I would hate to see decisions on immigration reform made on the basis of what is "good for the economy," good for business interests, or the wallets of economically comfortable Americans. In previous diaries I documented how our current high rate of immigration is driving a large increase in population and adversely effecting low-income American workers. I hope these issues, along with compassionate, humanitarian concern for illegal immigrants will be the basis for our decisions.
However, in our corporate-owned media, and even on Daily Kos, the assumed economic benefits of immigration are often given as a strong reason for both amnesty and continued high rates of immigration. Clearly, green cards for people with Stanford doctorates in electrical engineering are good for the economy, but it is also generally assumed that we benefit economically from the massive influx of unskilled immigrants, both legal and illegal. I would like to examine that assumption, because bad policy results from unsound arguments.
Robert Rector and Christine Kim (2007) published a study evaluating the tax costs and contributions in 2004 of non-diploma immigrant households, meaning those headed by an individual who has not completed high school. Sixty percent of these immigrants are legal, 40% are illegal, and there are 15.9 million people in these households. Rector and Kim estimated that in 2004 the average non-diploma immigrant household had a total income of $28,890. From this, they paid taxes of $10,573 to all levels of government, directly and also indirectly, through purchases, landlords or as taxes paid by their employers. However, the average non-diploma immigrant household received taxpayer-supplied benefits of $30,160. That means the household was being subsidized at the rate of $19,587 a year by other taxpayers.
In order to calculate only the actual fiscal impact of the presence of these immigrants, the $30,160 of calculated taxpayer-supplied benefits included only direct benefits to them such as education, welfare and other public assistance, and their share of expenses that increase with population, such as the cost of roads and law enforcement. It does not include what would be their fair share of the cost of such enormous government expenses as defense, research, and interest on the national debt. Rector and Kim also point out that these immigrants will not save Social Security and Medicare for us, because they consume more government benefits than they pay for with taxes, throughout their lives. Rector and Kim work for the Heritage Foundation, a very Republican organization, but their report is comprehensive and every assumption and calculation is documented. Their methods and results are difficult to contest.
The direct tax subsidy to non-diploma immigrants is large, but it is important to know to what extent it is offset by their non-tax impact on the economy. I used the detailed numbers reported by Rector and Kim, and a couple of other numbers, to compare the contribution of these households to the economy, with what they receive from it. In economic terms, the total of goods and services that a household provides to the economy is reasonably estimated as the income earned by the members of the household, plus the profit they contribute to the businesses that employ them, plus taxes paid by the employer on behalf of employees. These include taxes for unemployment insurance, workers compensation, and the employer’s share of Social Security and Medicare taxes. In 2004 corporate profits in the U.S. were 22% of total wages and salaries (Center on Budget and Policy Priorities) , and I assumed that the labor of workers provides 70% of those profits. With those percentages, the immigrant household would contribute profits of $4449 to its employers and the economy. If we add that to the household income of $28,890 and the applicable employer-paid taxes of $1943, the household’s total contribution of goods and services to the economy is $35,282. Employer-paid taxes on the share of profits attributable to employees are not included in the taxes, because profits themselves are included.
What are the goods and services received by the household from the economy? This includes the $30,160 in household benefits from the government, plus the household’s income of $28,890. From this is subtracted $7757, which is the total in taxes that the household pays directly or indirectly (as through purchases) from its income. The total of goods and services received is $51,293. So, they are consuming $51,293 in goods and services, but contributing only $35,282. Because we are an affluent nation that provides roads, schools, parks, police protection and some medical care to all of our people, the average non-diploma immigrant household actually consumes $16,011 more each year than it produces. The household incomes do not include employer-supplied health insurance or retirement plans, but since these would be added to both what the household produces and what it receives, they do not affect the $16,011 difference.
These immigrants are hard working people, but in economic terms they are effectively more benefit recipients than workers. Although they make the total economy (GDP) larger, which is what politicians and the media celebrate, they actually make the rest of us poorer by consuming more than they produce. It is true that by driving down wages these workers reduce their employers’ cost of doing business. Much of that feeds the profits already estimated, and some of it slightly lowers prices to consumers. But, reduced wages, greedily desired by the business community, are a serious burden for low-skill non-immigrant workers who must share those reduced wages. Cheap immigrant labor it is not good for our economy in any meaningful sense; it is an extravagant luxury.
We now receive about 1.1 million legal immigrants (Department of Homeland Security, 2008 Yearbook), and were receiving an average of 500,000 illegal immigrants per year (Camarota, 2007) until the recession. Of immigrants arriving from 2000 to 2007, 35% have less than a high school education (Camarota, 2007). That translates into more than half a million additional poorly educated immigrants a year.
But, while we are making summations, we should consider the humanitarian benefit of our policies, and perhaps also the costs, for the poor of the world. This is difficult to quantify, but for what we spend to maintain one immigrant in a state of poverty in our high-cost nation we could probably lift up a whole village in his homeland with programs for schools, and nutrition for children. That would be an investment with far greater benefits. If people are hungry you can feel good by taking a random few to lunch at the Ritz-Carlton, or you can do good by giving all of them the tools to make a living where they are. Are we really helping the poor of those countries or just taking a little political heat off their ruling elites by running a high stakes lottery for their citizens, and ridding them of the very people who might otherwise take the initiative to force change?
REFERENCES
Rector, Robert. and Kim, Christine, 2007. The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer. Heritage Special Report, SR-14. The Heritage Foundation. http://www.heritage.org/...
Center on Budget and Policy Priorities. Share of National Income Going to Wages and Salaries at Record Low in 2006, http://www.cbpp.org/...
Department of Homeland Security. Yearbook of Immigration Statistics: 2008. Table 1: Persons Obtaining Legal Permanent Resident Status: Fiscal Years 1820 to 2008. http://www.dhs.gov/...
Camarota, 2007. "Immigrants in the United States, 2007: A Profile of America’s Foreign-Born Population," by Steven A. Camarota of the Center for Immigration Studies. http://www.cis.org/...