TThe surge in immigration will help boost the U.S. economy by about $7 trillion over the next decade by increasing the size of the workforce and increasing demand, the Congressional Budget Office said Wednesday.
According to the nonpartisan agency, the stronger growth will benefit the federal government, increasing revenues over that period by about $1 trillion more than usual. However, the CBO estimates that wages will rise more slowly, due in part to the increase in the number qualified workforce.
“Population growth increases demand for goods, services and housing,” the CBO said in its fiscal and economic outlook for the next 10 years. “They also expand the productive capacity of the economy by increasing the size of the workforce.”
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The increased migration is largely due to people entering the U.S. illegally and those released by Customs and Border Protection officials on humanitarian grounds on probation or with a notice to appear before an immigration judge. Many of these migrants enter the labor market with a delay.
The agency's estimates come amid a heated political debate in Washington over the surge in migration at the U.S.-Mexico border and what should be done to control it.
On Wednesday, the Senate dealt 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 highlights some of the economic benefits that can come from increased immigration – a point that Federal Reserve Chairman Jerome Powell made in a 60 Minutes interview with CBS News on February 4.
“The U.S. economy has benefited from immigration over time,” Powell said, while emphasizing that he was not telling Congress what to do on the issue.
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The CBO forecasts that increasing immigration will boost inflation-adjusted gross domestic product growth by an average of 0.2 percentage points per year from 2024 to 2034, making it about 2% higher in 2034 than otherwise.
In its report, the CBO increased its estimate of the labor force in 2033 by 5.2 million people, largely due to higher net inflows from abroad.
According to the agency, the increased workforce will put downward pressure on average inflation-adjusted wages. This effect is expected to be partially reversed after 2027, but wages are still expected to be somewhat lower than usual in 2034, according to the CBO's estimate.
Wages are low in part because many migrants are expected to work in lower-paying jobs, driving down average wages. But an expansion of the labor supply also plays a role, according to the report.
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The CBO has emphasized that its population projections are extremely uncertain, particularly for later years. The increase in immigration that began in 2022 is expected to continue until 2026 and then decline.
In a briefing for reporters, CBO Director Phil Swagel said the agency had not taken into account housing costs and other costs faced by states and localities due to the surge in migration because they were outside the agency's purview.
He also refrained from commenting on congressional efforts to stem the flow of migrants into the United States
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