Economic effects: An overview
As consumers, illegal immigrants demand goods and services, which stimulates economic growth, while paying taxes and receiving some government benefits. Some studies indicate they receive more government benefits than they pay for, particularly in certain states.[20] Illegal immigrants also likely reduce the wages paid to some lower income and lesser-educated workers, with a corresponding reduction in prices in industries that employ their labor.[21]
CBO study
During 2007, the nonpartisan Congressional Budget Office reviewed 29 reports published over 15 years on the impact of unauthorized immigrants on the budgets of state and local governments. While cautioning that the reports are not a suitable basis for developing an aggregate national effect across all states, they concluded that:[20]
State and local governments incur costs for providing services to unauthorized immigrants and have limited options for avoiding or minimizing those costs;
The amount that state and local governments spend on services for unauthorized immigrants represents a small percentage of the total amount spent by those governments to provide such services to residents in their jurisdictions;
The tax revenues that unauthorized immigrants generate for state and local governments do not offset the total cost of services provided to those immigrants, although the impact is most likely modest; and
Federal aid programs offer resources to state and local governments that provide services to unauthorized immigrants, but those funds do not fully cover the costs incurred by those governments.
Heritage Foundation Study
In 2013, the conservative think tank The Heritage Foundation released a study concluding that as of 2010, the average unlawful immigrant household has a net deficit (benefits received minus taxes paid) of $14,387 per household.[22]
Economic benefits of illegal immigrants
Consumer demand
Economic activity produced by illegal immigrant spending employs about 5% of the total US workforce. Illegal immigrants occupy over 3 million dwellings, or just under 4% of the total number of homes in the US. UCLA research indicates immigrants produce $150 billion of economic activity equivalent to spending stimulus every year. The advantages of illegal migration tend mostly to be on the side of the employer. An employer will benefit from the illegal status of a migrant who is desperate for work and therefore prepared to accept poor pay, usually below local norms. Hiring an illegal worker also brings the employer the advantage of paying less in the way of welfare contributions and other non-wage costs.[23]
Nearly every dollar earned by illegal immigrants is spent immediately, and the average wage for US citizens is $10.25/hour with an average of 34 hours per week. This means that approximately 8 million US jobs are dependent upon economic activity produced by illegal immigrant activities within the US.[24][25][26]
Economic growth
Most arguments against illegal immigration begin with the premise that the illegal don't pay income taxes, and that they therefore take more in services than they contribute. However, IRS estimates that about 6 million unauthorized immigrants file individual income tax returns each year.[20] Research reviewed by the nonpartisan Congressional Budget Office indicates that between 70 percent and 80 percent of unauthorized immigrants pay federal, state, and local taxes.[20] Illegal immigrants are estimated to pay in about $7 billion per year into Social Security.[27] In addition, they spend millions of dollars per year, which supports the US economy and helps to create new jobs. The Texas State Comptroller reported in 2006 that the 1.4 million illegal immigrants in Texas alone added almost $18 billion to the state's budget, and paid $1.2 billion in state services they used.[28]
The Social Security and Medicare contributions of illegal immigrants directly support older Americans, as illegal immigrants are not eligible to receive these services.[29] The Internal Revenue Service issues an Individual Taxpayer Identification Number (ITIN) regardless of immigration status because both resident and nonresident aliens may have Federal tax return and payment responsibilities under the Internal Revenue Code. Federal tax law prohibits the IRS from sharing data with other government agencies including the INS. In 2006 1.4 million people used ITIN when filing taxes, of which more than half were illegal immigrants.[30]
Social Security subsidization
Illegal immigrants pay social security payroll taxes but are not eligible for benefits. During 2006, Standard & Poor's analysts wrote: "Each year, for example, the U.S. Social Security Administration maintains roughly $6 billion to $7 billion of Social Security contributions in an "earnings suspense file"—an account for W-2 tax forms that cannot be matched to the correct Social Security number. The vast majority of these numbers are attributable to illegal workers who will never claim their benefits."[31]
The Social Security Administration has stated that it believes unauthorized work by non-citizens is a major cause of wage items being posted as erroneous wage reports instead of on an individual's earnings record.[32] When Social Security numbers are already in use; names do not match the numbers or the numbers are fake, or the person of record is too old, young, dead etc., the earnings reported to the Social Security Agency are put in an Earnings Suspense file [ESF]. The Social Security spends about $100 million a year and corrects all but about 2% of these. From tax years 1937 through 2003 the ESF had accumulated about 255 million mismatched wage reports, representing $520 billion in wages and about $75 billion in employment taxes paid into the over $1.5 trillion in the Social Security Trust funds. As of October 2005, approximately 8.8 million wage reports, representing $57.8 billion in wages remained unresolved in the suspense file for tax year 2003.[32]
Price levels
NPR reported in March 2006 that when the wages of lower-skilled workers go down, the rest of America benefits by paying lower prices for things like restaurant meals, agricultural produce and construction. The economic impact of illegal immigration is far smaller than other trends in the economy, such as the increasing use of automation in manufacturing or the growth in global trade. Those two factors have a much bigger impact on wages, prices and the health of the U.S. economy. But economists generally believe that when averaged over the whole economy, the effect is a small net positive. Harvard's George Borjas says the average American's wealth is increased by less than 1 percent because of illegal immigration.[21]
Dr. David Jaeger from Center for American Progress said if all illegal workers were removed from the workforce, a number of industries would face substantial shortages of workers, and Americans would have to be induced into the labor pool or provided incentives to take jobs far below their current education and skill levels.[33] For this phenomenon to occur to a meaningful extent, substantial wage escalation would likely be necessary, thus eroding competitiveness in global markets. Dependence on foreign low skilled and low income labor will increase because the education level of US population has increased. If in 1960, about 50% of American men were employed by the low-skilled labor force without completing high school; the number is now less than 10%.
Economic costs of illegal immigrants
Ernesto Zedillo, former President of Mexico and current Director of the Yale Center for the Study of Globalization, asserts that illegal immigrants are only a drain on government services when they are incapable of paying taxes; and that this incapacity is the result of restrictive federal policies that require proof of citizenship.
Impact on wages for native low skilled workers
National Public Radio (NPR) reported in March 2006 that: "...overall, illegal immigrants don't have a big impact on U.S. wage rates. The most respected recent studies show that most Americans would notice little difference in their paychecks if illegal immigrants suddenly disappeared from the United States. That's because most Americans don't directly compete with illegal immigrants for jobs. There is one group of Americans that would benefit from a dramatic cut in illegal immigration: high-school dropouts. Most economists agree that the wages of low-skill high-school dropouts are suppressed by somewhere between 3 percent and 8 percent because of competition from immigrants, both legal and illegal. Economists speculate that for the average high-school dropout, that would mean about a $25 a week raise if there were no job competition from immigrants. Illegal immigrants seem to have very little impact on unemployment rates. Illegal workers certainly do take jobs that would otherwise go to legal workers, but illegal workers also create demand that leads to new jobs. They buy food and cars and cell phones, they get haircuts and go to restaurants. On average, there is close to no net impact on the unemployment rate."[21]
Research by George Borjas found that the influx of immigrants (both legal and illegal) from Mexico and Central America from 1980 to 2000 accounted for a 3.7% wage loss for American workers (4.5% for black Americans and 5% for Hispanic Americans). Borjas found that wage depression was greatest for workers without a high school diploma (a 7.4% reduction) because these workers face the most direct competition with immigrants, legal and illegal.[34] In contrast, a study by Economist Giovanni Peri concluded that between 1990 and 2004, immigrant workers raised the wages of native born workers in general by 4%.[35]
In 2008 Gordon H. Hanson at University of California-San Diego and National Bureau of Economic Research performed study on US economy and illegal immigration trend. From the study was concluded that unauthorized immigrants provide a ready source of manpower in agriculture, construction, food processing, building cleaning and maintenance, and other low-end jobs.[36] The study was performed to see if illegal immigration affects the native workers employment. Cities with high percentage of illegal immigration were used in this study and data showed that illegal immigrants overall impact on the US economy is small. On the other hand, US employers gain from lower labor costs and the ability to use their land, capital, and technology more productively. Even if this study didn’t show huge impact on US employment by illegal immigrants, other studies show that illegal immigrant cause increase unemployment for US high school drop-offs. In February 2008, for instance, the national unemployment rate was 4.8 percent, but the unemployment rate for adults (over 25 years old) without a high school diploma was 7.3 percent. In addition the unemployment rate for youth 16–19 years old was 16.8 percent and for young adults 20– 24 years old was 8.9 percent in February, 2008. These three main groups are the employees of low paid and low skilled jobs that are usually taken by illegal immigrants.[37] Since Alabama's new immigration law was signed into law on June 9, 2011, Alabama's unemployment rate fell 1.2 percentage points in three months - September through November. At the same time neighboring state had the same trend. Tennessee and Florida had rate dropped 0.6 percent, Georgia’s unemployment declined 0.4 percent, and in Mississippi unemployment dropped mere tenth of a percent.[38]
Costs of education
Estimates indicate that about 4% of the school-age population is made up of children who are illegal immigrants.[39] Many require remedial assistance in language skills, which increases costs to the public schools. During April 2006, Standard & Poor's analysts wrote: "Local school districts are estimated to educate 1.8 million illegal children. At an average annual cost of $7,500 (averages vary by jurisdiction) per student, the cost of providing education to these children is about $11.2 billion."[40] Other estimates of the costs to educate illegal children and US-born children of illegal immigrants reached $30 billion in 2009.[41]
Spending for public education of illegal immigrant children in K-12 public education in Minnesota for 2003-2004 was a total of $78.76 million to $118.14 million.[42] Alabama alone spend a quarter billion dollars a year on education and social services for illegal immigrants and their children.[43]
For the same time period, total spending in New Mexico at the state and local levels for illegal immigrant schoolchildren was about $67 million.[44]
Illegal immigrants who have attended school in California for three years are eligible for reduced in-state tuition for public colleges.[45]
Incremental legal expenses
Jessica M. Vaughan, Director of Policy Studies at Center for Immigration Studies reported in March 2012 that the Obama administration is trying to move away from using detention centers that are currently housing thousands of illegal immigrants each day. These facilities are very costly. The 608-bed Karnes facility cost the private operator, GEO Group, $32 million to build. This works out to $52,632 per bed. U.S. Immigration and Customs Enforcement (ICE) is expected to pay GEO Group about $15 million a year to run the center.[11] Some apprehended near the border especially native Mexicans, stay less than one day in detention while are under quick processing for departure. Their stay in detention is about 12 hours. ICE detention centers in the southwest border areas handle groups of 100 of these illegal entrants twice a day. These quick turn-backs numbered about 75,000 last year, or nearly 20 percent of ICE's total reported removals. Some of these who had to stay more than 12 hours are released under bonds until their court hearing because of lack of space in detention centers. As of 2010 715,000 of these failed to appear for their hearings in court or who have ignored orders to depart.[11] The US spending on enforcement activities is already very high. Center of Immigration Studies reported that in 2007-2008 enforcement resources like spending on border and interior enforcement cost far more than the tax savings they generated from reduced illegal presence in the United States. Because the net impact of illegal immigration.[46]
Health care
Reuters reported that illegal immigrants, as well as legal immigrants in the country less than five years, generally are not eligible for Medicaid. However, they can get Medicaid coverage for health emergencies if they are in a category of people otherwise eligible, such as children, pregnant women, families with dependent children, elderly or disabled individuals, and meet other requirements. The cost of this emergency care was less than 1% of Medicaid costs in North Carolina from 2001–2004 and the majority was for childbirth and related complications.[47] USA Today reported that "Illegal immigrants can get emergency care through Medicaid, the federal-state program for the poor and people with disabilities. But they can't get non-emergency care unless they pay. They are ineligible for most other public benefits."[48] In 2006, the Oklahoma Health Care Authority estimated that it would spend about $9.7 million on emergency Medicaid services for unauthorized immigrants and that 80 percent of those costs would be for services associated with childbirth.[49]
Because of the U.S. Emergency Medical Treatment and Active Labor Act of 1986 (42 U.S.C. § 1395dd), most hospitals may not refuse anyone treatment for an emergency medical condition because of citizenship, legal status, or ability to pay. An example of the cost conflict between federal government, state and local government, and private institutions, the Immigration and Naturalization Service (INS) brings injured and ill illegal immigrants to hospital emergency rooms but does not pay for their medical care.[50] Almost $190 million, or about 25 percent, of the uncompensated costs Southwest border county hospitals incurred resulted from emergency medical treatment provided to illegal immigrants.[50]
At least two research studies have been done which attempt to discover the cost of health care for illegal immigrants by asking the illegal themselves.
A phone survey in which Alexander Ortega and colleagues at the University of California asked illegal immigrants how often they receive medical care reported that illegal immigrants are no more likely to visit the emergency room than native born Americans.[51]
A RAND study concluded that the total federal cost of providing medical expenses for the 78% illegal immigrants without health insurance coverage was $1.1 billion, with immigrants paying $321 million of health care costs out-of-pocket. The study found that illegal immigrants tend to visit physicians less frequently than U.S. citizens because they are younger and because people with chronic health problems are less likely to migrate.[52][53]
Moreover, studies have also shown that not providing undocumented immigrants with a decent healthcare might actually cost the country in the long-run rather than save expenses. In 2000, researchers compared the perinatal outcomes and costs of undocumented women with and without prenatal care and inferred the impact of denial of prenatal benefits to undocumented immigrants in California. Nearly 10% of undocumented women had no prenatal care. These women were nearly 4 times as likely to be delivered of low birth weight infants and more than 7 times as likely to be delivered of premature infants as were undocumented women who had prenatal care. For every dollar cut from prenatal care, an increase of $3.33 in the cost of postnatal care and $4.63 in incremental long-term cost were expected. Elimination of publicly funded prenatal care for undocumented women could save the state $58 million in direct prenatal care costs but could cost taxpayers as much as $194 million more in postnatal care, resulting in a net cost of $136 million initially and $211 million in long-term costs. Although their parents are undocumented immigrants, these children are actually U.S citizens.[54]
Effect on per-capita wealth due to contribution to population growth
As recognized in a World Bank report,[55] population growth has a deteriorating effect on per-capita wealth. Quantitatively, it introduces "a Malthusian term" in calculations of changes in per-capita wealth with time. Wealth includes public as well as private wealth. A water reservoir, or a highway for automobiles, for example, has a per-capita value that diminishes as the number of people using it increases, unless the reservoir or highway is enlarged (which has costs, including environmental ones that may be hard to measure). As of 2012, net immigration, including both legal and illegal immigration, constitutes more than 25 percent of US population growth.[56]
Potential economic impact of amnesty
Amnesty refers to granting illegal immigrants additional rights, which grants access to more government services while requiring higher taxes. The Heritage Foundation reported in 2013: "If enacted, amnesty would be implemented in phases. During the first or interim phase (which is likely to last 13 years), unlawful immigrants would be given lawful status but would be denied access to means-tested welfare and Obamacare. Most analysts assume that roughly half of unlawful immigrants work “off the books” and therefore do not pay income or FICA taxes. During the interim phase, these “off the books” workers would have a strong incentive to move to “on the books” employment. In addition, their wages would likely go up as they sought jobs in a more open environment. As a result, during the interim period, tax payments would rise and the average fiscal deficit among former unlawful immigrant households would fall." During the interim phase immediately after amnesty plans then under discussion, tax payments would increase more than government benefits, and the average fiscal deficit for former unlawful immigrant households would fall moderately to $11,455. At the end of the interim period, unlawful immigrants would become eligible for means-tested welfare and medical subsidies under Obamacare. Average benefits would rise to $43,900 per household; tax payments would remain around $16,000; the average fiscal deficit (benefits minus taxes) would be about $28,000 per household. Amnesty would also raise retirement costs by making unlawful immigrants eligible for Social Security and Medicare, resulting in a net fiscal deficit of around $22,700 per retired amnesty recipient per year.[22]
Cost-benefit analysis
Professor of Law Francine Lipman [57] writes that the belief that illegal migrants are exploiting the US economy and that they cost more in services than they contribute to the economy is "undeniably false". Lipman asserts that "illegal immigrants actually contribute more to public coffers in taxes than they cost in social services" and "contribute to the U.S. economy through their investments and consumption of goods and services; filling of millions of essential worker positions resulting in subsidiary job creation, increased productivity and lower costs of goods and services; and unrequited contributions to Social Security, Medicare and unemployment insurance programs."[58]
Aviva Chomsky, a professor at Salem State College, states that "Early studies in California and in the Southwest and in the Southeast...have come to the same conclusions. Immigrants, legal and illegal, are more likely to pay taxes than they are to use public services. illegal immigrants aren't eligible for most public services and live in fear of revealing themselves to government authorities. Households headed by illegal immigrants use less than half the amount of federal services that households headed by documented immigrants or citizens make use of."[59]
Editorialist Robert Samuelson points out that poor immigrants strain public services such as local schools and health care. He points out that "from 2000 to 2006, 41 percent of the increase in people without health insurance occurred among Hispanics", although he makes clear that these facts are true of legal as well as illegal immigrants.[60]
According to a 1998 article in The National Academies Press, "many [previous studies] represented not science but advocacy from both sides of the immigration debate...often offered an incomplete accounting of either the full list of taxpayer costs and benefits by ignoring some programs and taxes while including others," and that "the conceptual foundation of this research was rarely explicitly stated, offering opportunities to tilt the research toward the desired result."[61] One survey conducted in the 1980s found that 76 percent of economists felt recent illegal immigration had a positive effect on the economy.[62]
National Public Radio (NPR) wrote in 2006: "Supporters of a crackdown argue that the U.S. economy would benefit if illegal immigrants were to leave, because U.S. employers would be forced to raise wages to attract American workers. Critics of this approach say the loss of illegal immigrants would stall the U.S. economy, saying illegal workers do many jobs few native-born Americans will do."[21]
The Center for Immigration Studies, an organization that advocates Immigration reduction in the United States, reported in 2004: "Households headed by illegal aliens imposed more than $26.3 billion in costs on the federal government in 2002 and paid only $16 billion in taxes, creating a net fiscal deficit of almost $10.4 billion, or $2,700 per illegal household."[63]
The Feb 2011 report "The Fiscal Burden of Illegal Immigration on US Taxpayers" from the Federation for American Immigration Reform, also an organization that advocates for reduction of immigration to the US, "estimates the annual costs of illegal immigration at the federal, state and local level to be about $113 billion; nearly $29 billion at the federal level and $84 billion at the state and local level. The study also estimates tax collections from illegal alien workers, both those in the above-ground economy and those in the underground economy. Those receipts [apx $13 billion] do not come close to the level of expenditures..." [64]
Relative contribution by income tax bracket
PEW studies on unauthorized immigrants estimates that the average household of 3.1 persons earns about $36,000 per year. This average wage is consistent with about the PEW estimate of 49% of illegal immigrants not having graduated from any kind of high school.[65]
The Congressional Budget office (CBO) estimates that people in this salary bracket (the second quintile) pay about 6.8% of their income in Federal taxes.[66]
The Heritage Foundation estimates that the average household in the bottom quintile received $29,015 in benefits and paid $4,251 in Federal, state and local taxes. In the second quintile the average household received $24,709 in benefits and paid $9,524 in Federal, state and local taxes. In the top quintile, the average household received $21,515 in benefits and services and paid $69,704 in Federal, state and local taxes.[67] However, it is unclear how much benefit the average unauthorized immigrant household is eligible for.
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