How Immigration Affects the US Economy

Immigrants are a core part of the US economy. They work, spend, pay taxes, have children and do most of the other things native-born Americans do that keep the economy growing.

But exactly how immigrants impact the economy is the subject of renewed scrutiny. Many economists and business leaders laud immigration for filling vacancies across the economy, but President-elect Donald Trump and many of his allies accuse immigrants of lowering wages and taking jobs from native-born Americans. By creating demand for more goods and services, thereby stimulating the economy, critics argue they also add to inflation.

On the campaign trail, Trump capitalized on an unprecedented wave of border crossings that peaked in 2022 and 2023 to stoke anti-immigrant animus. His pledge to crack down on illegal immigration and carry out the biggest deportation plan in US history — the specifics of which remain a mystery ahead of his inauguration on Jan. 20 — helped seal his return to the White House.

The role of immigrants in American life is one of the most fiercely contested issues of the Trump era. Here’s a no-nonsense guide to what the research says about their effects on the American economy.

Who are the immigrants in the US?

As of 2022, roughly one in four immigrants^[1] living in the US was born in Mexico, according to a Pew Research Center analysis of Census Bureau data. Other Latin Americans make up a big chunk of the immigrant population as well. China, India and the Philippines are also among the main origin countries.

For the US immigrant population, educational attainment closely tracks country of origin. About half of Mexican immigrants haven’t finished high school, and only one in ten has a bachelor’s degree. On the other hand, nearly three in four South Asian immigrants went to college, as well as half of those from Europe, the Middle East, North Africa and East Asia.

How many immigrants are working in the US?

The US government estimates there are currently more than 32 million immigrants in the workforce — roughly one in five workers. The foreign-born labor force has grown by nearly 4 million people since the start of the pandemic. Most of that growth came in 2022 and 2023 as a result of both an unprecedented number of people crossing the southern border and the government working through years of visa backlogs.

How many immigrants are in the US illegally?

From 2005 until 2022, the number of undocumented immigrants hovered around an estimated 11 million. An estimated 8 million of them were in the labor force, accounting for roughly one in four foreign-born workers.

Official government data that would offer clearer insights into the undocumented immigrant population since 2022 is not yet available. But border officials have logged more than 7 million encounters with foreigners trying to illegally cross the southern border in the past three years, a spike that suggests the number of undocumented immigrants in the US has increased significantly.

Before 2020, according to an analysis from the Congressional Budget Office, the number of unauthorized “foreign nationals” in the US typically increased by about 200,000 per year. But the CBO estimates that the surge that began in 2021 will increase the number of unauthorized immigrants in the US beyond those expected figures by 8.7 million by 2026.

The pace of the increase has likely slowed since a June 2024 executive order by President Joe Biden severely limited options for asylum. Since that change, border patrol encounters with migrants illegally crossing the southern border are down 55%.

Are immigrants really “taking” jobs from Americans?

While some in the anti-immigration camp – including Trump – argue those new workers are directly taking jobs from native-born Americans, the economy is not a zero-sum game. Foreign-born workers are more likely to work in sectors where demand for workers often outpaces the native-born supply.

Economists generally agree that, as a result, immigrants helped soften the blow of unprecedented labor shortages during the pandemic recovery. Federal Reserve officials have continuously cited immigration as a key contributor to an overall rise in the number of available workers, with Chair Jerome Powell going as far as saying part of the reason why the economy has often beat expectations is because the US has been “getting that supply.”

In addition, immigrants create demand for goods and services, oftentimes indirectly generating jobs.

Does more immigration mean lower wages?

The impact foreigners have on Americans’ wages has long been the million-dollar immigration question among economists.

Some researchers argue that the recent influx could undercut wages and worsen working conditions in some industries, with the CBO warning in 2024 that more migrants mean pay will rise more slowly in the next decade, in part reflecting the increase in the number of lower-skilled workers.

When measured over a period of 10 years or more, however, the impact of immigration on the wages of native-born workers is overall “very small,” according to a comprehensive study by the National Academies of Sciences, Engineering, and Medicine^[2].

How do high-skilled immigrants affect the economy?

The US has long acted as a magnet for some of the world’s brightest minds.

There were more than 14 million college-educated immigrants in the US as of 2022, according to the Migration Policy Institute. These workers tend to be concentrated in white-collar hubs such as California and New York, where they make up about 30% of the total college-educated workforce, and are often overrepresented in computer-based and mathematical occupations. On top of that, there are about 1 million international students in the US.

Immigrants have been key to US innovation. Despite them making up only 16% of the country’s inventors, immigrants have been responsible for more than a third of the new patents registered in the US in the past three decades, according to National Bureau of Economic Research economists. Their contributions are especially evident in the technology, medical and chemical industries, the study found.

Highly skilled immigrants have also become a controversial topic among conservatives, despite their importance to the tech industry and other key sectors such as finance, consulting and biomedicine. In December, several of Trump’s most prominent hardline anti-immigrant supporters criticized the President-elect for naming Sriram Krishnan, an Indian-born investor who supports the expansion of employment-based green cards, as a senior policy adviser on artificial intelligence. In response, many of Trump’s Silicon Valley backers, including Elon Musk, defended the H-1B program, the visa category that companies rely on to hire highly skilled foreign workers.

Where are immigrants settling?

In California, Texas, Florida and New York, immigrants account for about one in five residents. Within those states, they tend to favor big cities. Immigrants make up more than half of Miami’s population and about 38% of New York City’s population.

A 2024 Bloomberg News analysis of immigration court data found that the 1.8 million asylum seekers and refugees who landed in the US in 2023 overwhelmingly chose to settle in Democratic-leaning counties. Much like in previous generations, migrants seem to be favoring places with growing local economies, bolstering the labor force in places that are already thriving. In states with an approximately even split of Democratic and Republican voters, 85% of migrants settled in places where the economy grew from 2019 to 2022, according to the analysis.

How costly are migrants to government budgets?

Researchers have generally found that increases in immigration tend to raise the federal government’s revenues more than its costs. But because state and local governments tend to be responsible for basic services, a surge in immigration often raises their spending more than their revenues.

A 2024 CBO report found that the revenue local governments raised from newly arrived immigrants paying state income and property taxes is typically less than the education and health-care costs incurred.

New York City has become a poster child for that burden. According to city officials, more than 200,000 migrants have arrived in New York since 2022, straining public services and leading Democratic Mayor Eric Adams to declare an emergency and petition the federal government for aid., In 2023, the city began paying for migrants to leave, and Adams has offered to work with the incoming Trump administration on pursuing immigrants who’ve committed violent crimes. Other Democratic-led cities such as Chicago and Denver have also struggled financially to cope with the influx of migrants.

Speaking of costs, does immigration cause inflation?

More immigrants means more demand for necessities such as food, clothing and housing. But because many newcomers take lower-skilled jobs that don’t allow for the accumulation of wealth, their consumption is limited.

Researchers at the Dallas Fed found that the recent immigration wave has had “very little effect” on inflation. The CBO, for its part, projects that price growth will be “almost unchanged” in the next decade from where it would have been had the immigration surge not happened.

What’s the impact on the housing market?

Republicans have argued the recent immigration surge worsened the cost-of-living crisis, with Vice President-elect JD Vance going as far as claiming undocumented immigrants are to blame for a “totally unaffordable” housing market.

There is, in fact, some research that supports the idea that a surge in immigration could translate into higher housing costs. While CBO economists see the surge having little overall impact on inflation in the next decade, they say the “greatest upward pressure” will come from higher housing demand.

On the other hand, immigrants often help ease housing shortages as many of them take jobs in the construction sector. According to the Bureau of Labor Statistics, one in four construction workers nationwide was born outside the US. In some of the country’s largest housing markets, immigrants comprise an even higher share of the labor force. Foreign-born workers hold 53% of all construction jobs in New York City according to state data, and unauthorized immigrants have traditionally comprised about half of the construction workforce in Texas.

What happens if Trump follows through with his mass deportation plan?

Economists see Trump’s plan as costly both in the short and long term. Trump has offered few specifics about his proposal, but deporting 11 million unauthorized immigrants – the estimated total in the US as of 2022 – would cost more than $150 billion, with an additional $15 billion per year needed to maintain border security, according to the pro-immigration think tank National Immigration Forum.

Analysis by the Peterson Institute of International Economics found that expelling the country’s estimated 8.3 million unauthorized immigrant workers (as of 2022) would mean that, at best, the US would see no economic growth through Trump’s second term. Bloomberg Economics sees a mass deportation campaign having an outsize impact in Texas, Florida and California, leaving sizable gaps in the construction and leisure and hospitality sectors.

“It’s unclear to what extent Trump will succeed in implementing his immigration policies — but the primary economic impact of any policy that reduces the population will be a lower GDP,” wrote Bloomberg Economics’ Chris Collins.

Does the deportation plan have any historical precedent?

While Trump has vowed to carry out the biggest deportation campaign in the history of the US, he wouldn’t be the first to enact a mass deportation policy. In the aftermath of the Great Depression, President Herbert Hoover began a “repatriation” campaign to deport Mexicans – including Mexican-born American citizens. Under this program, about 1.8 million Mexicans and Mexican Americans were deported during the 1930s. Other deportation initiatives were carried out under Presidents Harry Truman and Dwight Eisenhower.

More recently, Democratic President Barack Obama faced criticism from immigration rights groups – some of which dubbed him “deporter-in-chief” – for his own track record. US immigration authorities deported more people during each of Obama’s two terms in office than they did in Trump’s first term.

What do businesses want?

The business world is weary of America’s divisive and chaotic immigration status quo. Both executives and economists routinely call for comprehensive federal immigration reform — often seen as a long-shot, but which they say is necessary to match the needs of the modern economy.

Their biggest complaint is with the antiquated quota system for awarding employment-based visas, which they say is too limited and too slow. US-based companies registered some 480,000 white-collar employees for the 2025 fiscal year H-1B visa lottery last year, but fewer than a third were selected. In addition to reforming the program, some industry groups advocate creating a path towards legal status for undocumented workers already in the US.