The Economic Consequences of Amnesty for Unauthorized Immigrants

22 Pages Posted: 6 Apr 2013

See all articles by Pia M. Orrenius

Pia M. Orrenius

Federal Reserve Banks - Federal Reserve Bank of Dallas

Madeline Zavodny

University of North Florida; IZA Institute of Labor Economics; Agnes Scott College

Date Written: January 1, 2012


Immigration policy reform has reached an impasse because of disagreement over whether to create a pathway to legal permanent residence and eventual U.S. citizenship for unauthorized immigrants. The United States first — and last — offered a large-scale amnesty as part of the Immigration Reform and Control Act (IRCA) in 1986. Despite increased border enforcement and provisions for employer sanctions, the law failed to curtail unauthorized immigration. The 9/11 terror attacks renewed the emphasis on national security and led to stricter policies regarding undocumented immigrants. Over the past decade, border and interior enforcement has increased, while avenues that allowed some illegal residents to adjust to legal status have been eliminated, and a growing number of states have adopted laws aimed at driving out unauthorized immigrants.

In the 25 years since IRCA, the unauthorized immigrant population swelled to 11 million (Hoefer, Rytina, and Baker 2011; Passel and Cohn 2011). This 2010 estimate is slightly below the peak of about 12 million in 2007, before the onset of the Great Recession, but more than four times the number of people who legalized their status under the 1986 amnesty. The net inflow of unauthorized immigrants currently appears to be near zero, but this may be more due to the relatively weak economy in the United States than to stricter policies (Cave 2011). Whether to offer a legalization program to unauthorized immigrants is ultimately a moral and political decision, but policymakers should also consider the economic implications of an amnesty. Legalization has economic benefits, most of which accrue to the people who adjust their status and their families. Tax revenues are likely to increase, an important consideration in an era of large deficits. There are costs as well: an amnesty entails losing the benefits of having a relatively cheap, flexible workforce; there may be a negative labor market impact on competing workers; and government transfers to the legalized population may rise. More importantly, policymakers need to think carefully about the implications of a legalization program for future illegal and legal immigration. The U.S. experience after IRCA indicates that an amnesty not accompanied by a well-designed, comprehensive overhaul of legal immigration policy can lead to increased legal and illegal flows and political backlashes.

Keywords: Obama immigration reform, Dream Act, illegal immigration to the united states, American immigration policy, low-skilled immigrant workforce, immigrant labor force, economic impact of immigration

JEL Classification: J15, J61, K37

Suggested Citation

Orrenius, Pia M. and Zavodny, Madeline, The Economic Consequences of Amnesty for Unauthorized Immigrants (January 1, 2012). Cato Journal, Vol. 32, No. 1, 2012, Available at SSRN:

Pia M. Orrenius (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5747 (Phone)
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Madeline Zavodny

University of North Florida ( email )

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Jacksonville, FL 32224-2645
United States

IZA Institute of Labor Economics

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Agnes Scott College ( email )

United States

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