value of immigrants is computed according to their years of education. According to the table, the NPV of immigrants with less than a high school education is $13,000, which means that, over their lifetimes, they will impose a net cost of $13,000 on the US in today's dollars. The NPV of an immigrant with more than a high school education is $198,000--this large positive sum explains why immigration overall is considered a net economic plus for the US despite the arrival of so many immigrants with less than a high school education.

Rand economist James P. Smith, chair of the 12-member panel that produced the report, summarized the major findings as follows: "It's true that some Americans are now paying more taxes because of immigration, and native-born Americans without high school education have seen their wages fall slightly because of the competition sparked by lower-skilled newly arrived immigrants. But the vast majority of Americans are enjoying a healthier economy as the result of the increased supply of labor and lower prices that result from immigration... Immigrants increase the supply of labor and help produce new goods and services. But since they are paid less than the total value of these new goods and services, domestic workers as a group must gain."

The report's conclusion that immigration generates federal benefits and state costs may affect the running battle between California and the federal government over who should pay for the integration of immigrants. According to study chair Smith, "The fact that the numbers are so negative at the state level and so positive at the national level should spark heated debate."

The panel that produced the NRC report included James P. Smith (Chair), Rand; Alan J. Auerbach, University of California-Berkeley; George J. Borjas, Harvard University; Thomas J. Espenshade, Princeton University; Richard B. Freeman, Harvard University; John F. Geweke, University of Minnesota; Charles Hirschman, University of Washington; Robert Inman, University of Pennsylvania; Guillermina Jasso, New York University; Ronald D. Lee, University of California-Berkeley; Mary Waters, Harvard University; and Finis R. Welch, Texas A & M University. Barry Edmonston was director of the study.

In 1996, the National Research Council produced two reports on immigration:

Edmonston, Barry (Ed). 1996. Statistics on U.S. Immigration: An Assessment of Data Needs for Future Research. Washington. Committee on National Statistics and Committee on Population, National Research Council.

Edmonston, Barry and Ronald Lee. (Ed). 1996. Local Fiscal Effects of Illegal Immigration: Report of a Workshop. Washington. Committee on Population, National Research Council.


Robert Pear, "Report Says Immigration Is Beneficial to the U.S," New York Times, May 18, 1997. Smith, James and Barry Edmonston (Eds). 1997. The New Americans: Economic, Demographic, and Fiscal Effects of Immigration. Washington. National Research Council. The text of the report is at: http://www.nap.edu/readingroom/reader.cgi?auth=free&label=ul.book.0309063566 A pre-publication version of the report available from the National Academy Press (800) 624-6242 for $55; the final version will be available in September, 1997.