Surge in immigration to boost US GDP by $7 trn over decade, says CBO

By Rich Miller

The surge in immigration will help bolster the US economy by about $7 trillion over the next decade by swelling the labor force and increasing demand, the Congressional Budget Office said on Wednesday.
 

The stronger growth will be good for the federal government, lifting revenues by about $1 trillion more than otherwise over the period, according to the non-partisan agency. Wages, however, will rise more slowly, in part reflecting the increase in the number of lower skilled workers, in the CBO’s estimation.

“Increases in the population boost the demand for goods, services, and housing,” the CBO said in its budget and economic outlook for the next 10 years. “They also expand the productive capacity of the economy by increasing the size of the labor force.”

The increased migration stems mainly from people entering the US illegally and from those released by Customs and Border Protection officials with humanitarian parole or with a notice to appear before an immigration judge. After a lag, many of those migrants join the labor force.

The agency’s estimates come amid a fierce political debate in Washington over the surge of migration at the US-Mexico border and what should be done to control it.  

The Senate Wednesday delivered a death blow to efforts to impose new border restrictions, blocking a carefully negotiated bipartisan compromise backed by President Joe Biden after his predecessor Donald Trump and House Republican leaders denounced the deal.

The CBO report underscores some of the economic advantages that can be gained from increased immigration — a point that Federal Reserve Chairman Jerome Powell made in a CBS News 60 Minutes interview broadcast on Feb. 4.

“The US economy has benefited from immigration” over time, Powell said, while stressing that he wasn’t telling Congress what should be done regarding the issue.

The CBO projects that the increase in immigration will lift the growth of inflation-adjusted gross domestic product by an average of 0.2 percentage points a year from 2024 to 2034, leaving it roughly 2% larger in 2034 than otherwise.

In its report, the CBO raised its estimate of the labor force in 2033 by 5.2 million people, mostly because of higher net inflows from outside the country.  

The expanded workforce will put downward pressure on average inflation-adjusted wages, according to the agency. That effect is projected to partly reverse after 2027, but wages are still expected to be slightly lower than otherwise in 2034 in the CBO’s estimation. 

Wages are depressed in part because many migrants are expected to work in lower-paying jobs, thus lowering the average salary. But an increase in the supply of labor also plays a role, according to the report.

The CBO has stressed that its population projections are highly uncertain, especially in later years. It’s assuming that the surge in immigration that began in 2022 continues through 2026, then subsides. 

In a briefing for reporters, CBO Director Phil Swagel said the agency did not take account of housing and other costs states and localities are confronting because of the surge in migration as those are outside the agency’s purview. 

He also steered clear of commenting on the efforts in Congress to tighten the flow of migrants into the US.