In October 2021, the Department of Homeland Security issued a notice of proposed rulemaking that would essentially codify President Barack Obama’s 2012 executive order allowing the children of immigrants who arrived in the country illegally to obtain legal status. That, in turn, would permit them to work and attend school here.

Obama’s order for Deferred Action for Childhood Arrivals (DACA) proved to be highly contentious. President Donald Trump moved to repeal it in 2018, prompting a lawsuit to stop the repeal. The Supreme Court ruled that the repeal itself was invalid but indicated that it could be possible for an administration to legally repeal DACA in the future. The Trump administration tried again to do so, but that effort ended in January 2021. The Biden administration now intends to make DACA’s future more secure.

In July of 2021, Texas Federal District Court Judge Andrew Hanen ruled that DACA must stop taking new entrants, in recognition of a 2018 lawsuit filed by the attorneys general of Texas and several other states. They argued that the 2012 rule caused the states irreparable harm because of the additional costs of providing this cohort health care, education, and law enforcement protection.

The plaintiffs’ argument was grounded on a false claim that DACA imposes costs on state or local governments or their residents. Over the last five years, we have published a series of research papers analyzing the economic effects of DACA on the U.S. economy. Our work finds that the program increases the education, employment, and wages of DACA recipients while also boosting tax revenue and economic output. What’s more, we not only find no evidence that DACA hurts low-wage American-citizen workers, but it appears to boost the wages and employment of this cohort.

Immigrants wanted / DACA opponents have argued that the rule in its current form hurts American-born workers by reducing their employment opportunities. This argument is wrong on two counts.

First, the opponents often assume that if DACA were ended, its beneficiaries would leave the United States. Because nearly all DACA-eligibles have spent most of their lives in the country, and many do not even speak the language of their native country, voluntary self-deportation is extremely unlikely. Instead of leaving the United States, these people would disappear into the shadows of the gray and black economy.

Equally unlikely is the prospect that these young immigrants would — or could — all be deported to their countries of origin. Logistically, this would be a massive undertaking for a government immigration system that is already stretched by the ongoing influx of refugees from Haiti and Central America. Politically, the likelihood of a massive deportation of DACAs is also extremely unlikely. Polls consistently show that 70%–85% of Americans support a right to residency for DACA-eligibles; any attempt to systematically deport these young people would be met by protests, resistance, and political repercussions.

From an economic perspective, it would make no sense whatsoever to deport hundreds of thousands of young workers, over half of whom have some post-secondary education and about one-fourth of whom have college degrees. The United States is currently facing a worker shortage, and demographic trends suggest that this will worsen over the coming decade.

The worker shortage is particularly severe in nursing, teaching, software development, physical and occupational therapy, and many similar occupations that require either a college degree or at least some modicum of post-secondary education. Terminating DACA would exacerbate these shortages even if it did not result in massive deportations because the immigrants’ legal status would keep them from filling these roles.

The data also suggest that DACA recipients — and foreign-born legal U.S. residents in general — are more amenable to relocating to pursue economic opportunities in another community. Given that geographic mobility for native-born Americans has declined since the 1950s, having a cohort with the ability and inclination to locate where jobs are plentiful helps to slow the increasing geographic stratification of jobs and career opportunities that has occurred in the 21st century.

Higher skills / Another problem with the argument that DACA hurts American-born workers and taxpayers is that it completely ignores DACA’s effect on educational incentives. An undocumented worker has relatively little incentive to pursue an education. If the only jobs open to that person consist of being a roofer, a prep cook, a waiter, a housekeeper, or a home aide, a high school diploma provides little to no advantages. In contrast, granting this cohort legal status opens up thousands of job possibilities. DACA, both by requiring a high school diploma (or equivalent) to qualify and by dramatically increasing the usefulness of and access to a post-secondary education, has incentivized millions of young immigrants to expand their job skills and increase their productivity.

In our most recent study, we estimate that DACA has increased the high school graduation rate among the eligible population by about 10.7% and increased the rates of post-secondary enrollment and college graduation in this cohort by 86%. Because of DACA’s requirements, the 1.3 million people currently under its protection, ranging in age from 14 to 39, all are either currently enrolled in school or have diplomas, and a substantial fraction — around one-fourth — have college degrees. Since 2012, DACA has allowed hundreds of thousands of immigrants to become doctors and nurses, teachers and accountants, machinists and welders, medical technicians and firefighters, business owners and chemical engineers.

Helping citizens / As a result, DACA has had two substantial positive effects on low-wage American-citizen workers. First, it has reduced the number of immigrant job competitors they face. A DACA recipient with, say, a nursing degree — filling a job slot in an occupation with chronic worker shortages — is no longer competing for an opening as a home health aide. A DACA recipient trained as a machinist — also filling a job slot with chronic worker shortages — is no longer driving an Uber. Thus, DACA has reduced the supply of unskilled workers, boosting the employment prospects of those who remain in this category — and their wages.

Secondly, DACA has increased the demand for low-wage workers. A DACA recipient employed as a teacher is more likely to dine at a local restaurant that employs lower-wage cooks and waiters. A DACA recipient who is an engineer is more likely to employ a home health aide to look after an aging parent. Economic research strongly supports the view that high-skill and low-skill jobs are complements, not substitutes: having more high-wage workers in a region increases the work opportunities for that region’s low-skill workers.

To fully appreciate the effects of DACA, it helps to consider what would happen if the program were to end. If we assume that this entire cohort would be deported en masse, the economies of Texas and the other states that filed the lawsuit would be worse off. Total economic output would be lower, worker shortages in a vast array of high-wage occupations would increase, demand for the services provided by low-wage workers would decline, and tax revenue would fall.

If, instead of leaving the country, we assume that DACA beneficiaries would remain and seek employment in the cash economy, then the states would also be worse off. The wages of low-income workers would fall, employment in skilled positions would decline, and tax revenues would also fall — while the government would still be providing essentially the same services to its population of legal and illegal workers that it does now. But in this scenario, the DACA recipients would contribute far fewer tax dollars to pay for it.

Thus, ending DACA would provide no benefits whatsoever to low-wage American-citizen workers. That should not be surprising; after all, eliminating DACA would, in effect, throw away the large amount of human capital that DACA recipients have amassed over the last decade. How does society benefit by trashing its capital investments and making itself less productive?

Instead of terminating DACA or merely looking to preserve it in its current form, policymakers should broaden its scope to include those who arrived as children between 2007 and 2017. Providing these young people with the same opportunity to make themselves more productive would contribute both to our nation’s economic output and our government’s fiscal balances through the increased tax revenues their greater productivity would generate.

Readings

  • “A New Estimate of the Cost of Reversing DACA,” by Logan Albright, Ike Brannon, and M. Kevin McGee. Cato Institute Working Paper no. 49, February 15, 2018.
  • “Estimating the Economic Impact of the 2021 Dream Act,” by Ike Brannon and M. Kevin McGee. SSRN Working Paper no. 3861371, June 8, 2021.
  • “Estimating the Economic Impacts of DACA,” by Ike Brannon and M. Kevin McGee. SSRN Working Paper no. 3420511, September 5, 2019.