The Lookout

How will Obama’s deferred action plan affect the economy?

Liz Goodwin
The Lookout

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Young people protest the planned deportation of a young Florida resident. (Joe Raedle/Getty Images)

As many as 1.76 million young people could benefit from the Obama administration's deferred action program, which gives illegal immigrants who were brought to the country as children relief from deportation and a temporary work permit. But what will the influx of new legal workers mean for the U.S. economy and government coffers?

Starting next Wednesday, the deferred action program lets people aged 30 or younger who were brought to the country when they were children apply for a two-year work permit and temporary legal status. (Applicants can't apply for permanent legal status or citizenship.) The Migration Policy Institute (MPI) estimates that about 620,000 adults ages 18 to 30 would meet the requirements--the rest of the 1.76 million illegal immigrants who qualify are under 18. Eighty thousand of the potential applicants have a bachelor's or associate degree already, and another 140,000 are currently enrolled in college.

While no formal estimates of the economic impact yet exist, Jeanne Batalova, who studies the program as part of her work at MPI, believes the net effect will be positive. The program most likely will result in increased tax revenues because authorized workers are less apt to be paid under the table. These new, legal workers will thus be more prone to pay into Social Security and Medicare, programs they will probably never have access to unless Congress passes an immigration reform bill.

"When people work legally, it creates better opportunities for everyone because it reduces the likelihood that employers will be turning to undocumented workers," Batalova said.

The lure of a work permit may also encourage more immigrants to stay in school and get their high school diploma, which would also mean higher future wages (and thus, higher tax revenues) than if they dropped out. And for the 220,000 young illegal immigrants who already have an associate or bachelor's degree or are on their way to one, the work permit will probably help them get a better, higher-paying job that's more aligned with their skill level.

Overall, Batalova expects that the new permits would have little effect on people who are already legally working, mostly because the number of permits is small compared to the total workforce, and because 60 percent of the eligible illegal immigrant adults are already working.

"While there might be some negative impact on individual people ... we don't expect to see a drastic impact on a certain group or in a certain geographic location," she said.

But not everyone agrees with this assessment. Steve Camarota of the Center for Immigration Studies tells Yahoo News that because the majority of those eligible for the work permits do not have a college degree he expects their legal status will have little impact on tax revenue. The reason: Lesser-educated workers tend to have lower incomes on average. "By legalizing them you might get more money for Social Security, but [you] might pay more out in [low-income tax credits]," he said.

The work permits will make it harder for American citizens who don't have a college degree--a group that already faces a high unemployment rate--to compete for jobs, says Camarota. The Center for Immigration Studies advocates for reduced legal immigration levels and encouraging illegal immigrants to leave the country through more aggressive enforcement of existing laws.

The administrative costs of the program are less clear. The Department of Homeland Security could need to hire as many as 1,400 new staff to handle the volume of applications, according to the Associated Press, but administration officials told reporters last week that they expect the $465 application fee to cover the costs.

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