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Immigration is one of the most contentious issues in American society, and understandably so. Approximately 44 million immigrants reside in the United States, constituting more than 14 percent of the population, and we welcome more than one million more new legal immigrants annually. Policy decisions about what types of individuals should be allowed to immigrate legally, how many immigrants to allow, how and whether to provide undocumented immigrants a path to citizenship, whom to deport, and how to secure borders are hotly debated, and any immigration reform will have ethical, political and economic ramifications.

With this in mind, the Federal Reserve Bank of Minneapolis is asking students in its 31st annual essay contest to use economics to describe and defend an effective immigration policy.

The Current System

In order to defend a new immigration policy, it is essential to understand the system as it stands.

Much of current immigration policy stems from the Immigration and Nationality Act of 1965, which sets a limit of 675,000 permanent immigrants per year, with certain exceptions. There are several ways immigrants to the United States are granted legal status. One channel is the family-based immigration system, in which close relatives of current U.S. residents can qualify for visas. Another is through work visas for employment-based immigration, where preference is given to certain types of workers (highly-skilled or seasonal, for example) and their families. Other legal immigration categories include refugees and those seeking asylum. Of the nearly 1.2 million people granted lawful resident status in 2016, 68 percent qualified as family-sponsored, 12 percent as employment-based, and 10 percent as refugees, with the remaining 10 percent coming through other programs.

Illegal immigration is important to consider as well. An estimated 11 million unauthorized immigrants resided in the United States in 2015. According to Pew Research Estimates, the unauthorized immigrant population is not significantly growing at present. Nevertheless, policies surrounding deportations, education, benefits, and the economic impact of, and legal status for, this population are a focus of much public debate about immigration.

Labor Markets

While economists generally agree immigration contributes to growth in the economy as a whole, there is less agreement about its effect on individuals and wages.

Basic economics indicates that an increase in the labor supply (more immigrants = more workers) should drive down wages, all else being equal. Still, some researchers find little evidence of depressed wages in response to increased immigration. It may be that native-born workers and immigrants are more often complements than substitutes; that is, immigrants fill jobs that native-born workers do not want or for which they are not qualified. Immigration can also energize the economy by bringing entrepreneurs, innovators, and consumers into the economy.

Other economists are skeptical of the claim that immigration doesn’t lower wages, pointing to studies that indicate that an influx of immigrants may significantly reduce wages, particularly among lower-skilled workers.

Public Costs and Benefits

Like most people, both legal and undocumented immigrants use social and other public services (education, healthcare, transit, etc.) and pay taxes. However, since many immigrants earn lower incomes, on average, than the native-born population, they may be more likely to use certain services, thereby placing extra burden on government programs. The unique social impact of undocumented immigrants is also important to note: nearly half of undocumented immigrants pay taxes toward benefits—namely social security and Medicaid—that they are ineligible to receive. Additionally, some see immigration as a potential answer to slower population growth and large-scale retirement in an aging workforce.

Other Factors to Consider

As you answer the prompt to “use economics to describe and defend an effective immigration policy,” keep in mind that your idea of an effective outcome may not be the same as someone else’s, and there are many options available. Regardless of what you choose, be clear about the goals of your immigration policy and make a strong case for why your proposal meets them. Your policy may have political, cultural and ethical motives but should be supported by economic reasoning.

A Wealth of Possibilities

This primer is intended to get students thinking about the topic. It is far from the last word on the subject, but rather is a stepping-off point for students who want to write a good essay. Many resources are available to draw upon, and essays can take many different approaches. The judges will reward creative thinking in addition to careful research, persuasive writing and solid economic thinking. Good luck!

If you have any questions, email