The Economic Cost of Repealing DACA
University of California, Davis
The Issue:On September 5th, 2017, Attorney General Jeff Sessions announced the plan to rescind the program known as Deferred Action for Childhood Arrivals (DACA), which grants protection from deportation to undocumented immigrants who came to the United States as children. The repeal was described by the attorney general as needed to correct the effects of DACA, which, among other issues, “denied jobs to hundreds of thousands of Americans by allowing those same jobs to go to illegal aliens.” Is there any support in facts and research behind this, explicitly economic-based, justification for repealing DACA?
These workers have high levels of human capital, they speak English, and their wages and productivity increased as a consequence of DACA.
- The Deferred Action for Childhood Arrivals (DACA) program was instituted through an executive order by president Obama in 2012 and has protected from deportation nearly 800,000 young individuals who came to the United States before the age of 16. In order to be eligible for the program, they needed to be studying or have a high school degree or GED equivalent, and have no criminal record. Undocumented immigrants who met program requirements were protected from deportation and granted temporary work permits for two years, with the option to renew these benefits. Removing this protection will make them subject to deportation. And, according to some, it may even put them at explicit risk, as they have been identified and registered and immigration authorities could easily find them if this information were to be accessible. More likely, for the near future, the repeal of DACA will push these youth back to being “undocumented” increasing their marginalization in the economy by drastically reducing the range of jobs they can access.
- What are the economic characteristics of DACA beneficiaries? The program requirements ensure that DACA beneficiaries have at least a high school education or its equivalent, and many beneficiaries either have or are pursuing higher degrees. For instance, a recent survey found that 36 percent of respondents who were 25 years or older had a Bachelor's degree or higher. Moreover, 45 percent of respondents were in school at the time of the survey and, of those, 72 percent were pursuing a Bachelor's or higher. This implies that the level of education they will achieve is quite high, with a high percentage of college graduates among them. The majority of DACA beneficiaries in the survey, 91 percent, were employed. More than a quarter of DACA enrollees, 220,000, live in California and 120,000 live in Texas. Therefore, these states will experience the largest consequences of changes to the program (see chart).
- DACA allowed these young individuals to find jobs that offer better pay for their skills and encouraged them to achieve more schooling, as they could benefit from such investment by accessing the legal labor market. A 2016 study found that DACA, by improving labor market options of its beneficiaries, moved 50,000 to 75,000 unauthorized immigrants into employment and increased their income. Similarly, 69 percent of respondents in a 2017 survey of DACA beneficiaries reported moving to a job with better pay after receiving DACA and 54 percent moved to a job that “better fits my education and training.” These workers have high levels of human capital, they speak English, and their wages and productivity increased as a consequence of DACA. They are and will be doctors, nurses, engineers, scientists, accountants, teachers, cooks, biologists and secretaries, among other occupations. People not only take jobs but also create job opportunities for others by working and consuming, and highly educated workers produce what economists call a "local job multiplier” for other workers – namely they create several connected jobs (see here). By increasing wage income, DACA also increases consumption and overall demand for U.S. services, products, and jobs where the DACA recipients live and spend. Economists have shown that highly skilled workers increase local productivity and create opportunities for the other workers too (see here and here).
- The idea that “downgrading” the working options of DACA recipients, by removing their legal status or, even worse, by deporting them, will create skilled jobs that unemployed Americans can and will take, seems particularly farfetched now. The unemployment rate for people with higher levels of education in the United States is currently very low. In July 2017 there were a record of 6 million unfilled job openings. While there were also around 6.5 million unemployed workers, the key problem was one of matching job openings with needed skills: job openings were mainly for skilled jobs while not many of the unemployed had high levels of education. For instance 65 percent of secretary jobs for executives required a college degree but only 14 percent of applicants had such a degree. Moreover job openings may be in some locations and unemployed workers living far from those openings may not be willing to move. It is reasonable to say, therefore, that there are more job openings than U.S.-born workers are able to fill –especially when it comes to high-skilled, jobs. DACA recipients have, and will have, skills that are not easy to replace.
- In terms of their fiscal contribution to the United States (the difference between what they pay in taxes and what they cost in public spending), DACA recipients are similar to the second generation of immigrants. While it is not easy to identify the fiscal contribution of immigrants, a recent EconoFact post explains how second generation immigrants are net positive contributors to the U.S. fiscal system over their lifetime because of their higher levels of education — which is similar to that of DACA beneficiaries. Based on calculations in a 2017 National Academy Report, the lifetime fiscal net contribution of second-generation immigrants (likely to be similar to that of DACA recipients) was estimated to have a net present value of $173,000 to $259,000 per immigrant. The U.S. public schooling system has invested in their human capital, and now these young individuals can contribute to the U.S. economy. The risk of deportation reduces their ability to do so. Economically this will be a cost and not a benefit.
- Finally as these individuals are young, they contribute to keep the labor market more balanced and the social security system more viable, during a period in which 4 million baby boomers retire each year. Social Security operates on a pay-as-you-go basis: Taxes paid by workers each year are used to pay benefits to current retirees. Social Security faces a long-run funding shortfall due to lengthening lifespans and reduced birthrates, among other factors. The U.S. should desperately try to attract young, highly educated people, as their contributions to the economy and to the social security system, would help mitigate these factors.
What this Means:
The ultimate contradiction is that the Trump administration’s recent proposal for reforming the legal immigration system is built around merit and economic contribution, explicitly selecting people with skills that are in demand by U.S. employers and who speak English fluently. The beneficiaries of DACA are a perfect example of such immigrants: They are educated, working for U.S. employers, speaking perfect English, and they are young. Still, contradicting the economic principles laid out to select legal immigrants, the current action on DACA pushes this group of foreign-born individuals — who meet the stated criteria — into illegality and potentially away from the United States, at an economic cost to the U.S. economy and all other U.S. workers.