Study: DREAM Act would generate $3.6 trillion for U.S. economy
The cost of tuition subsidies would be around $6.2 billion a year, but experts believe that Dreamers would pay for this and more over the long-term (Photo: flickr.com)
With California’s recent approval of the state DREAM Act and the presidential campaign in full-swing, controversy over immigration reform, and particularly the DREAM Act, continues. The legislation, which would grant temporary legal status to some young adults that grew up in the U.S. and make it easier for them to pursue higher education nationwide, has been at the center of political debates for over a decade now, but its immense potential to revive the U.S. economy often goes overlooked.
A 2010 study by Dr. Raul Hinojosa-Ojeda at UCLA found that beneficiaries of the DREAM Act could contribute up to 3.6 trillion dollars to the U.S. economy over the next 40 years. That comes out to 90 billion dollars a year — or .6% of annual U.S. GDP.
Others argue that it would take years for the Dreamers to generate this income and that the initial costs of subsidizing their college tuition would be steep, at more than 6 billion dollars per year.
Hinojosa-Ojeda, Founder and Director of the North American Integration and Development Center and a professor of Chicano studies at UCLA, set out to quantify just how much undocumented students would potentially contribute to the economy if granted citizenship. His agenda? To highlight the positive consequences of legalization.
For Hinojosa-Ojeda — who says some of his best students at UCLA are undocumented — conducting the study, “No DREAMer Left Behind,” was extremely personal.
Approximately 65,000 students that would qualify for the DREAM Act graduate high school each year, according to the National Immigration Law Center.
“Immigrants have always been the main drivers of the economy,” Hinojosa-Ojeda, who was born in Mexico and came to the U.S. as a child, told Univision News. “Moving people out of the shadows and giving them the ability to participate in the economy is a great benefit to them and to society.”
Controversy over the DREAM Act has exploded during the Republican primary campaign.
Presidential candidate Mitt Romney has made one thing clear: Those that came to this country illegally should not be granted a preferential path to citizenship. Though he considers himself “pro-immigrant,” Romney has said he would veto the DREAM Act if elected president, a statement that has struck a nerve throughout the Latino community.
Newt Gingrich told Univision’s Jorge Ramos that he supports “half the DREAM Act,” or at least the portion that would grant undocumented immigrants who serve in the military a pathway to citizenship. In recent days, while campaigning in Florida, Romney has suggested that if given the option he would also support this.
But President Barack Obama thinks otherwise. In his State of the Union speech on Tuesday, he urged Congress to resurrect the legislation.
Meanwhile, millions of undocumented students wait on the sidelines.
Hinojosa’s study is based on information from the Migration Policy Institute, which estimated that approximately 2.1 million students could qualify for legalization through the DREAM Act. But only 38 percent, or 825,000 individuals, would apply for and receive the benefits under this legislation, according to the Institute.
The Development Center researched two scenarios. In the first, they determined the income that the 825,000 beneficiaries would generate over a period of 40 years. In the second, which they titled, “No DREAMers left Behind,” they determined the income that all 2.1 million beneficiaries would generate over the same period, after successfully fulfilling the law’s education or military service requirement.
The study found that the first scenario (with the 825,000 that would apply for and benefit from the DREAM Act) would contribute 1.4 trillion dollars — in personal income — to the U.S. economy over the 40-year period. In the No DREAMers Left Behind case, the 2.1 million beneficiaries would contribute 3.6 trillion dollars.
Hinojosa-Ojeda was not at all surprised at the result. He believes that this amount is actually just a fraction of what these individuals would contribute to the economy, as the study only estimated the income they would produce, not the total profits they would generate for the companies they work for.
“It’s simple math,” he says, “The amount of money that the immigration population contributes to the economy is huge, but this information is absent from economic discussion and from public and media discussion.”
But Steven Camarota, director of research at the Center for Immigration Studies in Washington, D.C. and author of the memorandum, “Estimating the Impact of the DREAM Act,” doesn’t feel it’s that simple. A higher number of students in colleges or universities would signify larger tuition subsidies.
In his memorandum, Camarota found that on average, each undocumented immigrant that would attend a public institution of higher education would receive a tuition subsidy of $6,000 for each year that they attend, totaling $6.2 billion a year. Ultimately, it’s taxpayer money that would cover these subsidies.
“Even if we hope that in the long run these students will pay more taxes, that will be years down the road,” says Camarota. “Once there’s a price tag on the DREAM Act, the chances of passing it become much less.”
Professor William Sundstrom, professor of economics at Santa Clara University’s Leavey School of Business in Silicon Valley, says Hinojosa-Ojeda’s study provides a simplistic but reasonable estimate of what DREAM Act beneficiaries could contribute to the economy.
However, according to Sundstrom, the study does not provide a view on what he refers to as the “counter-factual” — what the economic results would be if the DREAM Act never passed, or did not exist. How much money would these students make in the next 40 years if they do not receive higher education? Would they even remain in this country?
While most talks surrounding the DREAM Act focus on its potential beneficiaries, there is also controversy about how the proposed legislation would affect taxpayers.
Hinojosa-Ojeda feels tax revenues would boom if these individuals were legalized to work in the U.S. since, in the long run, they would be more educated, would make more money, and, therefore, pay more taxes.
Sundstrom agrees, stating that the DREAM Act would foster well-paid and high-paying individuals.
“These are folks who are eventually going to be legal residents paying all sorts of taxes,” he explained
While it would take some time for Dreamers to start generating income, once they did, their tax contribution would be significant. If we use Hinojosa-Ojeda’s income projections for the 2.1 million Dreamers and a conservative effective federal income tax rate of 16% (around what the average middle class family pays each year) DREAM Act beneficiaries would pay 14.4 billion dollars per year and 567 billion dollars over the 40-year period. (If we use the income projections for the 825,000 Dreamers, these numbers would be $5.6 billion per year and $224 billion over 40 years.)
The DREAM Act, says Sundstrom, would pay for itself. While the legislation would prove costly for taxpayers, it is the Dreamers that would end up paying for it as educated, working citizens.
As the controversy heats up once again, thousands of undocumented students will continue to graduate high school each year. Though it may require billions in tuition subsidies for these students to obtain higher education, the long-term impact on the U.S. economy would be significant — up to 3.6 trillion dollars to be exact.