'Average Wage Across the Economy Would Decline for the First Decade', Says Analysis on Immigration Reform CBO Report
CNBC's senior editor, John Carney, analyzed the Congressional Budget Office's immigration bill report and found that wages across all skill levels would decline for the first ten years after the senate amnesty bill, S.744 passed.
Along with a nationwide wage decline, Carney says that according to the CBO report, unemployment would initially rise after S. 744 would become law.
Carney finds that the two main effects of S.744, wage decline and rising unemployment, come from the supply of labor increasing more quickly than capital available to employ the labor. This effect debunks the common pro-amnesty argument that "there are not enough workers to fill these jobs."
Carney believes now is a terrible time for immigration reform. The downward pressure of wages and unemployment would be devestating to the already fragile U.S. economy of high unemployment and stagnant wages.
While the CBO report says that wage decline and higher unemployment will definitely happen the first 10 years after S. 744 is passed, Carney is speculative of the CBO reporting the economy will "turn around" after the first decade.
CBO estimates that the total factor productivity (TFP, the average real output per unit of combined labor and capital services) would be higher by roughly 0.7 percent in 2023 and by roughly 1 percent in 2033, compared with what would occure under current immigration law. A higher TFP means higher GDP and wages.
The small percentages of 0.7% and 1% are dismal and Carney believes this outcome would only occur if the new immigrants were super innovated. Carney points out that new immigrants may not be as innovated as expected. Also, Carney cites a Eric Rasmusen economic paper, saying innovation could be effected if our transportation infrastructure declines due to a mass increase in population.
The CBO report says that the return of invested capital is likely to increase under S.744. But Carnety expalins that it means only the richest members of the economy will benefit from the bill, even as the poor continue to suffer. More importantly, economic inequality will grow under this law, not shrink.
Carney sums up his analysis of the CBO report, "it will be at least somewhat painful for the poorest workers for at least a decade. All for a tiny bit of extra growth per capita."
Read more of John Carney's analysis on CNBC.
Updated: Mon, Oct 2nd 2017 @ 3:09pm EDT