CBO: Senate immigration bill means lower wages for millions of American for over a decade (S744, budget deficit)

The Congressional Budget Office recently released a report containing economic projections for the Senate amnesty bill S.744 (cbo . gov/publication/44346).

Much has been made of the report's claim that the amnesty bill would reduce the deficit by $20 billion per year over the next ten years and $70 billion per year in the ten years after that (both are small amounts relative to the deficits in recent years, such as 2013's projected deficit of $973 billion).

However, not unsurprisingly, not much has been made of how much damage the amnesty bill would have for millions of American workers: those in the top and bottom quintiles of the "skill distribution". The CBO estimates that under the Senate amnesty bill their wages would decline for over a decade.

In their report, CBO admits the following (bolding added):

CBO and JCT expect that new immigrants of working age would participate in the labor force at a higher rate, on average, than other people in that age range in the United States. Relative to CBO’s projections under current law, enacting the bill would increase the size of the labor force by about 6 million (about 3½ percent) in 2023 and by about 9 million (about 5 percent) in 2033, CBO and JCT estimate. Employment would increase as the labor force expanded, because the additional population would add to demand for goods and services and, in turn, to the demand for labor. However, temporary imbalances in the skills and occupations demanded and supplied in the labor market, as well as other factors, would cause the unemployment rate to be slightly higher for several years than projected under current law.

The increase in average wages for the entire labor force in 2025 and later years relative to average wages under current law would occur primarily because the bill would boost the productivity of labor and capital (as discussed below). However, not all workers would experience those effects equally. The legislation would particularly increase the number of workers with lower or higher skills but would have less effect on the number of workers with average skills. As a result, the wages of lower- and higher-skilled workers would tend to be pushed downward slightly (by less than 1/2 percent) relative to the wages of workers with average skills.

The increase in the average wage would not occur for a dozen years. As the labor supply initially increased under the legislation, less capital would be available for each worker to produce output, and thus workers’ output, on average, would be lower for a time. That decline would reduce average wages relative to those under current law. Over time, as capital investment increased and the amount of capital per worker returned approximately to what it would have been under current law - and productivity improved as well - average wages would be higher than under current law.

It's not entirely clear whether that "lost decade" would apply to most workers, or just to those in the top and bottom quintiles (see their "Appendix: Effects of the Legislation on Relative Wages"). However, millions of American workers would experience a lost decade of increased unemployment and decreased wages when they were working.

Want to do something about this? Go search Twitter right now for leading supporters of the Senate bill. Then, look up their supporters and point out to them the negative impacts the bill will have on American workers, with the goal of reducing support for those leading supporters of the Senate bill.