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Background and Demographics
The economy is defined as the total consumption of goods and services in a region. An accepted measure of the economy is Gross Domestic Product (GDP). GDP measurements are published every quarter as an annualized percentage change. When the GDP change is positive, the economy is growing, and when negative, shrinking. Using a simplified model, we can say that GDP can grow in two ways; 1) Population Growth (more people consuming more goods and services); 2) Consumption Growth (the same number of people consuming more goods and services). Population growth is most closely linked with the immigration issue.
But simply growing a population doesn't guarantee economic growth. Think about today's older workers going into retirement. Once retired, many won't consume as much as a typical working adult. Babies and small children also do not consume like working adults. Thus, we introduce a useful population demographic measure...the dependency ratio. This ratio is simply the number of people not working (dependent) compared to those who are working. As the number rises above 50, there are more non-workers than workers. As of 2011, the U.S. dependency ratio was 50.07. It is projected to be above 60 by 2050 under current circumstances.
As the baby boomers retire, the only way to keep the dependency ratio from increasing is to have a steady supply of young people reaching working age. Here lies another problem...our population isn't producing as many children as it once did. One measure of birthing is the fertility rate, which measures the number of children per mother. The "replacement" rate (zero population growth) is 2.1. In 2011, the U.S. fertility rate was 1.9. The takeaway here is that for our economy to grow, we need more workers to help support those who are not working. And, we need a greater stream of children to become tomorrow's workers.
The Immigration Factor
Illegal immigrants (herein referred to as undocumented immigrants (UI)) tend to be younger and more mobile than other workers. They are often engaged in lower-skilled work and can follow it when it moves geographically. If homes are being built in Arizona, or oranges need picking in Florida, they will go. These UI's raise families, buy cars, spend money and pay sales taxes like any other working adult. Many UI's pay Federal income taxes using fake social security numbers. The Social Security Administration estimates that over 50% of UI's are paid by payroll check and have taxes withheld accordingly. Estimates show that adding UI's to the legal population would increase Federal tax receipts by over $1 billion per year. In addition, Hispanic women have a higher fertility rate of 2.4, which could help push the future dependency ratio down. All told, the potential economic gains for immigration reform are notable. UI's add to the working population and help supply the children needed for future work and economic growth.
However, it is never that easy. The issues surrounding immigration reform are substantial. No one considers deporting all 11 million UI's. But moving them toward citizenship is tricky. While it is true that UI's do valuable work and pay taxes, they also consume social services. Children born to UI's are automatically U.S. citizens and are eligible for Medicaid and food stamps. No state can deny a juvenile UI education from K though 12. Going beyond the taxes paid and services accessed, there is the morality question. Some lawmakers are justifiably concerned that providing a simplified pathway to citizenship for UI's unfairly rewards them as law breakers and effectively punishes those who are patiently waiting for the standard legalization process. My guess is that the potential economic gains appear tempting enough to overcome the political challenges. |
