Immigration’s Economic Impact Sparks Debate
The ongoing influx of foreign-born individuals into the United States has ignited a significant debate over its economic implications. A particular concern is the number of migrants who have bypassed established immigration protocols, with estimates suggesting that up to 14 million individuals may be undocumented between 2021 and 2024.
Following 2024, the overall number of undocumented immigrants is projected to decline. However, the discussion surrounding immigration encompasses both potential benefits and drawbacks. On the one hand, immigration could enhance the labor force, mitigate labor shortages, and bolster economic spending along with tax contributions. Conversely, it could exert downward pressure on wages and escalate consumer costs, particularly in the housing market—issues that remain contentious.
As an economist, I appreciate distinguishing between raw data and its analysis. Recent research sheds light on the economic effects of illegal immigration, particularly a comprehensive study released by the Dallas Fed in March. This study, which spans 2021 to 2025, aims to evaluate illegal immigration’s impact on both the labor and housing markets.
To understand these findings, it’s essential to clarify the role of the Federal Reserve. The United States is home to 12 regional Federal Reserve Banks, each serving distinct jurisdictions. For instance, North Carolina falls under the Federal Reserve Bank of Richmond. While these regional banks do not set monetary policies affecting interest rates or money supply—decisions made by the central Federal Reserve in Washington, D.C.—they serve as regional buffers ensuring local interests are considered in broader economic legislation.
The establishment of these banks was crucial in addressing the regional disparities that characterized the United States in the early 20th century. Concerns arose that the central authority might overlook the needs of smaller, regional economies. Thus, local Federal Reserve Banks were instituted to relay these concerns effectively. Among these, the Dallas Fed focuses on issues pertinent to its constituency, particularly as it relates to immigration due to its proximity to the southern border.
In its pivotal research, the Dallas Fed analyzed data spanning employment, wages, and housing prices in the context of illegal immigration from 2021 to 2025, applying established statistical methods to draw correlations.
The findings revealed a notable increase in total employment corresponding with an uptick in illegal immigration. This suggests that either new jobs were being created or existing vacancies were filled by undocumented workers, without displacing current employees. Furthermore, wage levels remained stable, indicating that the growth in undocumented workers did not adversely affect the earnings of those already employed. This stability can be attributed to immigrants filling new or unoccupied roles rather than directly competing with established employees. Additionally, the study highlighted that the influx of workers generally contributed to increased public revenue, alongside a decline in total social assistance payments from the government.
However, the report also identified challenges, particularly in housing markets, where both home prices and rents have surged during periods of increased illegal immigration. This trend can be explained by the limited availability of housing units, which struggles to keep pace with a growing population. As the number of households rises, the resulting competition for existing units drives up prices. Moreover, anticipating where new immigrant households might settle is critical for housing developers, who face significant hurdles in addressing these rapid increases in demand.
The conclusions drawn from this recent research demonstrate that the economic outcomes of illegal immigration are multifaceted, encompassing both beneficial and adverse effects. Understanding and anticipating these consequences is vital for enabling economies to adapt effectively.
Mike Walden is the William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University. His upcoming book, “North Carolina in an Age of Anxiety,” is set for release by UNC Press in October.
