Column: What are the benefits and costs of immigration?

Immigration of foreign born individuals moving to the U.S. has sparked serious debates about the pros and cons of the movement. Of particular concern has been the large number of immigrants who bypassed the established process of entering the country. Estimates of the number of "unauthorized immigrants" are as high as 14 million for the years 2021-2024. Since 2024, the number of unauthorized immigrants has fallen.

Potential positive impacts of immigration are an increase in the labor force, a reduction in labor shortages, more spending in the economy, and more taxes paid. Possible negative impacts are downward pressure on wage rates and increased costs for consumers, in particular for housing. These issues are most controversial for unauthorized immigrants.

As an economist, I prefer addressing disagreements with facts and analysis. Fortunately, a new study of the economic impacts of unauthorized immigration was recently released. In March, the Federal Reserve Bank of Dallas published a detailed study using data from 2021 to 2024 to estimate the impacts of unauthorized immigration in two key areas, the labor market and the housing market.

Before jumping into the results of the study, let me first explain what a Federal Reserve Branch Bank does. There are 12 Federal Reserve Branch Banks in the country, each with their own territory. North Carolina is part of the Richmond Federal Reserve Branch Bank. These banks do not set monetary policy applying to interest rates and the money supply. Those decisions are made by the central Federal Reserve Bank in Washington. Instead, the branch banks serve as regional offsets to the Federal Reserve Bank in Washington, which I will call the "Big Fed Bank." When the Big Fed Bank was created in the early 20th century, our country was greatly regionalized, with major differences and conflicts between the regions. Many businesses in the regions were worried the powerful Big Fed Bank in Washington would not consider regional interests, especially of smaller regions, when monetary policy was set. Hence, the 12 regional banks were created to make sure regional interests were communicated to the Big Fed Bank.

Like the Big Fed Bank, the regional banks engage in many tasks, including doing studies important to their constituents. With the Dallas bank being close to the southern border, it makes sense the Dallas Bank considered issues related to immigration would be important to its constituents.

The researchers at the Dallas Fed collected data for the period 2021-2025 on unauthorized immigration levels as well as on employment, wages, housing prices, and other important items, and then used standard statistical methods to connect relationships. Here's what the Dallas bank found.

Total employment rose directly with the increase in unauthorized immigrants. This means jobs were either created or open jobs were filled by the immigrants. There appears to have been no substitution of immigrants for existing workers.

At the same time, wages were not reduced. That is, the influx of unauthorized immigrants did not cause a lowering of wages for existing workers. The reason is likely because the immigrants took either new jobs or unfilled jobs and, therefore, did not compete with workers who were already employed. Also, another positive finding from the report is that the filling of new or vacant jobs resulted in an increase in public revenues. Lastly was a finding that public total social support payments from the government actually decreased.

A downside in the report is the finding for home prices and rents. Both were found to have increased during the surge in unauthorized immigration. There is logic in this finding for two reasons. First, at any point in time, the supply of residential units is limited. Hence when new households are added to the population, especially in large numbers, supply doesn't immediately increase. This means there will be more competition for the existing units and prices — both for homes and for rental units — will increase. Second, only if the number of new unauthorized immigrant households could be forecasted, as well as where the households would likely settle, could there be a possibility for contractors to build new housing units where they would be needed, thereby avoiding significant price increases.

The conclusion from this new research on the economic effects of unauthorized immigration is there can be numerous impacts, with some positive and others not as positive. But knowing and being able to anticipate these impacts will likely help the economy adapt. But, you decide.