SDC/BIDC Annual Conference Austin

May 22, 2013

Pia OrreniusFederal Reserve Bank of Dallas

Disclaimer: The views expressed herein are those of the presenter; they do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.

From Brawn to Brains:Immigrants in the U.S.

and Texas Labor Markets

Road map

Recent trends in immigrationCharacteristics of immigrants in U.S., TexasEffects of immigration on economic activityLabor market and fiscal effectsPolicy implications

VOLUME AND CHARACTERISTICS

Recent Trends in Immigration

Immigrants account for over half of recent labor force growth

SOURCE: Bureau of Labor Statistics.

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

5,000

10,000

15,000

20,000

25,000

30,000

0

2

4

6

8

10

12

14

16

18Number of Foreign Born Workers

Percent of Labor Force Foreign Born

Thousands of Workers Percent

Rising influx of foreign-born,low-skilled workers

1960 1970 1980 1990 2000 20110

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

0

10

20

30

40

50

60Millions Per-

cent

Foreign-born, low-skilled workers

Foreign born share of low-skilled labor force

NOTE: Number of foreign-born workers with less than a high school education aged 25 and older.Source: Census; 2011 American Community Survey

Age Profile of Immigrants vs. Natives in Texas

Under 4

5 to 9

10 to 14

15 to 19

20 to 24

25 to 29

30 to 34

35 to 39

40 to 44

45 to 49

50 to 54

55 to 59

60 to 64

65 to 69

70 to 74

75 to 79

Over 80Natives ImmigrantsAge

Percent1515 10 1055 0

Migration DecisionPull factors Host country economic growth, migrant networks

Push factors Home country conditions

Costs/Barriers Geographic proximity Current policy

Restricts high-skilled immigration; work-based immigrationEncourages family reunification; unauthorized immigration

Temporary high-skilled visas always run out before year-end

2000 2002 2004 2006 2008 2010 2012 20140

50

100

150

200

250

300

350

400Days

Days elapsed until high skill temporary work visas (H-1Bs) exhausted

Unauthorized immigrant flows

SOURCE: Warren, R., Warren, J.R., 2013, IMR.

-400

-200

0

200

400

600

800

1,000

1,200Thou-sands

Net change in unau-thorized population

NOTE: Shaded bars represent U.S. recessions.

0

5

10

15

20

25

30

35

40

Percent

SOURCE: 2011 American Community Survey.

Foreign born Native

Nearly one-third of the foreignborn lack a high school degree

Education Distribution by Nativity

Foreign Born Worker Concentration by State

Migrant workers concentrated in a few states

IMMIGRANTSTO TEXAS

Native-born in Texas, U.S. similar in education

0

5

10

15

20

25

30

35

Texas Native BornU.S. Native Born

Percent

Foreign-born in Texas have much lower education

0

5

10

15

20

25

30

35

40

45

50

Texas Immigrants U.S. Immigrants

Per-cent

Texas immigrants also lag in English ability

0

5

10

15

20

25

30

35

40

Texas Immigrants

U.S. Immigrants

Percent

Texas immigrants 60% from Mexico

59.8

11.4

1.3

3.2

18.6

5.7

Texas

Mexico Latin America Caribbean Africa Asia Europe, Canada, Oceania

Texans, foreign and native, have higher employment rates

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201252

54

56

58

60

62

64

66

68

70

Texas Foreign Born Texas NativeU.S. Foreign Born U.S. Native

Percent

And lower unemployment rates

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

2

4

6

8

10

12

Texas Foreign Born Texas NativeU.S. Foreign Born U.S. Native

Percent

Still Texan immigrants earn less

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012300

350

400

450

500

550

600

650

700

750

Texas Foreign BornTexas Native

Real $

Except for low-skilled, who earn the same as in the rest of the U.S.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012300

350

400

450

500

550

Texas Foreign Born

Real $

EFFECT ON ECONOMIC ACTIVITY

Economic BenefitsImmigrants benefit from higher wagesNatives also benefit More workers, lower prices Higher productivity through specialization;

efficiency through mobility Higher return to capital boosts investment Immigration surplus $38-$75 billion per year

Complementary immigration, bigger boost

Immigration and Economic Growth

Faster growth relies on productivity growthInnovation High-skilled immigrants, particularly in STEM fields

Highly educated immigrants receive patents at more than twice the rate of natives

Entrepreneurship 25 percent of high-tech startups between 1995

and 2005 founded by immigrants Immigrants 30 percent more likely to start a

business

Lawyers/Judges

Veterinarians

Actors, directors, producers

Chief executives and public administrators

Managers and administrators

Economists, market researchers, survey researchers

Chemical engineers

Registered nurses

Biological scientists

Architects

Dentists

Mechanical engineers

Pharmacists

High school and college instructors

Computer systems analysts and computer scientists

Mathematicians

Physicians

Chemists

Computer software developers

Medical scientists

0 20 40 60 80 100 120

PercentNote: Percent of workers age 25 and over, with bachelor's degree or higher who are foreign born for se-lected occupations.Source: 2011 American Community Survey

Foreign-born as a percent-age of college graduate la-bor force

16.4

STEM, health care occupations rely on high-skilled foreign workers

LABOR MARKET AND FISCAL IMPACTS

Labor Market Effects

Adverse wage and employment effects of immigration? Biggest impact on low-skilled natives and prior

immigrants

Effects on natives lower than expected given conventional model Many mitigating factors

Fiscal Impact

High-skilled immigrants pay more in taxes than they consume in public servicesBut low-skilled immigrants are a net fiscal drain Low wages, large families, lack of employer-

provided health insurance coverage

In the very long run, negative fiscal impact of low-skilled immigrants dissipates

POLICY IMPLICATIONS

Economics of Immigration & PolicyExpand high-skilled employment-based immigration 86% of green cards go to family & humanitarian Only 7% of green cards to principal workers Resolve LPR backlogs

Provide low-skilled employment-based visasImplement legalization program Speed integration; improve outcomes Restore circularity Bring workers onto books; employers compliant

Summary

Immigration has transformed the U.S., Texas workforce

Flows have been skewed toward low-skill Texas more than most other states

Macro economy has benefited But fiscal impact detracts

Reform should give economics of immigration a bigger role in policy