The impact of immigrants on the US economy

Though the U.S. is often described as “a nation of immigrants,” immigration to the United States has been among the most contentious political issues in recent decades and a dominant concern for voters over the past few years. Immigrants bring with them a range of mostly positive demographic, fiscal, and economic impacts. Yet we have entered a new era of significantly slowed migration, which my colleagues and I have estimated to be net negative in 2025 for the first time in at least half a century. What implications will that have? 

The current situation 

Each year, the United States welcomes new immigrants from around the world. After accounting for departures, the country experienced net migration of just under one million per year in the 2010s. This number typically includes about 500,000 legal permanent residents arriving from abroad, most often relatives of people in the United States, and around 100,000 refugees. There are also a large number of people who enter each year on temporary student or work visas. Many others arrive without visas, either by entering without going through official channels or by coming in as parolees or asylum-seekers. From 2022 through the summer of 2024, inflows in the parolee and asylum-seeker category were very large, causing net migration to peak at over three million in 2023, as shown in Figure 1.  

The picture has been very different since January 2025. The second Trump administration ended the refugee program, largely stopped considering asylum claims at the border, instituted travel bans for many countries, and threw sand in the gears of regular immigration processing for green card applicants, students, and workers. The result is that inflows are well below historical norms and especially below those of the past few years. At the same time, enforcement activity has increased the number of deportations, and voluntary exits have likely increased as well, though data are hard to come by. As shown in Figure 1, my colleagues and I previously estimated that net migration will be in negative territory for 2025 (between -295,000 and -10,000) based on an analysis of available data, and predicted that migration in 2026 will likely also be in negative territory.  

The demographic picture 

This change in immigration comes as the United States is entering a period of population aging and declining fertility. The ratio of the number of working-age people (ages 18 to 64) to those 65 and older has fallen from 5.7 in 1970 to 3.4 in 2024 and is projected to fall to 2.7 by 2040. A year or two of slower immigration will not have a noticeable long-term effect, but if the United States becomes a permanently unattractive destination, we should be prepared for population decline. As shown in Figure 2, the Census Bureau estimates that, in a zero-immigration scenario starting in 2022, the U.S. population would fall by over seven million between 2022 and 2040.¹

Why does this matter to the economy? A major reason is that the Social Security and Medicare systems rely on current workers’ contributions to finance expenditures for the older population. A sustained decline in immigration would substantially affect the financial health of these systems. For example, the 2025 Social Security Trustees Report suggests that halving long-run net migration from 1.696 million to 0.833 million would worsen the long-run actuarial deficit (the financial health of the program over the next 75 years) by 25%. 

The fiscal picture 

Immigrants are a fiscal boon to the U.S. In a new report released by the Cato Institute, the authors update a model created by the National Academies of Sciences, Engineering, and Medicine to examine the impacts of immigrants on the U.S. government’s budget. Their findings are clear: In each year from 1994 to 2023, across all levels of government, immigrants paid more in taxes than they received in benefits. This resulted in a cumulative fiscal surplus of $14.5 trillion in real 2024 U.S. dollars over that period, including savings on interest payments on the national debt.  

It is important to recognize that the fiscal benefits of immigration are not shared equally. The federal government enjoys contributions from the payroll tax, but undocumented immigrants and recently arrived legal immigrants are eligible for little in the way of federal benefit programs. However, many immigrants and their children do use educational and health services funded at the state and local levels. This creates fiscal hardship for cities and states that could be ameliorated by policies that help support places welcoming new immigrants.  

The macroeconomy 

GDP growth is slowed by reductions in net migration, particularly abrupt ones. In our January report, my colleagues and I demonstrate how the decline in migration between 2024 and 2025 will reduce GDP growth by between 0.19 and 0.26 percentage points and lower consumer spending by $40 billion to $60 billion in 2025. These macroeconomic effects result from the direct impact of having fewer workers and consumers in the country, as well as the indirect effects of reduced spending by immigrants due to increased uncertainty. 

Though much of the rhetoric surrounding the immigration issue focuses on jobs for American workers, most economists agree that lower migration levels do not ultimately lead to additional employment for U.S.-born workers. Immigrants are consumers as well as producers of goods and services, so fewer immigrants means less consumer demand. As a result, the main effect of reduced immigration is simply a smaller economy. Moreover, an extensive literature documents that immigration to the U.S. has led to innovations that have boosted the productivity of U.S.-born workers. Cutting off immigration flows harms American economic growth. 

The big picture 

Though nearly all economists agree that immigration boosts the U.S. economy, the issues at stake in the current moment extend beyond what can be measured in the data. Our national identity is rooted in pluralism, openness, and rule of law, even if the nation has often fallen short of those ideals. Attacks on fundamental principles—the civil rights of immigrants, the notion of birthright citizenship, and restraints on executive powers—strike at the core of what has made America exceptional.  

The needed solutions therefore encompass immigration policy and beyond. Congress has not passed major immigration reform in 30 years, abdicating its responsibility and concentrating excessive power within the executive branch. Bipartisan reform packages which likely would have the support of legislators and the public, such as the 2013 comprehensive bill and the DIGNITY Act, have not been brought forward for a vote. Congress must take its duty to legislate on the immigration issue seriously.  

At the same time, the political temperature around immigration has allowed some Americans to overlook the broadening scope of executive authority and civil rights violations. The disregard for the law in the immigration arena threatens to weaken the institutions we value throughout civil society. Unless Americans insist on adherence to the rule of law, the economic, political, and social effects of eroded institutions are likely to persist even if we reopen our borders.