Personal Finance

Are immigrants taking jobs from U.S. workers? Here’s what economists say

Published

3 weeks ago

September 28, 2024

The first debate between Vice President Kamala Harris and former President Donald Trump is shown on television at the Juventud 2000 migrant shelter in Tijuana, Mexico, on Sept. 10, 2024. Immigration has been a hot topic throughout the presidential campaign.

Carlos Moreno/NurPhoto via Getty Images

The idea that immigration has a negative impact on the U.S. job market is a common theme of former President Donald Trump’s speeches on the presidential campaign trail.

“They’re taking your jobs,” the Republican nominee told supporters on Sept. 21 in Wilmington, North Carolina.

Immigration is also a top issue for Republican voters: 82% of Trump supporters say immigration is “very important” to their vote in the 2024 presidential election, second only to the economy, according to the Pew Research Center. It’s the lowest-priority issue for Democrats, Pew found. Pew polled 9,720 U.S. adults from Aug. 26 through Sept. 2.

However, evidence suggests immigrants help the overall economy. And, at a high level, they aren’t taking jobs from or reducing the wages of U.S.-born (or so-called native) workers, according to economists who study the impact of immigration on the labor market.

“Overall, the consensus is very strong that there are not significant costs to U.S.-born workers from immigration, at least the type of immigration we have historically had in the U.S.,” said Alexander Arnon, director of business tax and economic analysis at the Penn Wharton Budget Model.

Immigrants expected to boost the economy

There are several reasons why immigrants largely benefit the economy and job market, economists said.

For one, the job market isn’t static.

Immigrants take jobs but they also create new ones by spending in local economies and by starting businesses, economists said. One 2020 research paper from the National Bureau of Economic Research found immigrants are 80% more likely to become entrepreneurs than native workers.

A recent “surge” of immigrants to the U.S. is expected to add $8.9 trillion (or 3.2%) to the nation’s GDP over the next decade, according to the Congressional Budget Office, a nonpartisan scorekeeper for Congress.

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“That’s enormous,” said Michael Clemens, a professor at George Mason University and an economist whose research examines the economic causes and effects of migration. “That creates jobs, that raises pay, that is an increase in the size and complexity of the U.S. economy.”

Immigrants also aren’t perfect substitutes for U.S. citizens in many job positions; in fact, the two groups often complement each other rather than compete, economists said.

However, some economic research suggests immigration can impact the wages of certain subgroups of U.S.-born workers, especially those with lower levels of educational attainment.

Overall, the consensus is very strong that there are not significant costs to U.S.-born workers from immigration.

Alexander Arnon

director of business tax and economic analysis at the Penn Wharton Budget Model

Some economists contend an influx of immigrants can reduce wages for such Americans in the short term, though other researchers have found that Americans ultimately benefit, partly because those in direct competition with immigrants are able to find higher-paying jobs.

“Not everybody agrees about it,” Clemens said.

A big supply of new labor due to immigration can be “difficult and anxiety-inducing” for American workers who must adjust, he added.

“But people end up in better circumstances,” he said.

Immigration helped cool ‘overheated’ job market

The El Chaparral pedestrian border crossing at the San Ysidro Port of Entry in Tijuana, Mexico, on Jan. 4, 2024.

Carlos Moreno/Bloomberg via Getty Images

Immigrants accounted for about 14% of the U.S. population in 2022, according to Pew, citing most recently available federal data.

Most are in the U.S. legally: Undocumented immigrants represented 3.3% of the total U.S. population and 23% of immigrants in 2022, Pew said. Their number has increased in recent years, to 11 million, but remains below its 2007 peak of more than 12 million.

The number of immigrants coming to the U.S. has “increased sharply in recent years,” the CBO wrote in July.

Net immigration is expected to be 8.7 million people higher from 2021 to 2026 than would have been extrapolated from pre-Covid migration trends, the CBO said. (Its analysis excludes those with green cards.)

The influx has been beneficial for the pandemic-era economy, economists said.

It “helped cool an overheated labor market” over the past two years, Elior Cohen, an economist at the Federal Reserve Bank of Kansas City, wrote in May.

Demand for workers hit historic highs as the U.S. economy started to reopen in 2021. Wages rose sharply — at their fastest pace in decades — as businesses competed for workers, putting upward pressure on high inflation.

Immigrant labor alleviated “severe staffing shortages,” especially in industries like leisure and hospitality, helping dilute those inflationary wage pressures, Cohen wrote.

In this sense, immigrants weren’t competing with U.S. citizens for jobs but instead taking a surplus of available jobs, said Giovanni Peri, an economics professor and director of the Global Migration Center at the University of California, Davis.

In fact, a long-term net decline in the number of non-college-educated immigrants to the U.S. from 2010 to 2021 likely contributed to those recent labor shortages, he said.

“If there is a time when low-skilled immigration isn’t competing with natives and helping fill shortages, it’s been the last two years,” Peri said.

‘Little evidence’ of employment impact

Even before the Covid-19 pandemic, economists from varying sides of the debate published a “consensus” viewpoint in 2017 on the job market effect of immigration, Clemens said.

The panel of economists found “little evidence that immigration significantly affects” overall employment levels among Americans, they wrote for the National Academies of Sciences, Engineering, and Medicine.

“I’d say the consensus has gotten [even] stronger” since then, said Arnon of the Penn Wharton Budget Model, who authored a separate 2016 analysis of existing research on immigration’s economic impact.

To the extent there’s job competition from new immigrants, it tends to fall mostly on prior immigrants rather than native U.S. workers, according to the National Academies paper.

Prior immigrants are most likely to experience “negative wage effects,” it said.

However, native-born high school dropouts may experience that effect, as well, since they “share job qualifications similar to the large share of low-skilled [immigrant] workers,” the National Academies paper said.

Immigrants without a high school degree account for the largest share of foreign-born workers, followed by those with graduate or professional degrees, according to the Penn Wharton analysis.

A heated debate on low-skilled workers

A boat arrives in Key West, Florida with Cuban refugees in April 1980 from Mariel Harbor after crossing the Florida Straits.

Tim Chapman | Miami Herald | Getty Images

One influential — and controversial — paper by Harvard economist George Borjas echoes that finding about high school dropouts.

Borjas — who was among the more than three dozen economists who authored the National Academies consensus paper — studied the Mariel boatlift, a mass emigration of 125,000 Cuban refugees to South Florida from April to October 1980.

At least 60% of these “Marielitos” were high school dropouts, he said. Borjas found that the large boost in labor supply caused the wages of high school dropouts in Miami to drop “dramatically,” by 10% to 30%.

Stephen Miller, a senior policy adviser during the Trump administration, cited the paper in 2017 as a justification for a new proposal to curtail legal immigration, particularly among lower-skilled workers.

Asked to comment on Trump’s campaign statements about immigration and jobs, Anna Kelly, a spokeswoman for the Republican National Committee, said in an emailed statement that the former president “has never wavered in his promise to put America First, including workers born in the USA and incentivizing companies to keep jobs at home.”

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Borjas’ finding was in contrast with earlier work by economist and Nobel laureate David Card, who had found the Mariel boatlift didn’t increase unemployment or negatively affect wages of “less-skilled” non-Cuban or Cuban workers.

Some economists, including Clemens, dispute Borjas’ findings. Borjas didn’t return a request for comment.

“Sudden surges of immigration obviously affect the ability of native workers to find and take jobs on a given afternoon,” Clemens said.

But immigrants “also create jobs,” Clemens said. “A large preponderance of evidence is the job creation effect overwhelms the competition effect, even in the short term.”

Effect may depend on the economic environment

Migrant workers pick strawberries during harvest south of San Francisco.

Joe Sohm/Visions Of America | Universal Images Group | Getty Images

Native U.S. workers and immigrants, even those with similar educational backgrounds, tend to complement each other via their skills, making each other more productive and in essence jointly creating each other’s jobs, Clemens said.

For example, in a restaurant, a native worker with better command of spoken English might be a waiter, while an immigrant might do kitchen-prep work or wash dishes, tasks that don’t require such language dexterity. On farms, native workers might be supervisors or run high-tech equipment while immigrants handpick crops, Clemens said.

Research by Peri and Alessandro Caiumi of the University of California, Davis, finds that factors like “occupational upgrading” generally lead native workers who initially compete with immigrants for jobs to earn higher wages in the future.

For example, from 2000 to 2019, such factors helped boost wages for less-educated native workers by a “significant” 1.7% to 2.6%, and there was also “no significant wage effect on college educated natives,” Peri and Caiumi wrote. Similarly, from 2019 to 2022, estimates suggest “small positive effects” on wages.

Ultimately, “what might have happened in Florida during the Mariel boatlift in the 1980s may be different than what happens in Arizona in the 2010s,” said Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank.

“From a policy perspective, you have to figure out which of the studies are most relevant to the current economic environment you’re considering,” Strain said.

Personal Finance

Buying a home? Here are key steps to consider from top-ranked advisors

Published

14 hours ago

October 15, 2024

Business Finance News

Buying a home is often the biggest financial decision you’ll ever make.

It’s not just about choosing a place to live; it’s about making a long-term investment that will impact your financial future for years to come.

Therefore, if you are looking to buy a home, there are certain steps you should take to prepare for the purchase, according to several advisors ranked in CNBC’s 2024 Financial Advisor 100 List.

“Number one is doing that initial homework and financial planning,” said Brian Brady, vice president at Obermeyer Wood Investment Counsel in Aspen, Colorado. The firm ranks No. 23 on the 2024 CNBC FA 100 list.

Most important, it has to be a “smart financial decision” that makes the most sense for you, explained Stephen Cohn, co-founder and co-president of Sage Financial Group in West Conshohocken, Pennsylvania. The firm ranks No. 61 on the 2024 CNBC FA 100 list.

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“I run into a lot of first-time homebuyers, friends, kids, acquaintances. They fall in love with the house, and it may not make sense for them financially,” said Ron Brock, managing director and chief financial officer at Sheaff Brock Investment Advisors in Indianapolis, Indiana. The firm ranks No. 7 on the 2024 CNBC FA 100 list.

He tells them: “Just be smart. Don’t be house poor.”

Here are some key steps to consider if you plan to buy a home:

1. Have a strong credit score

Make sure you have strong credit, said Shaun Williams, private wealth advisor and partner at Paragon Capital Management in Denver, Colorado. The firm ranks No. 38 on the 2024 CNBC FA 100 list.

“The higher the credit score, the better the terms you’re going to get on the loan, and the lower the interest rate will be,” said Ryan D. Dennehy, a financial advisor at California Financial Advisors in San Ramon, California. The firm ranks No. 13 on the 2024 CNBC FA 100 list.

For example, a FICO score ranging 760 to 850 might qualify for a 6.226% annual percentage rate, according to Bankate.com. That can translate to a $1,842 monthly payment, Bankrate found.

On the other hand, a FICO score of 620-639 might get a 7.815% APR, roughly amounting to a $2,163 monthly mortgage payment, per Bankrate examples. They are based on national averages for a 30-year fixed mortgage loan of $300,000.

You can start the process by paying down any existing debts that you have on time and in full, and avoid new loans as you get closer to buying a home, experts say.

2. Start saving for the down payment

While a 20% down payment is not required to buy a house, buyers try to put more money upfront to avoid mortgage insurance costs and potentially lower monthly payments.

In the third quarter of the year, the average down payment was 14.5%, and a median of $30,300, Realtor.com told CNBC.

In order to start saving for a down payment, you need to figure out your cash flow, or how much money is coming in versus going out every month, said Steven LaRosa, director and senior portfolio manager at Edgemoor Investment Advisors based in Bethesda, Maryland. The firm ranks No. 14 on the 2024 CNBC FA 100 list.

Also, try to maximize how much money you can save or put away towards the down payment, said LaRosa.

3. Boost your emergency savings

It’s not just the down payment that needs to be built up, said Williams.

“You should have six months of your spending needs, including the house spending needs, in an emergency fund,” he said.

You don’t want to be in a situation where you use up all of your savings for the upfront costs of buying a house and end up with no cash left.

Home emergency spending was $1,667 across 1.5 projects per household in 2023, according to a report by Angi, an online marketplace for home improvement professionals.

3. Think about the lifestyle you want

Ask yourself what kind of lifestyle you look forward to, said Brady.

“Are you looking for a condo? Do you want a single-family home?” he said.

Then you can focus on factors like location and price, said Brady.

Meanwhile, some of the additional costs that come with owning a house are driven by where you live, like property taxes, utility and insurance costs, he said.

In some areas, “it’s next to impossible” to get home insurance, said Brady. “And if you can [get home insurance] you’re paying quite a bit.“

Nearly three-quarters, or 70.3%, of Florida homeowners and 51% of California homeowners say they or the area they live in has been affected by rising home insurance costs or changes in coverage in the past year, according to Redfin, an online real estate brokerage firm.

5. Factor in other homeownership costs

Owning a home goes far beyond the monthly mortgage payment.

You need to factor in additional costs, experts say.

To that point, the costs of homeownership adds up to an average $18,118 annually, or $1,510 a month, according to a report by Bankrate.com. The national figure includes the average costs of property taxes, homeowner’s insurance, and electricity, internet and cable bills. Maintenance was estimated at 2% a year of the home value.

“Those are very significant additions that sometimes people glance over and don’t put enough weight on,” said Cohn.

As such costs are unlikely to decline as time goes on, it’s important to have an emergency fund for homeownership costs, experts say.

6. How long you plan to stay in the house

“We like to use a five to seven year minimum,” said Cohn. The longer you’re in a house, the more likely the fixed costs will amortize, or pay off, over time, he said.

Additionally, in the early years of the loan, you’re mostly paying the interest rate, and not the loan itself, experts say.

“You’re not accumulating any equity from putting money into the mortgage in the first 5 to 7 years,” said Cohn.

“If you start looking at how much goes to principal and how much goes to interest in the first several years, it’s probably all interest,” said Brock.

Personal Finance

What to do if you can’t pay taxes on Oct. 15 tax extension deadline

Published

17 hours ago

October 15, 2024

Business Finance News

Urbazon | E+ | Getty Images

The tax extension deadline has arrived and there are options if you still can’t pay your balance, tax experts say.

About 19 million U.S. taxpayers filed for an extension by the April 15 tax deadline, which bumped the filing due date to Oct. 15. But taxpayers affected by natural disasters may have even more time, with new deadlines ranging between Nov. 1 and as late as May 1, 2025, depending on location.

However, for federally declared disasters after April 15, filers were not granted more time to pay their tax bill. Penalties and interest on unpaid balances started accruing after the April 15 deadline.

Many taxpayers wrongly assume that a tax extension provides more time to pay, experts say.

“That’s a surprise to a lot of people,” said Josh Youngblood, an enrolled agent and owner of The Youngblood Group, a Dallas-based tax firm.

If you missed the tax deadline, the late payment penalty is 0.5% of your unpaid balance per month or partial month, capped at 25%. You will also incur interest on unpaid taxes.

By comparison, the failure-to-file penalty is 5% of unpaid taxes per month or partial month, up to 25%.

You have ‘various payment options’

The IRS has options if you can’t pay your taxes, “but you have to be current on your filing requirement,” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.

After filing, there are “various payment options” online, and many filers will receive an immediate acceptance or rejection of payment plan requests without calling the IRS, according to the agency.

“If you owe less than $50,000, establishing a payment plan with the IRS is almost going to be automatic,” O’Saben said.

IRS online payment plans, or “installment agreements,” include:

Short-term payment plan: This may be an option if you owe less than $100,000, including tax, penalties and interest. You have up to 180 days to pay in full.
Long-term payment plan: This may be available if your balance is less than $50,000, including tax, penalties and interest. You must pay monthly, and you have up to 72 months to pay off the balance.

Although the late-payment penalty and interest will continue to accrue, an IRS payment plan could cut your late-payment fee in half while the agreement is in effect, according to the IRS.

One downside of IRS payment plans is future tax refunds could be used to offset your unpaid balance, O’Saben said.

‘Don’t ignore it because it won’t go away’

If you have unpaid taxes, you can expect notices from the IRS, and communication with the agency is key, experts say.

“Don’t ignore it because it won’t go away,” Youngblood said. “I’ve had clients come in, and they have a whole pile of unopened IRS letters.”

“The IRS is not as bad as they think,” he added. “They actually want to work with people.”

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Personal Finance

More colleges set to close in 2025, while ‘Ivy Plus’ schools thrive

Published

19 hours ago

October 15, 2024

Business Finance News

Is it best to go to college or dive straight into the working world?

Many colleges are under financial pressure, and the cracks are starting to show.

At least 20 colleges closed in 2024, and more are set to shut down after the current academic year, according to the latest tally by Implan, an economic software and analysis company.

Altogether, more than 40 colleges have closed since 2020, according to a separate report by Best Colleges.

As the sticker price at some private colleges nears six figures a year, students have increasingly opted for less expensive public schools or alternatives to a four-year degree altogether, such as trade programs or apprenticeships.

At the same time, the population of college-age students is also shrinking, a trend referred to as the “enrollment cliff.”

Experts have continuously warned that ongoing problems with the new Free Application for Federal Student Aid form have resulted in fewer students applying for financial aid, which could also contribute to declining enrollment.

That has left some colleges and universities in a bind, especially “small private — often liberal arts — schools,” said Candi Clouse, a vice president at Implan.

Meanwhile, the country’s most elite institutions are thriving.

College applications jump

Coming out of the pandemic, a small group of universities, including many in the Ivy League, experienced a record-breaking increase in applications, reports show.

Last year, Yale University, for example, accepted 3.73% of the record-high 57,465 students who applied to the Class of 2028.

Overall, the number of college applicants jumped 11% in the 2023-24 school year, even as enrollment flatlined, the latest data from the Common Application found, suggesting more students are applying to the same schools.

If you are not a big brand, you have a real problem on your hands.

Hafeez Lakhani

founder and president of Lakhani Coaching

“There’s been a paradox in higher education for five-plus years,” said Hafeez Lakhani, founder and president of Lakhani Coaching in New York.

“At the very same time you have an enrollment crisis building, you have record application volume at the most selective schools,” he said. “The consensus is, it’s only worth going to college if it’s a life-changing college.”

Meanwhile, private colleges that are less prestigious but equally expensive are struggling to attract applicants, he added.

For a majority of students, “the costs are nowhere near reasonable,” Lakhani said.

“If you are not a big brand, you have a real problem on your hands,” he said.

College is becoming a path for only those with the means to pay for it, other reports show.

Children from families in the top 1% are more than twice as likely to attend a so-called Ivy Plus school as those from middle-class families with comparable SAT or ACT scores, according to the National Bureau of Economic Research.

Though opinions on which schools should be considered Ivy Plus vary, the group generally includes the eight private colleges that comprise the Ivy League — Brown, Columbia, Cornell, Dartmouth, Harvard, University of Pennsylvania, Princeton and Yale — plus the University of Chicago, Duke, Massachusetts Institute of Technology, and Stanford.

Most Americans still agree a college education is worthwhile when it comes to career goals and advancement. However, only half believe the economic benefits outweigh the costs, according to a separate report by Public Agenda, USA Today and Hidden Common Ground.

The rising cost of college and ballooning student loan balances have played a big role in changing views about the higher education system, which many think is rigged to benefit the wealthy, the report found.

And costs are still rising.

Tuition and fees plus room and board for a four-year private college averaged $56,190 in the 2023-24 school year. At four-year, in-state public colleges, it was $24,030, according to the College Board, which tracks trends in college pricing and student aid.

Already, the majority of applicants hail from the wealthiest zip codes, the Common Application found.

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