Frequent and vigorous debates concerning immigration have thrust the DACA issue into the spotlight as one of the most contentious and relevant issues in the 21st century. We live in an increasingly transnational world, where border security and migration underscore critical national policies of most countries. Indeed, Western nations have experienced soaring immigration trends, and governments are left scrambling to respond with appropriate policies. However, arriving at a national consensus on what is an appropriate response to an influx of immigrants is extremely difficult. President Trump’s recent dismantling of the Deferred Action for Childhood Arrivals (DACA) program highlights one such decision. To yank the rug out from under Dreamers who have invested their lives and money in the US is not only egregiously cruel but will also damage the US economy by creating human capital holes that would otherwise be filled by Dreamers. This article seeks to show that this policy, or move to repeal policy, is based on a culture of fear rather than facts by examining the market and government failures surrounding the policy.

DACA Background

DACA emerged from a 2012 executive order signed by President Obama. The program allowed Dreamers, classified as undocumented immigrants arriving in the US, to embark on a path to citizenship. By registering with the government, the possibility that Dreamers would get ‘lost in the system’ is removed; further stipulations ensure participants would be educated and have the desire to work, further reducing the chance of free riders.  

Additionally, the 90% of Dreamers who worked also paid into social security, but cannot collect it; this provided considerable support to a government institution groaning under the pressure of an aging workforce. Benjamin Goggin at Digg highlights that by the time President Trump announced the repeal of DACA, there were some 800,000-program recipients contributing to the wealth and knowledge of US society, a simultaneously minuscule and consequential number.  

The Labor Market

So, what really happens to the labor market with an influx of immigrants? Popular opinion claims immigrants reduce available income and capital for everyone in the labor market by taking a share. However, the Committee on National Statistics proves that immigration has the opposite effect, where it actually increases capital return, “making capital more productive and increasing income to owners of capital”. Immigration also causes aggregate income to increase, in which some would lose their jobs but the net benefits would exceed the losses.

Having said that, an individual’s boost in income  “depends on the number of immigrants relative to natives, natives’ share of income, and the size of the wage effect of immigration” and on whether immigrants complement or substitute native’s jobs. Theoretically, in the US labor market “the influx of immigrants initially drives down wages but native incomes still rise in the aggregate due to the immigration surplus.”

Another common misconception about immigration is that migrants are mostly poor and have little to no savings, thus becoming a burden to the native society. However, data has shown the contrary is true, “Even if immigrants arrive without capital, domestic savings and investment will rise as a result of the higher return to capital”. In fact, when “the capital-labor ratio is restored, the adverse wage effect of immigration and the immigration surplus disappear. Immigrants who are who complements to native workers will cause a native wage increase as a result of increased productivity. However, the opposite is true as well- given immigrants are more likely to be substitutes for low-skilled labor jobs and the fact that most Dreamers do not fall into that category, this reasoning should not be the basis of repealing policy.

Market Failures

Markets are not flawless. In very few cases, markets left to their own devices do facilitate astonishingly efficient allocation of resources. Immigrants in the US, documented or otherwise, face systemic discrimination that permeates the labor market, leading to market failure in the form of non-price entry barrier.  This can be quite devastating because it reduces labor supply and negatively affects quality because the applicant pool is reduced, drives up labor costs, increases income inequality and restricts the labor market.

Letting Dreamers work in the US has economic benefits. As aforementioned, many immigrants, including Dreamers are educated and contribute to our social security system. By removing those people and closing our borders, the US takes a loss on growth in social security. This leads to intergenerational inequity, in which policies have damaging impacts spanning generations.

It is still unclear what trends will emerge from the US’ declining workforce but we do know that it is crucial to focus on “educational investments in youth, including the children of immigrants; and on the skill composition of future immigrants… Driving out young workers who will pay into the system for many decades is a way to make these problems worse.”

Government Failures

Not all government is good government. Governments often have a crucial role in the success of a market when intervening in times of failure. According to empirical data, and Paul Krugman at New York Times, Dreamers are “an exemplary segment of our population”, productive and committed to working hard and staying out of trouble, and for many that meant pursuing higher education as a way to improve their lives.”

The repeal cast a wide net that covered high-skilled workers and human capital, which the US will no longer be able to utilize, creating a social deadweight loss. What’s more is that the US government literally cannot afford to fully repeal DACA. The Brookings Institute declared DACA’s dismantling to come with “mind-boggling” price tag of nearly $10 million, which is 100% more than ICE’s annual budget of $5 million.

Importance of Framing in Policy

The strategic terms used to shape political discourse surrounding immigration debates within the US conjure a frightening social problem. Negative connotations of immigrants frame the repeal of DACA as policy that is protecting Americans from those who cause them harm. Illegal alien connotes a dichotomy of Us versus Them by emphasizing “both the unlawful activity and the fact that those arriving are different and foreign.”

The term undocumented worker highlights a different narrative, in which “immigrants have entered the country to work and merely lack the appropriate paperwork.” Attorney General, Jeff Sessions has encouraged this discourse in an effort to pass the DACA repeal by asserting the program has “denied jobs to hundreds of thousands of Americans by allowing those same jobs to go to illegal aliens.” The President himself is guilty of fueling an Us versus Them culture by stating his concern for “the millions of Americans victimized by this unfair system” in reference to DACA.

Government officials are rational humans and respond to incentives like everyone else, most often to gain political support, which often affects the outcome of a policy. In essence, the revocation of DACA was a political tactic born out of rent-seeking and nationalistic notions that immigration, and free trade by extension, should be curtailed.

Image Source: USA Today.