Would the Dreamer Amnesty Benefit the Economy?

April 2013

CAP’s Economic Argument for the DREAM Act

A study commissioned by the left-of-center Center for American Progress (CAP) found that the DREAM Act amnesty legislation would “…add $329 billion to the U.S. economy by 2030.”>¹ This study, “The Economic Benefits of Passing the DREAM Act” reached its conclusion by assuming that if the legislation were not enacted the illegal aliens would remain in the country and work in lower paying jobs. That assumption jibes with the policy of the Obama Administrations to halt deportation of illegal aliens unless they have been convicted of a felony or are a threat to national security. However, that policy is a form of wish fulfillment. It is not inevitable that illegal aliens will remain in the United States in violation of the law. It is, therefore, a false assumption.

Consideration of the effects of the DREAM Act cannot be considered in a policy framework vacuum. There is no intent by the legislation’s proponents that illegal aliens who do not qualify for the act’s benefit would remain in their illegal status and remain subject to deportation. The legislation is in effect a “foot in the door” approach to paving the way for a full scale amnesty for all illegal alien residents. If the act’s beneficiaries were to gain legal residence, the next step would be to seek amnesty for family members of the newly legalized residents to avoid family separation. This type of incremental amnesty approach would have as its objective gaining legal status for all.

Evidence of the fact that this is the intent of the legislation’s sponsors may be seen in the action of President Obama — an advocate for the DREAM Act² — and his administration in adopting policies that restrict immigration law enforcement against most illegal residents. If the administration had any intention of deporting the illegal alien parents, it would not grant provisional legal status to the illegal alien offspring, because that would lead to the separation of the family — a principal shibboleth of the amnesty advocates.

“We have internally set it up so that the parents are not referred for immigration enforcement if the young person comes in for deferred action.” — DHS Secretary Janet Napolitano³

The reason for beginning amnesty advocacy with the DREAM Act is that the intended beneficiary population is the easiest on which to make an argument that their economic participation as legal residents would be a benefit. But, if the DREAM Act is simply a first step designed to facilitate adoption of a much broader amnesty, the assertions of an economic benefit should be considered in the context of the economic and fiscal effects of the full-scale amnesty that the advocates of the DREAM Act are pursuing. It makes no sense to set out on a voyage if you know in advance that the eventual destination is one that you do not want to reach.

Guzman and Jara, the CAP study’s authors, rely on the assumption that every additional worker contributes to an increase in the Gross Domestic Product (GDP). An increase in the GDP does not mean an increase in the GDP per capita, and it does not mean that the additional worker contributes more to the economy than the fiscal burden of that worker. As demonstrated in research by FAIR and by others, the illegal alien population in general is a major fiscal drain at the federal, state and local levels of government and would be more so if an amnesty were enacted.⁴

The argument that each additional worker adds to GDP — besides being used to justify CAP’s pursuit of an amnesty for illegal aliens — is an argument for open borders and unlimited immigration. If each additional worker is a benefit, then why limit the entry of additional workers? The reason our immigration law sets limits is that unlimited immigration would lead to a continuing stream of tens of millions of immigrants and would, inter alia, have harmful impacts on the U.S. workforce, create severe burdens on the nation’s infrastructure and social assistance programs, and counter efforts to reduce the population’s impact on the environment. In addition, depending on its composition, immigration may entail fiscal costs that far outweigh any economic bonus.

Just as there is virtually no national support for unlimited immigration, there should be no acceptance of the premise that persons who are in the country in violation of the immigration law should be allowed to remain because their work adds to the GDP.

What is the DREAM Act?

The legislative proposals to give legal permanent residence to illegal aliens have varied, but they generally aim for legal status for illegal aliens younger than 30 brought into the United States by their parents before the age of 16 with five years of U.S. residence and completion of high school or a GED. Permanent legal residence, “green cards” are made available to those who complete two years of higher education or military service or volunteer service.

[The all volunteer military service is not lacking in qualified volunteers. So opening up military service to illegal aliens would simply reduce opportunities for military service among current applicants, i.e. U.S. citizens and legal residents. This is also occurring as military force levels are being reduced.] “The U.S. army already began to shrink last year, downsizing toward 490,000 from 570,000.” “Budget cuts may force Pentagon to cut armed forces — U.S. top military chief” rt.com 2/10/13 “General Martin Dempsey, chairman of the Joint Chiefs of Staff, said about a third of the [sequestration] cuts would have to come from the armed forces, …”

The potential beneficiaries are estimated in the CAPS study at 2.1 million persons. That includes about a million who are now under age 18, three-quarter of a million who now have a high school education or equivalent including some in post-secondary studies, and another half million who are school dropouts who could go back to school for a GED.⁵

The legislation is promoted as compassionate treatment for those brought here illegally as children and the argument that the children should not be punished for the sin of the parent. Poster children are rolled out who are academic achievers with the claim that they are Americanized and have no ties to their country of birth. This, obviously, is spin. An example of that fact was provided by a young illegal alien who had received the temporary DACA status against deportation, who in a recent meeting hosted by DHS’s director of the Citizenship and Immigration Services branch, Alejandro Mayorkas, asked why DACA beneficiaries were unable to get advance parole permission to travel to their homelands except in emergency special circumstances. He said he and many other DACA beneficiaries would like to receive permission to visit relatives in their home countries whom they had not seen for a long time.⁶

The portrayal of young illegal aliens as class valedictorians is, of course, not representative of the potential beneficiaries. Some are juvenile delinquent gang members. Many are school dropouts, e.g. the estimated half million aliens who could qualify for the DACA provisional amnesty if they enrolled in GED classes. Yet the proposed legislation would embrace them all as prospective members of our society.

Methodological Flaws in the Report

Guzman and Jara used complex modeling to arrive at their estimates of the potential earnings and related benefits of adoption of the amnesty for the illegal alien youth. But, the validity of their model depends on the underlying data and the assumptions used to construct it. Those data and assumptions are questionable and misleading, as outlined below.

The Legalized Population Model — To model the population that might benefit from the amnesty, the study used data collected on the economic experience of beneficiaries of the 1986 amnesty.⁷ There are two problems with the researchers’ use of that data. First, the survey data included only amnesty recipients over the age of 18, and therefore provided no information on the educational achievement of younger amnesty beneficiaries. The second problem with that survey data is that they did not include the two-fifths of the 1986 amnesty recipients who obtained legal status through their work in agriculture. The agricultural workers will have included few, if any, visa overstayers. By contrast, among those who were included in the survey data, 21 percent were visa overstayers. Visa overstayers are persons screened and found eligible to enter the United States — most of them who benefited from the 1986 amnesty entered with student visas.⁸ Thus, those beneficiaries of the amnesty clearly represent a different socioeconomic profile than those who enter illegally to seek work in agriculture.

The Post-Secondary Education Model — To model what would be the post-secondary education acquisition pattern of potential amnesty beneficiaries, Guzman and Jara decided to apply the post-secondary pattern of U.S. citizens. They argued that because the illegal alien youth had been brought into country at an early age, they had grown up with and had been educated with U.S. children and therefore would resemble their educational progression.

“Since DREAMers all came here and participated in U.S. education, a better comparison point for educational achievement is their U.S.-born counterparts, controlling for sex, age, and race and ethnicity, which is what we have done here.”

They also wrote, “In our final estimate we assumed that if the DREAM Act is enacted, the eligible population would experience the transition rates of their U.S.-born counterparts.” That is a very questionable assumption.

The 2010 Census data on the educational achievement of native-born U.S. citizens show 59.3 percent aged 25 and over to have at least a 2-year post-secondary degree. This can be compared with survey data collected among recipients of the beneficiaries of the 1986 amnesty. Survey work commissioned by the U.S. Department of Labor found “…that between 1987/88 and 1992 the share with 13 or more years of education edged up from 12 to 15 percent.”⁹ The level of 13 years of education suggests post-secondary study but still less than the two additional years of study required to achieve an associate degree.

Further, the survey of post-1986 amnesty recipients did not include the two-thirds of amnesty recipients who earned amnesty through agricultural work. Those amnesty recipients likely included few, if any, who had completed more than a 6th grade education before seeking work in the United States. Had they been included in the survey five years following the amnesty, the share of those with 13 or more years of education would certainly have been much lower.

The survey data found that, “Over 6 percent attained diplomas or degrees [since they were amnestied].” Of that six percent, one third, i.e., two percent, were degrees at a higher level than high school. If the agricultural workers were included, and it is assumed that nearly none of them went back to school to continue their education to at least an associate degree, then the experience with the 1986 amnesty population after five years indicates a 1.2 percent share continuing their education to at least a two-year post secondary degree.

This 1.2 percent share was on top of the share that already had attained that level of education before legalization. That level was found by the first survey of the legalized population conducted in 1987 — also not including those gaining amnesty through agricultural work — at 12 percent of the applicants.¹⁰ If the 12 percent share is similarly adjusted to include the agricultural workers, it would presumably fall to 7.2 percent.¹¹ When the addition of 1.2 percent of the amnestied population gaining a degree within the first five years after the amnesty is added the 7.2 percent already with that level of education, the total becomes 8.4 percent. That, clearly, is a very different level of academic progress for the amnesty beneficiaries than the 59.3 percent average degree achievement of U.S.-born citizens. And the discrepancy is presumably even greater because some of those who were found to have completed at least 13 years if education in the survey may not have continued their studies to earn a two-year degree.

The Post-Amnesty Employment Model — Guzman and Jara assume that in addition to a return on the investment in additional education of DREAM Act beneficiaries that gaining legal status by itself would lead to greater employment opportunities and increased earnings and result in greater tax payments. This assumption also is questionable.

First, it must be noted that some illegal aliens use false or stolen documents to gain well-paying jobs. An example is former Washington Post reporter Jose Antonio Vargas, a Pilipino illegal alien. Such persons do not stand to gain economically from amnesty and, instead, may lose their jobs if the employer resents learning that the employee lied about legal status.

Second, some illegal alien workers gain employment because the employer knows they do not have legal status and are, therefore, more exploitable than U.S. workers who are better protected from illegal exploitation if they are not paid overtime or denied leave. Exploitive employers are unlikely to reward amnestied employees, and may dismiss them with a view to keeping a compliant workforce.

Thus, the legal status gained by amnesty might confer no benefit or worse result in the loss of employment. This possibility is not just hypothetical. It is backed up by the experience recorded in the follow-up study of the IRCA amnesty beneficiaries five years after legalization. The survey found a higher rate of unemployment than was the case at the time of the amnesty.

“… by 1992, the likelihood of unemployment was higher for legalized than for other U.S. men — a reversal of the pattern seen prior to legalization.”¹²

Balancing Economic Gain with Fiscal Loss

Even though the economic gain postulated by Guzman and Jara is unrealistic because of the faulty assumptions on which it was based, there still would be some economic benefit from encouraging continued education. According to Pew research, an associate degree on average adds $6,410 per year above the earnings of a high school degree.¹³ Higher degrees add still greater benefits. Nevertheless, those gains are likely to be achieved by a small share of the illegal alien population that is the ultimate beneficiary population that the DREAM Act is intended to facilitate.  

It must also be kept in mind that the additional education of DREAM Act beneficiaries would represent a major fiscal cost. Assuming average taxpayer supported funding of community colleges at the level of the difference between state residents and foreign students of $2,300 per year for two years, the expenditure would amount to about $660 million — more than the potential annual economic benefit.¹⁴ In addition, because local resident tuition does not cover the costs of the community schools, there is an additional taxpayer subsidy that would be expended on the illegal aliens pursuing additional education to qualify for green cards.

Most students would not be able to carry a full-time student academic load and a full-time job, so during the extra years of study, the economy would suffer an absence of the contribution from the youths work.

Guzman and Jara estimated the economic benefit resulting from increased earnings of DREAM Act beneficiaries as $181 billion over 20 years, or an average of $9 billion per year. If, however, the number of prospective amnesty beneficiaries who actually fulfill the terms of the amnesty is much smaller — as suggested by the experience with the 1986 amnesty — less than seven percent of the number used in their calculations, that implies a more realistic annual economic gain of about $615 million. The same magnitude of reduction would apply to secondary effects such as tax collection and related job creation.

To put that small amount of theoretical gain in context, FAIR estimated in 2010 that the fiscal costs of illegal immigration amounted to about $113 billion dollars per year.¹⁵ That study also argued that amnesty for the illegal alien population would result in an additional costs because the beneficiaries would be on a path to full participation in the social assistance programs available to foreign residents as well as U.S. citizens. A study of the potential cost of the full-scale amnesty being proposed in 2007 by Robert Rector at the Heritage Foundation estimated likely annual costs of the proposed amnesty at $2.6 trillion over 10 years ($260 billion per year). That estimate antedated the enactment of Obamacare, and that would boost fiscal costs still higher.

Thus, the decision of Guzman and Jara to ignore the potential negative offsets to their inflated estimate of economic benefits makes sense only if the research was intended to present a one-sided argument in favor of adoption of the DREAM Act.