How does immigration affect the economy? Discussions about the economic effects of immigration are often influenced by larger ethical and political stances around this topic, positions grounded in questions about the kind of world in which people want to live. Many arguments against immigration, for instance, tend to emphasize rates of cultural change or assimilation, while those in favor often point toward the history of immigration and America’s moral promises.
Economically, those in favor of immigration argue that immigrants boost the economy by increasing the labor supply and promoting innovation. Those against it argue that immigrants harm low-skilled laborers by taking jobs that American workers would otherwise get or depressing wages for native-born low-skilled workers.
How correct are these contentions? And which other factors contribute to the economic impact of immigration? With immigration continuing to be a serious national concern, it is worth taking the time to look at the data as best as we can assess it.
Key Takeaways
- Immigrants are more and more educated and diverse, often filling jobs that aren’t being taken by the native workforce.
- Despite the rhetoric, studies show that immigrants have little to no impact on wages or available jobs in the U.S.
- In general, high-skilled immigration adds to innovation, government revenue, and boosts the economy.
- As the U.S. population ages and grows larger due to baby boomers, immigration helps keep the workforce robust.
Increased Diversity in Immigration
As of 2023 (latest information), in the U.S., the number of people born outside of the country reached approximately 47.8 million, which is about 14.3% of the nation’s population. The largest portion is from Mexico, about 23%, followed by 6% from India, 5% from China, 4% from the Philippines, and 3% from El Salvador.
The level of education amongst immigrants is also growing. In 2022, approximately 35% of adult immigrants had at least a bachelor’s degree, which is a little above the national average. For immigrants arriving in the U.S. since 2010, 45.2% of immigrants hold a bachelor’s degree or higher. This is higher than the 38% of U.S.-born adults who hold a bachelor’s degree or higher.
Similarly, naturalization rates have also grown. As of 2023, of those born outside of the U.S., about 49% are now U.S. citizens.
Fast Fact
Immigrants make up approximately 14.3% of the U.S. population.
Does Immigration Depress Low-Skilled Wages?
Despite the prevalence of the argument that immigration suppresses wages of low-skilled native-born citizens, evidence suggests that the impact of immigrants on these wages is relatively small and contained. Some reports say that it is “essentially zero.”
A 2023 study from Brookings states that immigrants and native-born workers generally operate in complementary labor markets, with immigrants doing the jobs that Americans aren’t filling.
Additionally, the Economic Policy Institute says that immigration does not adversely impact the wages earned by native born U.S. workers on a larger, national scale. It may reduce wages for newly arrived immigrants and native-born low-education workers, however. It also does not decrease the number of jobs available to workers born in the U.S.
The Federal Reserve, in 2023, also showed that immigration has a low or no negative impact on average wages or employment for native workers.
Does Restricting Immigration Improve Wages?
Further studies have suggested that restrictions on immigration do not necessarily lead to higher wages for native-born workers. A 2019 National Bureau of Economic Research study of 1920 immigration quotas found that—although they did reduce immigration—the quotas did not lead to an increase in wages for native-born workers.
In fact, the study reported a slight decline in native-born wages after the quotas were implemented because of both the falling rate of immigration and the immigration of unrestricted groups.
Effects on Productivity and Government Revenue
A 2024 report from the Congressional Budget Office (CBO) showed that the net labor force in 2023 will be larger by 5.2 million people, primarily due to net immigration. As a result, from 2033 to 2034, GDP will increase by $7 trillion, federal revenues will grow by $1 trillion, and the deficit will decrease by $900 billion.
High-skilled immigration has grown, and with it comes a noted positive impact on the wages and employment of natives, whether they’re college-educated or not.
One economic benefit has been an increase in innovation, measured by an increase in patenting per capita, which is connected to productivity growth. This has led economists to argue that high-skilled immigration has brought more innovation, entrepreneurship, and technological change.
As an example of this, “immigrants have started more than half of America’s billion-dollar start-up companies,” according to the National Foundation of America Policy.
Effect on the Aging of America
Immigrants may also offer a way to slightly slow the rising age distribution of the American population.
Scholars have expressed concern over the low fertility rate and the rising age of the American population, which they say could strain government budgets as the number of people who pay into public-sector benefits, such as Social Security and Medicare, falls in comparison to the number of people collecting those benefits. An aging population would also require more medical care.
Analysis of Social Security Administration projections indicates that the number of workers paying into Social Security per Social Security beneficiary will be roughly 2.1 by 2040, down from 3.7 workers in 1970.
Fertility rates in the country have been generally below the “replacement rate,” the fertility rate necessary for a population to maintain itself (2.1 children per woman) since 1971, according to the U.S. Centers for Disease Control.
Immigrants tend to be younger than the populations of their receiving countries, with a larger proportion of them being of working age, which has led economists to argue that net immigration represents a means of stabilizing the aging populations of economies in the global North in general.
In North America, for instance, immigration made up 32% of the population growth between 2000 and 2018, according to an economic analysis published by the International Monetary Fund.
An increase in immigration to the economies of the global North is desirable from a demographic point of view, Giovanni Peri, a professor of economics at the University of California, Davis, has argued.
“It would reduce population decline, keep the size of the labor force from shrinking, improve age dependency ratios, and produce positive fiscal gains. From a policy standpoint, this means increasing the number of immigrants allowed, reducing other constraints on immigration, and planning for future inflows,” he said.
One additional point: An aging society needs healthcare workers. Previous studies have also suggested that immigrants often work in medicine-related fields.
Immigration Under the Trump Administration
During the first Trump administration, the U.S. took aggressive steps to restrict the flow of immigrants, based on the belief that they negatively influence the culture and economy.
The administration, which came to office by promising to curb immigration at the southern border by building a wall and stepping up enforcement, explicitly linked immigration to criminality and suppressed wages, such as in President Trump’s 2017 “Buy American and Hire American” executive order.
The Biden Administration reversed some of these policies, even walking back some of the core commitments of the Trump presidency to restrict immigration flows.
Since taking office again in 2025, however, Trump continued his attempts to bring down immigration. His policies involve mass deportations and ending birthright citizenship. How many of his policies will stick and how they will impact immigration remains to be seen.
What Jobs Do Most Immigrants Have?
Construction employs the most immigrants. Other industries that employ a large number of immigrants include professional and business services, other services, transportation and utilities, leisure and hospitality, and manufacturing.
What Challenges Do Immigrants Face in Their Jobs?
Common challenges immigrants face in their jobs include discrimination, exploitation, stress and concerns related to U.S. immigration policies, and a hard time being able to afford all of their expenses.
Do Illegal Immigrants Get Paid Less?
Yes, illegal immigrants get paid significantly less than their legal counterparts. Studies show the difference is approximately 42%.
The Bottom Line
Immigration is often viewed through an emotional and political lens. While native-born citizens fear that immigration will hurt their chances of employment or negatively affect their wages, the details are much more complex than easily shouted slogans.
Research has shown that the jobs immigrants fill are complementary to those of native workers, not ones they take. Additionally, immigrants add to innovation, GDP, and overall financial health. This is particularly important as the U.S. is facing an aging population and labor shortages.
While immigration is an intricate issue, research shows that limiting immigration would likely do more damage to the country than help it.
