President announces immigration reforms - A three year promise to not deport and a three year work permit.

From [HERE] US President Barrack Obama on Thursday announced execution action [remarks] on immigration that would allow 4.7 million undocumented immigrants to stay in the US. The reform allows immigrants that have been in the US for more than five years or have children who are citizens to register and pass a criminal background check in order to stay in the country. The reform also requires that immigrants to pay their fair share in taxes. The immigrants will also not be allowed to vote nor will they qualify for certain federal benefits, such as health care coverage. Obama also stated that he would add additional resources at the border in order to stem the crossing of immigrants and return those that have crossed. The president also stated the reform would make it easier for highly skilled graduates and entrepreneurs to stay in the US and contribute.  [MORE]

Estimates vary, but this will probably affect around 4 to 5 million undocumented immigrants. The effect this will have on labor markets is complicated slightly by the fact that it’s not really a full amnesty. Instead it’s really a three year promise to not deport, and a three year work permit. If the next administration decides to not allow renewals or if someone doesn’t apply for one, they can be deported in the future. So the existing literature on legalization may not apply here, or the effects may be mitigated. Will this reduce the wage impact? It’s hard to say.

Another way this could affect labor markets is by increasing labor supply if more immigrants get jobs. This won’t affect native wages much because the evidence shows low-skilled immigration doesn’t really impact native employment much to begin with. But more importantly, illegal immigrants already have jobs. In fact, according to Pew their labor force participation is significantly higher than the native participation rate. Of the 11.2 million illegal immigrants in the U.S., they estimate 8.1 million are in the labor force, a participation rate of 72.3%. In contrast, the overall U.S. participation rate is 62.8% right now. So maybe they will work more, but they already work a lot. [MORE]