Yesterday, the Congressional Budget Office released a report forecasting that immigration reform would cut federal budget deficits by $900 billion over 20 years.
Less-noticed is another report they released, showing how immigration would affect the broader economy.
The effects are good.
CBO expects that more immigration would raise productivity, increasing both wages and returns to capital and making the country not just bigger but richer. But it would take some time for those improvements to flow through to most workers.
It's not just a stereotype: Immigrants really do drive innovation. They're twice as likely as native-born Americans to win Nobel Prizes, found companies that go public, and apply for patents.
Innovation raises productivity, and productivity raises wages. By 2033, immigration reform would add 0.5% to the average worker's wage. Most of that gain would go to moderately-skilled workers, who would get a 1% wage boost.
But it will take time to get there. At first, the labor supply will grow faster than the capital stock, depressing wages and raising returns to capital. As Americans save and invest in response to higher capital returns, demand for labor will strengthen and wages will rise.
See the rest of the story at Business Insider