How The Immigration Surge Boosted The Economy

President Donald Trump’s crackdown on the border is stifling a surge of immigration that gave an $8.9 trillion boost to the economy, according to one recent analysis.

Less than a month into the second Trump administration, the new president’s hardline immigration policy is already affecting the economy, though its scope is not yet clear. On his first day in office, Trump ordered roundups of immigrants lacking permanent legal status, declared a state of emergency, and sent military troops to the border.

Businesses that rely on immigrant labor are already feeling the effects, Federal Reserve Chair Jerome Powell noted at a press conference last month.

“Businesses that are dependent on immigrant labor are saying that it’s suddenly gotten harder to get people,” Powell said. “You don’t see that in the aggregate data yet, but yes, you hear it anecdotally.”

Hospitality, agriculture, and construction are among the industries that employ large numbers of immigrants and could experience the most severe effects from deportations and immigration reductions.

How Has Immigration Affected the Workforce?

The data on the crackdown may not yet be available, but there is plenty of information about the effects of the immigration surge that preceded it.

A surge of immigration in the wake of the pandemic raised the population, boosted economic growth, and reduced federal budget deficits as immigrant workers paid more in taxes than they received in services, according to a July analysis by the Congressional Budget Office.

The CBO estimated that between 2021 and 2026, 8.7 million more people would have arrived in the country than if immigration had stayed steady at the pre-pandemic rate of around 200,000 people per year. The new arrivals included people entering the country legally, people entering illegally, and people who received visas to enter the country but stayed after they expired.

By 2034, the immigration surge will have added $8.9 trillion to the nation’s total economic output, the CBO estimated. After taking economic growth into account, the migrants are expected to have had a positive effect on the federal budget, lowering deficits by $900 billion over that time period.

The analysis did not account for the effects on state and local budgets but noted that local governments typically have to spend more on education, health care, and other services for new immigrants than they receive in new tax revenues.

The new workers often took jobs that employers were having difficulty filling in the wake of the pandemic, according to an analysis by researchers at the Federal Reserve Bank of Kansas City.

The effects weren’t all positive, from the point of view of workers in the affected industries: wage growth slowed down in sectors that employed large numbers of immigrants, the analysis found.