DACA and the Economics of Immigration

by on October 25th, 2017

Today’s article was written by Sumit Malik.

President Trump defended his decision to rescind the Deferred Action for Childhood Arrivals (DACA) program as an effort to promote “safe communities, a robust middle class, and economic fairness for all Americans.” In his statement, the President painted his stance as simultaneously shrewd and compassionate. He pointed a finger at roughly 800,000 undocumented immigrants brought to the US as children, who were safeguarded from deportation under DACA, for purportedly disrupting social stability and hindering economic progress. The evidence, however, overwhelmingly conveys the opposite.

In the DACA discussion, the foremost considerations should be those of compassion and human decency. DACA recipients, also known as “Dreamers,” most of whom came to the US under the age of 7, established their roots here. They were raised side-by-side with birthright citizens as peers, classmates, and colleagues, and for many this is the only country they know. A quarter of Dreamers now have children, who are US citizens by law. To repeal DACA is to place less importance on the strength of an individual’s deep personal bonds than on the papers he or she holds.

That said, even if we reduce the debate to cold, hard economics, facts supporting the stated rationale for the repeal are scarce. Rather than bolster the economy, the repeal of DACA will reduce US gross domestic product by upwards of $430 billion over the next decade, according to a Center of American Progress study. Dreamers, who are 22 years old on average, are key contributors to the US economy, particularly in light of secular demographic trends. Their tax contributions to critical public programs, including Social Security and Medicare, mitigate the looming economic challenges of supporting an aging population.

The issues underlying the repeal of DACA have cast a spotlight on a broader, longstanding conversation regarding the implications of immigration. Importantly, while economists differ on the impact of immigration overall on domestic employment and wages, DACA recipients represent a relatively highly skilled, highly educated segment of the immigrant population. There is little disagreement that skilled, highly productive immigrants grow the domestic economic pie, the benefits of which are shared by all Americans.

Immigration more broadly, and in particular low-skilled immigration, is a more contentious topic. George Borjas, a professor at the Harvard Kennedy School whose expertise is in labor economics and immigration, has prominently argued that immigration puts pressure on incomes for low-skilled domestic workers. Central to his analysis are data from the wave of Cuban refugees to the US in 1980, following Cuban President Fidel Castro’s announcement that residents would be permitted to leave the island from the port town of Mariel. Low-skilled workers cascaded to the US, largely to Miami, creating excess supply of potential employees that drove down salaries and redistributed wealth away from workers. Analysis on the Mariel boatlift phenomenon has particularly broad implications because the sudden influx of immigrants, rather than a trickle over time, created a natural experiment enabling cause-and-effect inferences to be drawn.

Professor Borjas’ findings have been vigorously debated. Alternative analyses of the 1980 Mariel boatlift using the same data have uncovered little or no impact of the worker migration on unemployment and wages, contradicting Borjas’ conclusions. These studies, including early research by David Card from UC Berkeley and a publication within months of Borjas’ work by Giovanni Peri from UC Davis, indicate resilience of the labor market in absorbing an excess supply of workers. The centrality of the studies in informing immigration policy fanned the flames of the academic dissent, even escalating the dispute to accusations of bias and omission. Borjas’ critics have homed in on the small size of the cuts of data used in his analysis, questioning the robustness of the results.

Irrespective of the verdict on the broader immigration debate, it’s crucial to avoid generalizing the results beyond their scope. Even if we were to accept the conclusions of Borjas’ study at face value, they should have limited weight in the DACA debate; indeed, misapplying evidence from research into low-skilled immigration has muddled the conversation. A policy of expelling Dreamers puts politics above people, and it stands on neither the moral nor the academic high ground.

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Sumit Malik (HBS ’19) is an investor, writer, and entrepreneur. Professionally, his background is in venture capital and private equity at Warburg Pincus, strategy as a board member of Santander Asset Management Chile, and investment banking at Goldman Sachs. Personally, he writes for academic and popular publications and performs music and poi (light- or fire-spinning). He previously received an A.B., summa cum laude, from Harvard College and an S.M. from the Harvard Graduate School of Arts and Sciences.

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