The number of immigrants entering the United States legally is greater today than it was at the turn of the century. In fact, after peaking in the early 1900s and registering little activity since, legal immigration has recently surpassed those earlier record levels.1 The current rate of U.S. immigration—the level of immigration adjusted for population—however, is much lower today than it was a century ago. Between 1900 and 1910, about 11 immigrants per thousand residents entered the United States legally. The current rate is about five per thousand, but rising.

Despite the decline in the immigration rate, many Americans still believe that immigration hurts U.S. workers and the economy. Immigrants are perceived as taking jobs away from native-born Americans and filling the rolls for public assistance without paying their share of taxes to replenish the kitty. Nothing could be further from the truth.

A recent report prepared by a panel of economists and sociologists, and published by the National Research Council (NRC), shows that immigrants not only diversify the American economy, but also contribute to economic growth.2 And it is because they are different from natives that the economy as a whole profits. In many instances, immigrants both cause prices to fall, which benefits all consumers, and enable the economy to domestically produce a wider variety of goods than natives alone could.3 If immigrants weren’t different from natives, they would only augment the population and the scale of the economy, but not have an effect on the overall growth rate of per capita income.

As the NRC report shows, the overall effect immigration has on gross domestic product is between $1 billion and $10 billion a year. While these amounts may seem negligible in an $8 trillion economy (about one-eighth of 1 percent at most), they are still a gain—and not the drain many believe immigration to be.

How Should Immigration Affect the Economy?

Immigrants increase the supply of labor in the economy. In the most basic labor market scenario, where all workers are producing only one good, this increase—when nothing else changes—will result in a lower market wage for all workers if all workers are the same. But all workers are not the same. Some natives will compete with immigrants for positions because they possess similar skills; others will work alongside immigrants, complementing the immigrants’ skills with their own. This skill distinction means that not all native workers will receive a lower wage. Those who compete with—are substitutes for—immigrants will receive a lower wage than they would without immigration, while those who complement immigrants will receive a higher wage.

As explained below, immigration produces net economic gains for all native-born workers, even though one group—which most economists believe to be unskilled domestic workers—experiences a monetary loss (that is, a lower wage). Unskilled domestic workers benefit from the added diversity of goods that immigrants enable the economy to produce. Skilled domestic workers, who are believed to complement immigrant labor, benefit from a higher wage, as well as the added diversity of goods. If the wages of these two groups of native workers did not change in response to immigration, there would be no domestic economic gain for them because the value of the immigrants’ production would return directly to the immigrants.