Economic impact of illegal immigrants in the United States
The economic impact of illegal immigrants in the United States is challenging to measure and politically contentious.
- 1 Overview
- 2 Illegal Immigrant population
- 3 Economic benefits of illegal immigrants
- 4 Economic impact of illegal immigrants
- 5 Potential economic impact of amnesty
- 6 Cost-benefit analysis
- 7 See also
- 8 References
There were approximately 11.3 million unauthorized immigrants in the U.S. in 2016, roughly unchanged from the prior year but well below the 12.2 million peak in 2007. There were an estimated 8 million unauthorized immigrants in the U.S. civilian workforce in 2016, roughly 5%. Unauthorized immigrants demand goods and services (thus creating jobs) while contributing payroll and income taxes. They also lower prices in the industries where they provide labor, such as agriculture, restaurants, and construction. A 2017 National Academy of Sciences report reviewing the academic literature on immigration found that immigration benefits the American population on the whole, but had small and mixed effects for low-skilled Americans. The Congressional Budget Office reported in 2007 that "the tax revenues that unauthorized immigrants generate for state and local governments do not offset the total cost of services provided to them" but "in aggregate and over the long term, tax revenues of all types generated by immigrants—both legal and unauthorized—exceed the cost of the services they use." Economist David Card estimated in 2009 that the impact of immigration (both legal and illegal) on income inequality is minimal, less than 5% of the increase between 1980-2000.
Illegal Immigrant population
According to the Pew Research Center, there were 11.3 million unauthorized immigrants living in the United States in 2016, statistically unchanged from the previous year. The number peaked at 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. Non-Mexicans numbered 5.7 million, indicating Mexicans are no longer the clear majority of unauthorized immigrants. 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 represent 26% of farming and 15% of construction labor. They are primarily concentrated in six states: California, Texas, Florida, New York, New Jersey, and Illinois. About two-thirds have been in the U.S. for more than a decade.
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.
One immigration research group reported that the number of illegal immigrants in the U.S. was 12.5 million in August 2007 at its peak. 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 from 11.6 million in January 2008. Between 2000 and 2009, the unauthorized population grew by 27 percent.
Between 2000 and 2007, the fastest rate of growth of the illegal immigrant population was in Georgia, where it grew by 15.2%. In California, the state receiving the greatest number of new illegal immigrants, the number grew by 10.2%, in Florida by 16.7%, and in Texas by 32.7%. Arizona has the highest number of illegal immigrants of any US state. Their share of the workforce there is about 12%. According to a 2010 report by the Georgia Fruit and Vegetable Growers Association, Georgia farmers suffered because of a state regulation requiring illegal immigrants to be reported and not hired. Georgia farmers lost more than 50% of labor and crops because of the limited labor force.
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 age 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 benefits of illegal immigrants
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.
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.
Taxes paid by illegal immigrants
IRS estimates that about 6 million unauthorized immigrants file individual income tax returns each year. Research reviewed by the nonpartisan Congressional Budget Office indicates that between 50 percent and 75 percent of unauthorized immigrants pay federal, state, and local taxes. Illegal immigrants are estimated to pay in about $7 billion per year into Social Security. 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.
The Social Security and Medicare contributions of illegal immigrants directly support older Americans, as illegal immigrants are not eligible to receive these services.
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. For 2010, the Social Security Administration estimated that illegal immigrants and their employers paid $13 billion in social security (OASDI) payroll taxes.
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. 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.
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.
Dr. David Jaeger from Center for American Progress estimated that 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. 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 impact of illegal immigrants
Impact on wages for native low skilled workers
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. 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.
Costs of education
Estimates indicate that about 4% of the school-age population is made up of children who are illegal immigrants. 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." Other estimates of the costs to educate illegal children and US-born children of illegal immigrants reached $30 billion in 2009.
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. 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." 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.
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. 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.
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.
- 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.
Moreover, studies have also shown that not providing illegal 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 illegal women with and without prenatal care and inferred the impact of denial of prenatal benefits to illegal immigrants in California. Nearly 10% of illegal 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 illegal 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 illegal 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 illegal immigrants, these children are actually U.S citizens.
A 2007 review of the academic literature by the nonpartisan Congressional Budget Office found that "over the past two decades, most efforts to estimate the fiscal impact of immigration in the United States have concluded that, in aggregate and over the long term, tax revenues of all types generated by immigrants—both legal and unauthorized—exceed the cost of the services they use." While the overall fiscal impact on the US is beneficial, unauthorized immigrants have an adverse impact 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:
- "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 them, the impact is modest, and most do not qualify for them"; 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 of necessities."
Effect on income inequality
Economist David Card wrote in 2009 that immigration (legal and illegal) has a minor impact on income inequality and wages: "Together these results imply that the impacts of recent immigrant inflows on the relative wages of U.S. natives are small. The effects on overall wage inequality (including natives and immigrants) are larger, reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives. Even so, immigration accounts for a small share (5%) of the increase in U.S. wage inequality between 1980 and 2000."
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.
A 2013 report from the Federation for American Immigration Reform, a non-profit group that advocates limiting both legal and illegal immigration, "report 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." PolitiFact analyzed this study and concluded, "It's uncertain how much immigrants in the United States illegally cost taxpayers, but FAIR's data is largely based on broad estimates and assumptions."
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 are not 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."
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."
Professor of Law Francine Lipman 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."
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.
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. However, it is unclear how much benefit the average unauthorized immigrant household is eligible for.
Heritage Foundation Study
In 2013, 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. Many legislators, researchers and policy professionals from both sides of the immigration debate challenged the methodology of the 2013 Heritage Foundation study and its conclusions, indicating that the Heritage Foundation's estimated deficit figure is grossly inflated and such a deficit may not even exist.
Institute on Taxation and Economic Policy Study
The Institute on Taxation and Economic Policy released a report in February 2016, stating that 11 million illegal immigrants in the United States are paying annually an estimated amount of $11.64 billion in state and local taxes, "on average an estimated 8 percent of their incomes."
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