The Hidden Engine: What Immigrants Actually Do for the American Economy

The debate about immigration in the United States has a way of generating more heat than light. On one side, you have politicians who talk about immigrants almost exclusively in terms of crime, cultural displacement, and public costs. On the other hand, you have advocates who sometimes overstate the case in the opposite direction, flattening a genuinely complex picture into simple heroic narratives. What tends to get lost in the middle is the actual economic data — the numbers that describe what happens when roughly thirty-one million foreign-born people show up for work every morning in America, pay taxes, start businesses, buy groceries, and rent apartments.

The picture that data paints is not perfectly simple. But its main lines are clear enough that most serious economists across the political spectrum agree on them. Immigration, taken as a whole, makes the American economy substantially larger, more productive, and more fiscally sustainable than it would otherwise be. And the current administration's approach of accelerated mass deportations, if carried through at scale, would accomplish roughly the opposite of what its proponents claim.

What Immigrants Contribute: The Numbers Behind the Argument

Begin with scale. Foreign-born workers now make up approximately one in five members of the entire American civilian workforce — a share that has nearly doubled over the past thirty years, rising from under ten percent in the mid-1990s to more than nineteen percent in 2024. These workers are not clustered in a single corner of the economy. They drive trucks and run emergency rooms. They frame houses and write software. They teach in universities and harvest crops. Their labor force participation rate is actually higher than that of native-born Americans — nearly sixty-seven percent compared to roughly sixty-two percent — meaning that, proportionally, immigrants are more likely to be working than the people who were born here.

The fiscal arithmetic that flows from this participation is substantial. In 2022 alone, immigrants contributed nearly four hundred billion dollars in federal taxes and close to two hundred billion more in state and local revenues. Undocumented immigrants, who are largely ineligible for the federal benefit programs they help finance through payroll contributions, paid close to ninety-seven billion dollars in taxes during the same year. The Social Security program, which faces long-term funding challenges driven by an aging native-born population, is meaningfully supported by immigrants who pay into it and will draw less out of it than American-born workers. The 2025 Social Security Trustees Report estimated that cutting net migration in half would worsen the program's long-run actuarial deficit by a quarter.

Looking forward, the Congressional Budget Office projected that immigration flows expected between 2024 and 2034 would add roughly nine trillion dollars to gross domestic product over that decade — a number large enough to reduce the federal deficit by nearly a trillion dollars over the same period. The Budget Lab at Yale estimated that immigrants, both legal and undocumented, accounted for approximately a fifth of the country's real GDP growth since 2019.

Beyond the headline figures, there is the entrepreneurship dimension, which tends to receive less attention than it deserves. Immigrants represent about thirteen percent of the American population, but account for roughly twenty percent of new business starts. In 2022, those immigrant-founded businesses generated over a hundred billion dollars in revenue. The technology sector is the most visible example of this pattern — a remarkable share of the most valuable American technology companies were founded by immigrants or their children — but the phenomenon extends far deeper into the everyday economy, into small manufacturing, retail, food service, construction contracting, and the countless other businesses that generate employment and tax revenues in communities that rarely make the evening news.

The Sectors That Would Break

If you want to understand why economists react with such consistent alarm to proposals for large-scale deportation, it helps to look at where undocumented workers specifically are concentrated, rather than treating immigration as an undifferentiated phenomenon.

Of the approximately eleven million undocumented immigrants living in the United States, roughly eight million were participating in the workforce as of 2022. Nearly ninety percent of them fall within the prime working-age range. They are heavily concentrated in a handful of industries that share two characteristics: they are essential to the functioning of everyday American life, and they have long struggled to attract native-born workers at the wages they pay.

In construction, immigrants — including undocumented workers — account for more than a quarter of the entire workforce. The sector was already facing roughly two hundred and eighty thousand job openings as of late 2024, and projections suggested the need for hundreds of thousands of additional workers above normal replacement rates in the coming years. Remove 1.5 million construction workers from the pool, as mass deportation estimates suggest, and the result is not that American-born workers fill those positions at slightly higher wages. It is that houses do not get built, renovations stall, infrastructure projects fall behind schedule, and the cost of everything made of wood, concrete, and drywall rises accordingly.

Agriculture is even more exposed. Certain crops — strawberries, lettuce, tomatoes, asparagus — require intensive hand labor at specific moments in the growing season that cannot be easily mechanized even with current technology. The farms that produce this food operate on thin margins and have historically relied on immigrant labor, including undocumented workers, to function. Remove that labor and the choices are painful: either the crops do not get picked and rot in the field, or prices rise enough that many lower-income American households find fresh produce unaffordable, or both. Historical evidence from past enforcement waves suggests prices rise even when only a modest share of agricultural workers are removed.

Similar pressures would appear in hospitality, where roughly a million immigrant workers are employed; in manufacturing, where estimates suggest nearly nine hundred thousand; and in transportation and warehousing, where roughly four hundred and sixty thousand. These are not sectors where robots are ready to step in tomorrow. They are sectors where removing workers means producing less, paying more, or both.

Do Mass Deportations Help the Economy? The Evidence Says No

The Trump administration has argued — and many of its supporters believe — that removing undocumented workers helps American-born workers by reducing competition for jobs and pushing wages up. This argument has a surface plausibility and a partial grain of truth. Research does suggest that authorized lower-skilled workers, including American-born ones, might see modest wage gains in the short term as some labor market competition decreases. The Penn Wharton Budget Model estimated that a ten-year deportation program could produce roughly a five percent wage gain for authorized lower-skilled workers — though that gain would disappear if the deportation program were eventually reversed.

But the rest of the picture looks considerably worse. The Peterson Institute for International Economics ran the numbers on two scenarios: deporting 1.3 million undocumented workers represents the low end of plausible enforcement, while deporting 8.3 million represents a more comprehensive sweep. Under the moderate scenario, GDP falls by about 1.2 percent and employment drops by 1.1 percent by 2028. Under the aggressive scenario, GDP falls by 7.4 percent and employment by nearly seven percent over the same period — a result that economists describe as being roughly equivalent to the United States experiencing zero net economic growth throughout Trump's entire second term.

Inflation would rise in both scenarios. When you remove large numbers of workers from industries that are already supply-constrained, prices in those industries climb. Research drawing on historical deportation episodes found that food prices, construction costs, and service sector prices all increased following enforcement surges. Peterson Institute projections suggested that under the aggressive deportation scenario, inflation could spike as much as nine percentage points above baseline, in a country that had only recently managed to bring elevated post-pandemic inflation under some control.

The employment effects are counterintuitive but well-documented. Analysis of the Obama-era deportation program, which removed roughly four hundred thousand undocumented immigrants, found that for every half-million removed from the labor force, approximately forty-four thousand American-born workers also lost jobs — not because immigrants had been taking those jobs, but because immigrants were generating economic activity that supported them. They were customers in local stores, tenants in apartment buildings, patients in clinics. Removing them reduced demand as well as supply, and the net effect on American workers was negative.

Then there is the operational cost, which the administration's rhetoric tends to gloss over. Running a mass deportation program at scale is extraordinarily expensive. Estimates for removing one million people run to roughly eighty-eight billion dollars annually — covering arrests, detention, legal proceedings, and deportation flights. Removing the full undocumented population over a decade would cost something in the range of one trillion dollars, according to detailed budget analyses. The Cato Institute, which is not exactly known for sympathy toward illegal immigration, estimated that the immigration-related provisions of the administration's legislative agenda would carry a fiscal cost of nearly nine hundred billion dollars over the next decade, largely because it would remove workers whose taxes currently help finance the federal budget.

The Real Problem the Debate Is Avoiding

None of this is an argument for open borders, unlimited migration, or ignoring the genuine complexities of integrating large numbers of new arrivals. The immigration debate in the United States has been stuck in a dysfunctional loop for decades, partly because both sides have been more interested in mobilizing their respective bases than in honestly describing the trade-offs involved. There are legitimate concerns on multiple sides of this issue, and pretending otherwise doesn't serve anyone.

The real challenge is that the American immigration system is, by the frank assessment of experts across the political spectrum, badly designed for the present reality. US immigration law was written primarily to serve family reunification objectives, and the employment-based pathways that exist are chaotic, underfunded, backlogged for years or decades, and poorly matched to actual labor market needs. The result is that the country has simultaneously too little legal immigration of the kinds most economically useful and too much illegal immigration, filling gaps that the legal system is too rigid to accommodate.

The Biden administration's surge in irregular border crossings created real strains — in border communities, in city shelter systems, in school districts — that were politically costly and substantively difficult to manage. Trump's approach has dramatically reduced those crossings. That is a real accomplishment that addresses a genuine problem. But the administration has paired that reduction with aggressive interior enforcement and mass deportation of people who have been living and working in the country for years or decades, which is a very different intervention with very different economic consequences.

What Workable Solutions Actually Look Like

Countries that have managed immigration more successfully than the United States have generally done so through a combination of deliberate labor market orientation, robust legal pathways, and sustainable enforcement — rather than oscillating between neglect and crackdown as political winds shift.

Canada and Australia both employ points-based selection systems that assess potential immigrants on factors including education level, language proficiency, work experience, age, and whether they have a job offer from an employer operating in an area of documented labor shortage. The advantage of this approach is not that it produces perfect results — neither Canada nor Australia has a frictionless immigration system — but that it explicitly connects migration flows to economic needs, which creates political legitimacy and measurable outcomes. About sixty percent of permanent residents admitted to Canada each year come through economic immigration categories, compared to a much smaller share in the United States, where family reunification has historically dominated.

A serious reform of the American system would start by dramatically expanding and streamlining employment-based visa pathways, matching their scale to documented labor shortages across skill levels rather than capping them at numbers set by laws written decades ago. It would include expanded seasonal and temporary worker programs for agriculture and other industries with predictable annual labor needs, designed with worker protections strong enough to prevent systematic wage depression. It would create more robust paths from temporary work authorization to permanent residence for people who have demonstrated over the years that they are stable, productive contributors to their communities.

For the population of long-term undocumented residents — the millions of people who have lived in the United States for a decade or more, raised families, paid taxes, and built lives — a realistic policy needs to make some determination about what to do with them that goes beyond periodic enforcement surges. Deporting them is enormously expensive, economically damaging, and in many cases, humanly cruel without being strategically coherent. Most economists who have studied the question conclude that some form of earned legalization — conditional on background checks, tax compliance, and continuous legal residence — would be both economically positive and administratively more sensible than trying to maintain a permanent class of legally vulnerable people in the workforce.

Border enforcement and legal immigration reform are not alternatives to each other. The evidence from countries that have managed the balance well suggests they work together: clear and functioning legal pathways reduce the incentive for unauthorized entry, while credible enforcement makes the legal pathways more politically sustainable. What has never worked, in the United States or anywhere else, is treating enforcement as a substitute for reform — repeatedly trying to suppress a problem by removing its symptoms rather than addressing the underlying misalignment between legal capacity and economic demand.

The math on immigration is not particularly subtle. Thirty-one million foreign-born workers, generating nearly a fifth of GDP growth, paying nearly six hundred billion dollars in taxes annually, and filling essential roles across every major sector of the economy, are not a burden to be eliminated. They are a structural feature of the American economic model as it currently exists. Changing that model requires reforming the system that produced it — not dismantling the workforce the system created while leaving the underlying incentives in place.