The economic impact of illegal immigration to the United States refers to the effects of economic activities of migrants without a legal citizenship or residency. Because of the political controversy around illegal immigration, the impact is generally divided into two groups: activities that have a positive effect on legal residents, such as increased economic activity and increased tax income, and activities that have a negative effect on legal residents, such as usage of government programs and decreased wages.
Illegal immigrant population
According to the Pew Research Center, there were 14-15 million illegal immigrants living in the United States as of 2023, statistically indicating a dramatic increase from the 10-11 million population in 2022. According to an article the Pew Research Center published on July 22, 2024, the unauthorized immigrant population in the U.S. grew to 11 million in 2022, but remained below the peak of 12.2 million in 2007, following a steady increase that began in 1990. An estimated 5.6 million unauthorized immigrants were from Mexico in 2015 and 2016, down from 6.4 million in 2009. This trend continues to decrease the number of unauthorized immigrants from Mexico dropped to 4 million in 2022. While it continues to drop, Mexico is still the most common country of origin for immigrants in the U.S. Non-Mexicans numbered 5.7 million, indicating Mexicans are no longer the clear majority of unauthorized immigrants. The unauthorized immigrant population from other countries grew. The U.S. civilian workforce includes 8 million unauthorized immigrants, accounting for 5% of those working or looking for work in 2014. This number has been relatively stable since 2007, ranging between 8.0 and 8.3 million. Unauthorized immigrants make up about 4.8% of the U.S. workforce in 2022. They are primarily concentrated in seven states: California, New Mexico, Texas, Florida, New York, New Jersey, and Illinois. About two-thirds have been in the U.S. for more than a decade. Since then, between the years of 2019 to 2022, the illegal immigration population grew in six states: Florida, Massachusetts, New Jersey, New York, and Texas. The only state that saw a decrease in the population was California.
The reduction has been driven mainly by a decrease in the number of new immigrants from Mexico, the single largest source. Net immigration from Mexico to the U.S. has stopped and possibly reversed since 2010. At its peak in 2000, about 770,000 immigrants arrived annually from Mexico; the majority arrived illegally. By 2010, the inflow had dropped to about 140,000—a majority of whom arrived as legal immigrants.
At its peak in August 2007, the number of illegal immigrants in the U.S. was 12.5 million. This decreased by 1.3 million to 11.2 million by July 2008 (11%) due to either increased law enforcement or fewer job opportunities. Based on the Department of Homeland Security estimates in 2009, unauthorized immigrant population living in the United States decreased to 10.8 million in January 2009. On the whole, between 2000 and 2009, the unauthorized immigrant population grew by 27 percent. The size of illegal immigrants that have entered the U.S. declined by almost 300 thousand in 2018 to 2020, but then grew by 630 thousand from 2020 to 2022.
Immigrants to the U.S. are concentrated at both the high and low-income ends of the U.S. labor market, determined largely by their educational attainment. In 2004, at the low end, half of workers aged 25 and older who lacked a diploma were from Mexico and Central America. These workers were employed in jobs that required little formal education, such as construction labor and dishwashing, and on average they earned much less than did the average native worker.
Economic impact of illegal immigrants Consumer demand An employer can gain economic advantages when hiring workers without legal authorization, because these employees may accept lower wages and minimal benefits out of necessity. This can reduce labor costs relative to paying documented workers with taxpayer identification numbers and full legal protections. While unauthorized immigrants are legally barred from work in the United States, they nonetheless constitute a significant part of the labor force. In 2023, an estimated 9.7 million unauthorized immigrants were part of the U.S. workforce, accounting for about 5.6 % of all workers — one of the highest shares on record.
According to an article by Council on Foreign Relations ,undocumented households collectively held about $299 billion in spending power and nearly $389 billion in combined income in 2023, indicating that most earnings were quickly circulated back into the economy through consumption and taxes. This highlights that most immigrant workers with low qualifications spend most of what they earn on consumption needs.
By comparison, average wages for U.S. workers generally exceed the federal minimum and have continued to rise in recent years, with private-sector average hourly earnings around $36–$37 per hour in late 2025.
Because unauthorized workers are present in construction, agriculture, hospitality, and other labor-intensive sectors, their participation helps support overall economic activity and employment. Estimates from 2023 suggest that undocumented immigrants filled around 8.5 million jobs and are embedded across many industries despite their status.
Budgetary impacts
In recent years, the number of people arriving in the United States has risen sharply. Most of this increase is due to a growth in the group the Congressional Budget Office (CBO) classifies as other foreign nationals. Some individuals in this category have been authorized to enter or stay in the country, while others have not; additional details about this group’s makeup are discussed later. Based on trends observed before 2020, CBO would have expected net immigration in this category to average about 200,000 people annually. Instead, under CBO’s projections, net immigration exceeds that expected level by a cumulative 8.7 million people between 2021 and 2026.
A 2024 report examines how that surge in immigration from 2021 to 2026 affects CBO’s baseline economic and budget projections for the 2024–2034 period. Specifically, it focuses only on the incremental effects of the surge, rather than the overall impact of all immigrants who arrived during those years or earlier and were already living in the United States. The analysis centers on federal revenues, mandatory spending, and interest on the debt. While the report offers a general discussion of possible implications for discretionary spending, it does not quantify effects on state and local government budgets.
To estimate the impact of the immigration increase, CBO developed a counterfactual scenario in which the surge does not occur. In that scenario, net immigration of people in the other-foreign-national category remains at 200,000 per year from 2021 through 2034, matching baseline assumptions from 2027 onward. CBO then produced economic and budget projections under that scenario and compared them with its baseline projections. The differences between the two sets of outcomes represent CBO’s estimates of the effects of the immigration surge.
CBO emphasizes that these estimates are highly uncertain and will be updated as additional data and information become available.
Impacts on the Budget
According to CBO’s baseline projections, the immigration surge increases federal revenues, mandatory spending, and interest costs, but overall it reduces cumulative federal deficits by $0.9 trillion over the 2024–2034 period. Some of these budgetary effects result directly from having more people paying taxes and receiving federal benefits. Others arise indirectly from changes in the economy caused by the surge, including higher interest rates and increased productivity among workers who are not part of the surge population.
CBO estimates that federal revenues increase by $1.2 trillion over the 2024–2034 period as a result of the surge. The annual revenue effect grows over time, reaching $167 billion—equal to 2.2 percent of total revenues—in 2034. Most of this increase comes from individual income and payroll taxes paid by immigrants in the surge population. Additional revenue gains stem from higher overall economic activity.
Over the same period, the surge raises spending on federal mandatory programs and net interest by a total of $0.3 trillion. Spending on certain mandatory programs rises over time as more immigrants in the surge population, along with their U.S.-born children, become eligible for benefits. By 2034, those benefits increase mandatory spending by $23 billion, or 0.4 percent of the total. Economywide effects of the surge also raise annual spending, reaching $27 billion in 2034. Higher interest rates driven by the surge lead to increased interest costs on federal debt. Altogether, total federal outlays in 2034 are $50 billion higher because of the surge.
These estimates exclude discretionary spending, which depends on future congressional appropriations. Nevertheless, CBO expects the surge to place additional demands on discretionary-funded programs, particularly those administered by the Department of Homeland Security and the Office of Refugee Resettlement within the Department of Health and Human Services. In 2024, funding for discretionary activities directly related to immigration totaled $37 billion, which is $1 billion more than in 2019 after adjusting for inflation, and the Administration has requested further increases for 2024.
The surge is also expected to affect other discretionary programs tied to population size, such as funding for K–12 education, income support, and infrastructure. If funding for these broad categories rose proportionally with the population increase from the surge, CBO estimates those increases would amount to $24 billion in 2034 and $0.2 trillion over the 2024–2034 period.
CBO does not include discretionary spending effects in its budget totals because such spending will depend on future legislative decisions. Lawmakers could address increased needs either by raising overall appropriations or reallocating funds from other areas.
State and local government budgets are also likely to be affected, though the impact will differ across jurisdictions. Existing research generally finds that immigration increases costs for state and local governments more than it increases revenues, and CBO expects a similar outcome for the current surge. However, the surge population differs in some ways from immigrant groups examined in past studies, and CBO has not conducted a comprehensive analysis of its effects on state and local finances.
Impacts on the Economy
Many of the projected budgetary impacts of the immigration surge are driven by broader economic changes. In CBO’s projections, the surge increases total nominal gross domestic product by $1.3 trillion, or 3.2 percent, in 2034, and by $8.9 trillion cumulatively over the 2024–2034 period. Total wages paid annually also rise, with the increase reaching about 3 percent in 2034. These higher wages significantly contribute to increased federal revenues because they are subject to income and payroll taxes.
Additionally, two main consequences of the surge—faster labor force growth and stronger demand for housing investment—raise the return on capital and place upward pressure on interest rates. Those higher interest rates are a key factor behind the increase in federal spending.