IMMIGRATION is the quintessential supply-side policy. It expands the labour force, encourages investment and provides taxpayers to support America’s growing ranks of the grey-haired. Sadly, Barack Obama’s immigration order will have few such benefits, because it is aimed largely at illegal immigrants who arrived years ago while doing precious little to increase the flow of newcomers.
The reform that passed the Senate last year (but was never taken up by the House of Representatives), besides legalising millions of illegal immigrants, would have created new entry routes for foreign workers, especially those with skills, experience and education. The Congressional Budget Office reckoned it would boost the population in a decade’s time by 10m, the number of workers by 6m, and the level of GDP by 3.3%.
By contrast, Mr Obama’s Council of Economic Advisers reckons his order will boost GDP in the next decade by between 0.4% and 0.9%, mostly because of provisions unrelated to illegal immigration. These give foreign entrepreneurs more ways to get into America, allow the spouses of skilled visa-holders to work, and let foreign-born science graduates spend more time in America doing their training.
In theory, the economy should benefit as illegal immigrants, no longer fearing they will be deported, switch to jobs better suited to their skills. But that advantage is likely to be small: a study by Silvia Helena Barcellos, now at the University of Southern California, found that Mexican high-school dropouts who qualified for the 1986 amnesty earned only 2-3% more than those who did not qualify, and that there was little difference in where they worked or the types of jobs they had, though their better-educated counterparts got better jobs.
Immigration is already shrinking as a contributor to American growth. Legal immigration has been around 1m a year for the past decade, and is edging down as a share of the population (see chart). Illegal immigration more or less came to a halt in 2007. Since then, the number of illegal immigrants freshly arrived in the country has been roughly balanced, or exceeded, by the number who have left, died or been deported. The longer Congress goes without legislating a change, the costlier it will be for the economy.