What Obama immigration plan means for US economy

Obama's new immigration orders could boost labor income by $6.8 billion, helping to generate 160,000 new jobs and $2.5 billion in additional tax revenues, say economists. But immigration reform by Congress would do more. 

President Barack Obama's expansive executive action on immigration is good for the U.S. economy — just not as good as partnering with Congress on broader reforms.

Announced Thursday, the executive order would prevent the deportation of about 4 million parents and guardians who lack the same legal status as their children. By gaining work permits, they will likely command higher wages, move more easily between jobs and boost government tax revenues, according to multiple economic analyses.

"This is focused on people who are already in the economy today, who are contributing mightily but are basically operating in the shadows," said Raul Hinojosa-Ojeda, a professor at the University of California, Los Angeles. "Their economic potential is being held back."

The new order could boost labor income by $6.8 billion, helping to generate 160,000 new jobs and $2.5 billion in additional tax revenues, according to estimates by Hinojosa-Ojeda. The findings dovetail with separate research showing that a 1986 amnesty measure raised incomes for illegal workers in the years that followed.

Still, any gains from the executive action would be modest in the $17 trillion U.S. economy.

White House officials estimate that the executive order would expand gross domestic product less than 0.1 percent a year over the next decades.

Along with the Congressional Budget Office, independent economists say growth would be much stronger with a broader overhaul that would more than double the number of illegal workers eligible for legalized status, in addition to reforms that would attract high-skilled immigrant workers who are more likely to lead and found new companies.

The Senate passed a measure last year to fix the immigration system, but it stalled in the Republican-majority House that favored a step-by-step approach. The CBO estimated the Senate-backed reform would have added another 0.33 percent annually to GDP growth.

The president's order "falls short of a comprehensive reform that would have a more sweeping effect on the economic landscape," said Joel Prakken of the forecasting firm Macroeconomic Advisers.

More substantial reforms could lift economic growth by an additional 0.24 percent a year — or about $41 billion — for the next two decades, according to an analysis that Prakken contributed to last year for the Bipartisan Policy Center. The reforms could also cut the federal debt by $1.2 trillion over the same period, increase home construction, lift wages and add 8.3 million workers to the economy.

A broader overhaul would also create a framework for attracting more immigrants, which would mute the negative economic impacts of an aging population. As more Americans retire, the percentage of the population with jobs has slipped, limiting the ability of the economy to expand.

But the executive order would do little to promote additional immigration, nor would it fully address the concerns of technology companies looking for high-skilled foreigners.

Obama's plan does not raise the current annual limit of 65,000 so-called "H-1B" visas for skilled workers, although he promised to streamline some of the rules governing them. Scientists, engineers and computer programmers all earn higher wages than the comparatively low-paid workers who would be helped by Obama.

Silicon Valley entrepreneur Mike Galarza knows the issue first hand. A native of Mexico, he described a daunting bureaucratic obstacle course to obtain a visa that allowed him to launch Entryless, an online business accounting startup, last year in Menlo Park, California. Now he's struggling to find talent. Galaraza said he recently lost a job candidate with a Ph.D. in computer science because there were no more H-1B visas available.

"The U.S. is not welcoming enough to entrepreneurs who want to create value for the American economy," Galarza said. "I'm glad if (Obama) is able to help those 5 million people, but he needs to focus on the issue of tech workers and foreign entrepreneurs, as well."

Groups such as the Center for Immigration Studies have critiqued the benefits of adding immigrants, noting that many U.S. citizens are still searching for work more than five years after the Great Recession ended. By giving these workers legal status, it will inevitably help their earnings prospects but do little for the rest of the economy, said Steven Camarota, the organization's research director.

But the business community disagrees, saying they need immigrants in order to expand their operations.

In response to Obama's executive action, Buffalo Wings & Rings estimates it would be able to add five restaurants to its more than 45 franchised outlets.

"For us, it's an opportunity," said Philip Schram, executive vice president of development at the Cincinnati-based chain.

A 2013 survey by the advocacy group Small Business Majority showed 84 percent of small business owners are in favor of immigration reform. Owners believe it will help them have a more stable workforce, especially in industries like agriculture, hotels and restaurants, said the group's CEO, John Arensmeyer.

The obstacle has been that jobs in agriculture don't appeal to people born in the United States, so Jim Gilbert, owner of Northwoods Nursery in Molalla, Oregon, hires immigrants to tend to the plants he grows and sells.

"There are not enough people to do the jobs we need to do," Gilbert said.

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AP Business Writers Brandon Bailey and Joyce Rosenberg contributed to this report.

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