Chapter 6
The Cost of Immigration

WEIGHING THE COSTS AND BENEFITS OF IMMIGRATION

Immigration is a hotly contested issue. Immigration supporters contend that immigrants contribute considerable sums of money to the public coffers and that, in an aging society, immigration is the only hope for a secure economic future. By contrast, immigration opponents argue that immigrants cost taxpayers far more than they contribute.

According to the Center for Immigration Studies (CIS), in "Costs" (December 17, 2006, http://www.cis.org/topics/costs.html), the National Research Council estimates the annual net fiscal impact of immigration to be between $11 billion and $22 billion per year, "with most government expenditures on immigrants coming from state and local coffers, while most taxes paid by immigrants go to the federal treasury." Because immigrants are disproportionately low skilled, they earn lower wages and pay a lower level of taxes. The CIS notes that their relative poverty and higher fertility rate causes them to use more government services.

FEDERAL SPENDING FOR IMMIGRATION

Immigrants and Public Assistance

In Immigrants at Mid-decade: A Snapshot of America's Foreign-Born Population in 2005 (December 2005, http://www.cis.org/articles/2005/back1405.pdf), Steven A. Camerota of the Center for Immigration Studies states that "immigration accounts for most of [the] increase in the uninsured" population in the United States. He cites Census Bureau reports that the total population without health insurance grew by 12.4 million between 1989 and 2004. Much of this growth in uninsured population has been attributed to reduced availability of employer-sponsored insurance because of escalating costs. Camerota reports that 8.3 million immigrants who arrived during or after 1990 do not have health insurance. He further estimates that nearly 700,000 children born to these post-1990 immigrants lack insurance. Thus, the roughly nine million new immigrants and their U.S.-born children account for 73% of the growth in the nation's uninsured population. Table 6.1 shows that Central American countries produced the highest percentages of uninsured immigrants. More than half of the immigrants in the United States from three countries—Guatemala (58%), Mexico (53.8%), and Honduras (50.4%)—lacked insurance. The greatest number of uninsured immigrants (5.8 million) came from Mexico.

MEDICAID

According to Camerota, 17.4% of immigrants and their U.S.-born children under age eighteen were enrolled in Medicaid in 2004, compared with 12% of natives and their children. He arrives at these figures with the last two sets of data at the bottom of Table 6.1. For example, subtracting 29.3% "Immigrants and Their US-Born Children [Uninsured]" from 46.7% "Immigrants and Their US-born Children Uninsured or on Medicaid" leaves 17.4% of all immigrants and their U.S.-born children using Medicaid insurance benefits.

ALL PUBLIC ASSISTANCE PROGRAMS

Camerota also evaluates use of public assistance programs by immigrants. Table 6.2 shows the share of U.S. households in which at least one member of the household received public assistance (including Temporary Assistance to Needy Families and state-administered general assistance programs); Supplemental Security Income (SSI) for low-income elderly and disabled people; food stamps; Medic-aid health insurance for those with low incomes; subsidized or government-owned housing; or Women, Infants, and Children nutrition program services. Information is reported for the entire household based on whether the head of household is a native or an immigrant. This means U.S.-born children of immigrants are counted with the immigrant household. Besides comparing all native households to all immigrant households, Camerota compares immigrants by period of arrival in the United States.

In Camerota's analysis, if "welfare" only means cash assistance programs (public assistance, SSI, food stamps, and public or subsidized housing), then immigrant use was roughly the same as natives. However, he notes that "some may reasonably argue that because immigration is supposed to benefit the United States, our admission criteria should, with the exception of refugees, select only those immigrants who are self-sufficient…. From the point of view of taxpayers, immigrant use of Medicaid is the most problematic because that program costs more than the combined total for the other five programs" identified in Table 6.2. Medicaid was used by 24.2% of immigrant households, compared with 14.8% of native households.

NEW DOCUMENTATION REQUIREMENTS MAY AFFECT CITIZENS

The Deficit Reduction Act of 2005 requires people applying for or renewing Medicaid coverage to provide documentation of U.S. citizenship. These new requirements were implemented to address concerns that illegal aliens are receiving Medicaid benefits for which they are not eligible. Primary evidence of citizenship is a U.S. passport, Certificate of Naturalization or Certificate of Citizenship, and in some cases state driver's licenses that meet the same documentation requirements for issue. Documentation such as a birth certificate, hospital records, insurance records, and so on have to be accompanied by an identity document. Some groups are excluded from this requirement, such as people already receiving Social Security Disability Insurance and children in foster care.

The Kaiser Commission on Medicaid and the Uninsured, in the fact sheet "Citizenship Documentation Requirements in Medicaid" (January 2007, http://www.kff.org/medicaid/upload/7533-02.pdf), expresses concern that obtaining passports and birth certificates to enroll in Medicaid can be costly and time consuming for low-income people. The Kaiser Commission identifies Native Americans; people with disabilities who do not receive Medicaid, SSI, or Social Security Disability Insurance; the homeless; and Hurricane Katrina victims as groups particularly likely to have difficulty obtaining the required documents to prove their eligibility for Medicaid. An additional change requires that a U.S.-born child of an ineligible immigrant mother cannot obtain Medicaid benefits, other than emergency care at birth, until an application with citizenship documentation has been filed on behalf of the child. The Kaiser Commission believes that this change will discourage the mothers from applying and the infants will not receive routine medical care.

Since implementation of the new documentation requirements, the Kaiser Commission reports that some states have experienced declining enrollments in the State Children's Health Insurance Program, a program available to low-income children who do not qualify for Medicaid. Child welfare advocates are concerned that difficulty in obtaining required documentation will delay or prevent vulnerable children from receiving needed health care.

EARNED INCOME TAX CREDITS

The Earned Income Tax Credit (EITC) is for low-income workers. People eligible to receive the EITC pay no federal income tax and instead receive cash assistance from the government based on their earnings and family size. Camerota notes that the figures for the EITC are probably overstated because the Census Bureau estimated the numbers based on income and family size. (See Table 6.2.) According to Camerota, with an annual cost of over $30 billion, the EITC is the nation's largest means-tested cash assistance program for workers with low incomes. In 2005, 15.8% percent of native households qualified for the credit, compared with 30% of immigrant households.

Table 6.3 shows that in 2004 and 2005 immigrants from the Dominican Republic had the highest use of welfare programs in general (57.2%) and the highest use of food stamps (19.4%), subsidized housing (17.8%), and Medicaid (49.7%). Immigrants from Russia had the highest use of SSI (15.4%). The EITC was used by nearly half of immigrants from Mexico (49.9%) and Guatemala (49.5%). Slightly less than twice the share of immigrant households (30.1%) used welfare programs, compared with native households (16%).

IMPLICATIONS OF IMMIGRANT WELFARE USE FOR STATES

More than one-third of immigrant households in Arizona (37.3%), California (35%), and New York (34.5%) used some type of welfare program. (See Table 6.4.) For state governments, Medicaid is a particular concern because half to two-thirds of the program's costs are borne by state taxpayers. Arizona and Texas had the greatest share of immigrants and their foreign-born children using Medicaid—63.2% and 61.3%, respectively.

SOCIAL SECURITY AND IMMIGRANT EARNINGS

According to Eduardo Porter, in "Illegal Immigrants Are Bolstering Social Security with Billions" (New York Times, April 5, 2005), "Immigrant workers in the United States are now providing the [Social Security] system with a subsidy of as much as $7 billion a year." His report is based on Social Security taxes, which are deducted from employee paychecks, matched by employers, and held in the Social Security Administration's (SSA) Earnings Suspense File (ESF). These are wage credits for which Social Security numbers and employee names do not match SSA records. Mismatches often result from typographical errors in employer annual wage reports or in omissions, such as an employee's failure to notify the SSA of a name change because of marriage. However, taxes paid by illegal aliens using false Social Security numbers (numbers never issued) or stolen numbers also end up in the ESF.

In Social Security Benefits for Noncitizens: Current Policy and Legislation (July 22, 2004, http://hutchison.senate.gov/RL32004.pdf), Dawn Nuschler and Alison Siskin of the Congressional Research Service report the total ESF at $421 billion at the end of fiscal year (FY) 2003. In his testimony before the House Committee on Ways and Means, Subcommittee on Social Security, Deputy Commissioner of Social Security James B. Lock-hart III (February 16, 2006, http://www.ssa.gov/legislation/testimony_021606.html) reported that the $7.2 billion in payroll taxes credited to the ESF in tax year 2003 represented 1.3% of total 2003 Social Security taxes paid. According to Lockhart, 2003 was the most recent year for which data were available. Lockhart and Porter both appear to be using 2003 ESF data, but there is no clear definition of what share of the 2003 ESF actually came from illegal workers.

Porter cites a U.S. Government Accountability Office (GAO) audit of the ESF concerning the earnings reported under false Social Security numbers. The audit identified one hundred employers filing the most earnings reports with false numbers between 1997 and 2001. More than half of such employers were located in three states with large immigrant populations: California, Texas, and Illinois. About 17% of these employers were restaurants, 10% construction companies, and 7% farm operations.

Totalization Agreements

Nuschler and Siskin report that most jobs in the United States are subject to Social Security tax. Noncitizens performing Social Security-covered work must pay Social Security payroll taxes. This includes legal temporary workers and those working without authorization. Nuschler and Siskin note some exceptions. For example, the work of aliens under certain visa categories (e.g., H2A agricultural workers) is not covered by Social Security. Generally, the work of citizens of a country with which the United States has a totalization agreement is not covered if they work in the United States for less than five years. A totalization agreement coordinates the payment of Social Security taxes and benefits for workers who divide their careers between two countries.

In June 2004 U.S. and Mexican representatives signed a totalization agreement. According to the SSA, in "The U.S.-Mexico Totalization Agreement" (January 2007, http://www.numbersusa.com/hottopic/totalization.htm), totalization with Mexico relieves U.S. citizens working for U.S. companies in Mexico from paying Social Security taxes to both countries. The agreement also removes the double-taxation requirement for Mexican citizens working for Mexican companies in the United States. Employers and their employees in both countries contribute to either the U.S. or Mexican Social Security systems, but not both. By SSA estimates, approximately three thousand U.S. workers and their employers will share tax savings of $140 million over the first five years of the agreement. However, according to Nuschler and Siskin, the SSA also estimates the agreement will cost about $105 million in annual benefits paid during the first five years of the agreement. Nuschler and Siskin state the GAO reported in 2003 that "'the cost of a totalization agreement with Mexico is highly uncertain' because of the large number of unauthorized immigrants from Mexico estimated to be living in the United States."

Opponents of the totalization agreement argue that Mexican workers who cross the border and work illegally in the United States will be able to collect U.S. Social Security benefits. They also believe that an amnesty could give illegal workers credit for Social Security taxes paid during years of illegal work.

EXISTING U.S. TOTALIZATION AGREEMENTS

According to the SSA (March 2, 2007, http://www.ssa.gov/international/status.html), the United States has totalization agreements in effect with twenty-one countries. Table 6.5 details the number and types of U.S. Social Security monthly benefit payments made to citizens of foreign countries under totalization agreements. Between 1996 and 2005 the total number of payments increased from 59,455 to 112,910.

U.S. Department of Homeland Security Budget

The government's focus on border security measures since the terrorist attacks of September 11, 2001, dramatically increased immigration-related costs. The largest segments of the 2007 U.S. Department of Homeland Security's (DHS) $42.7 billion budget were focused on monitoring and limiting who enters the country. (See Table 6.6.) The U.S. Coast Guard received $8.2 billion of the total budget, the U.S. Customs and Border Patrol, $7.8 billion, and the Transportation Security Administration, $6.3 billion. The $4.7 billion allotted to the U.S. Immigration and Customs Enforcement (ICE) agency was 11% of the overall 2007 budget, but it represented the largest increase (21%) over the 2006 budget.

According to the DHS, in Budget-in-Brief Fiscal Year 2007 (2007, http://www.dhs.gov/xlibrary/assets/Budget_BIB-FY2007.pdf), the second priority listed in its budget was strengthening border security and reforming immigration processes as part of a Secure Border Initiative. This included "establishing a Temporary Worker Program." The addition of fifteen hundred new agents would bring the border patrol to nearly fourteen thousand agents. About $100 million was targeted to electronic border surveillance and response. Another $400 million would be used to increase to 27,500 the number of detention beds for aliens apprehended.

U.S. Aid for Refugees

U.S. refugee policy has been based on the premise that the care of refugees and other conflict victims, as well as the pursuit of permanent solutions for refugee crises, are shared international responsibilities. The more refugees assisted in their home regions, the fewer that might ultimately require resettlement outside those regions. Following this philosophy, the U.S. Department of State annually contributes to overseas assistance funds administered by international organizations and nongovernmental organizations that carry out relief services.

The FY2007 State Department budget request for the Emergency Refugee and Migration Assistance program was $832.9 million. (See Figure 6.1.) Overseas aid to refugees accounted for 65% of the budget, whereas 27% was targeted for refugees admitted to the United States.

STATE SPENDING ON IMMIGRATION

Cost to States for Incarcerating Criminal Aliens

The DHS's Bureau of Justice Administration oversees the State Criminal Alien Assistance Program (SCAAP), in conjunction with ICE. SCAAP provides federal payments to states and localities that incurred correctional officer salary costs for incarcerating undocumented criminal aliens. These funds apply to aliens with at least one felony or two misdemeanor convictions for violations of state or local law who are incarcerated for at least four consecutive days during the reporting period. SCAAP covers only a share of corrections staff salaries related to the incarceration of criminal aliens. Other expenses, such as feeding, clothing, and providing medical attention to the prisoners, are not included in this federal reimbursement program.

The Bureau of Justice Assistance (2007, http://www.ojp.usdoj.gov/BJA/grant/scaap.html) reports that FY2006 awards totaled $376 million, an increase of 31% over $287 million awarded in FY2005. Because the funding formula did not change, the increased awards represented a combination of more localities applying for reimbursement and a greater number of prisoner days attributed to criminal aliens. According to the Federation for American Immigration Reform, in "Immigration's Impact on the U.S." (January 2007, http://www.fairus.org/site/PageServer?pagename=research_research9605), the $287 million SCAAP awards for FY2005 represented just 33.5% of actual salary costs incurred by states and localities in housing illegal aliens.

Financial Impact of Undocumented Immigrants in Texas

In Undocumented Immigrants in Texas: A Financial Analysis of the Impact to the State Budget and Economy (December 2006,

http://www.cpa.state.tx.us/specialrpt/undocumented/undocumented.pdf), Carole Keeton Stray-horn indicates that state revenue generated by the estimated 1.4 million illegal aliens living in Texas exceeded the cost of state services they received in FY2005. Strayhorn notes that her findings are contrary to two other studies on costs to states: The Cost of Illegal Immigration to Texans (April 2005, http://www.fairus.org/site/DocServer/texas_costs.pdf?docID=301) by Jack Martin and Ira Mehlman and Costs of Federally Mandated Services to Undocumented Immigrants in Colorado (June 30, 2006, http://www.thebell.org/PUBS/IssBrf/2006/06ImmigCosts.pdf) by Rich Jones and Robin Baker. These studies find state costs for illegal aliens exceeded revenues generated by the illegal aliens. According to Strayhorn, these two studies do not accurately represent costs of illegal aliens because they include data for legal permanent residents, citizen children of illegal alien parents, and expenses paid from other than state funds.

Strayhorn focuses on state-funded services to "undocumented immigrants" living in Texas. In many cases funding is determined by federal restrictions on state spending. The government-sponsored programs listed as "available" to undocumented immigrants are in Table 6.7, such as K-12 education or emergency medical care, generated a cost to the state when used. Because Texas does not have a state income tax, Strayhorn suggests it is easier to identify undocumented immigrants' share of consumption taxes that all residents pay.

EDUCATION COSTS

Using data from the GAO and the Texas Education Agency, Strayhorn estimates that 135,013 undocumented students attended Texas public schools in the 2004–05 academic year and cost the state $957 million. Strayhorn notes that Martin and Mehlman have a much higher estimate of $1.7 billion for the 2003–04 Texas academic year because they include federal funds.

In 2001 the Texas Legislature made provisions to allow certain noncitizen residents to be classified as Texas residents for in-state college tuition. In 2005 the legislature made residency requirements for in-state tuition uniform for all students regardless of legal status. As a result, the number of noncitizen students enrolled with in-state tuition increased tenfold, from 393 in 2001 to 3,792 in 2004. (See Table 6.8.) During this period the average per student cost of state funding decreased. Strayhorn notes that not all noncitizen students in this report were undocumented. For example, noncitizen children of ambassadors and diplomats living in the state might qualify for instate tuition and thus be counted in the report. Strayhorn estimates the state's cost for undocumented students receiving in-state tuition at $11.2 million.

HEALTH CARE COSTS

Health care for undocumented immigrants was a major expense shared by private, local, state, and federal entities. Table 6.9 identifies major types of health care expenses paid by Texas in 2005. The largest share (30% of all health care costs for undocumented immigrants) was $38.7 million in emergency Medicaid. Medicaid provides health care to low-income families, pregnant women, elderly people, people with disabilities, and dependent children who meet income and assets limitations. In the case of a medical emergency that may threaten an individual's life (including labor and childbirth), Medicaid is available to people who otherwise qualify regardless of immigration status. The estimated $57.9 million total cost of services for undocumented immigrants comprised 10.6% of Texas's health care expenditures in FY2005.

REVENUES

Strayhorn identifies revenue sources from undocumented immigrants in Texas as consumption taxes (general merchandise, motor vehicles, gasoline, alcoholic beverages, cigarettes and tobacco, and hotels), lottery proceeds, utility taxes, court costs and fees, other revenue (including higher education tuition, state park fees, and fireworks taxes), and school property taxes. Table 6.10 provides estimates of these state revenues and the share paid by undocumented immigrants. By this calculation undocumented immigrants contributed about 3.3% of Texas state revenues in FY2005.

ECONOMIC IMPACT

Table 6.11 tallies the costs of undocumented immigrants in Texas and the revenues they generated in FY2005, according to Strayhorn in Undocumented Immigrants in Texas. The result was a net $424.7 million positive impact on the state of Texas. Strayhorn notes, however, that undocumented immigrants had an estimated negative impact of $928.9 million on local governments and hospitals.

Cost of Undocumented Immigrants to Colorado

Jones and Baker note in Costs of Federally Mandated Services to Undocumented Immigrants in Colorado that "while there is a small deficit, it is clear … that undocumented immigrants are not bankrupting state and local government" in Colorado. Jones and Baker examine the cost of federally mandated services provided to Colorado's undocumented immigrants during fiscal years 2005 and 2006. The $224.9 million expense came from the three major categories used by Strayhorn: K-12 education, emergency medical care, and incarceration. They do not include in-state tuition expenses for higher education. According to Jones and Baker, a March 2006 report by Defend Colorado Now, an organization they characterized as "proponents of a proposed constitutional amendment to deny nonfederally mandated, non-emergency government services to undocumented immigrants in Colorado," estimated the costs of these services at over $1 billion. Jones and Baker note that a May 2006 Issue Brief by the Colorado Legislative Council placed the cost of these services considerably lower at $218 million.

Key differences among these studies are the data sources and methods used to determine how many undocumented residents are in a state and what services they used. Both Jones and Baker and Strayhorn rely on 2005 estimates of the nation's undocumented population developed by Jeffrey S. Passel of the Pew Hispanic Center in Size and Characteristics of the Unauthorized Migrant Population in the U.S. (March 7, 2006, http://pewhispanic.org/files/reports/61.pdf). Jones and Baker estimate that 28,480 school-age undocumented children in Colorado cost the state $175.6 million. Furthermore, they tally $31.3 million in emergency medical care that, like Stray-horn, includes legal permanent residents and other authorized foreign nationals.

Jones and Baker estimate that 250,000 undocumented immigrants in Colorado paid $159 million to $194 million in state and local taxes, which covered 70% to 86% of their estimated $224.9 million in expenses to the state for federally mandated services.

COST OF IMMIGRATION CONTROL LEGISLATION

In 2005 Colorado voters approved a ban on state spending on illegal immigrants except as required by the federal government. Mark P. Couch notes in "Pricey Immigration Law" (Denver Post, January 25, 2007) that state departments acknowledged spending about $2 million in 2006 to comply with the law. No departments reported a cost savings.

REMITTANCES—THE FLOW OF MONEY OUT OF THE UNITED STATES TO LATIN AMERICA

In "Consulates in U.S. Hit the Road to Help Far-Flung Paisanos" (Wall Street Journal, November 29, 2006), Joel Millman describes efforts by Latin American governments to help migrants continue working in the United States. At stake was some $50 billion in remittances—money migrant workers send to support family members back home. Millman states that "for El Salvador, Haiti and Nicaragua, such remittances are their largest source of hard currency." The income is so important to the economies of Latin American countries that diplomatic teams at consulates in the United States are taking their services to their constituents.

Millman describes a visit by members of El Salvador's San Francisco, California, consulate to the remote island of Kodiak, Alaska, where an estimated six hundred Salvadoran nationals worked in the fishing and canning industries. Among other services, the consul staff helped fifty Salvadoran nationals complete applications for Temporary Protected Status that would allow them to stay permanently in the United States. In another example cited by Millman, members of the Mexican consulate set up an assembly line of laptop computers, digital cameras, and fingerprint scanners to renew passports and produce identification documents for Mexican nationals during a trip to Anchorage, Alaska.

Identification Documents

Some foreign governments, including Mexico, issue consular ID cards to their citizens living abroad. According to Katherine Gigliotti and Ann Morse in The ABCs of IDs for Immigrants in the United States (December 2004, http://www.ncsl.org/print/immig/immigrantid05.pdf), the ID cards provide no proof of legal immigration status in the United States but help consuls keep track of their citizens for tax and census purposes. Mexican nationals can obtain a Certificate of Consular Registration—the Matrícula Consular—only by appearing in person at one of their country's forty-five consular offices in the United States (or a traveling office) and providing documentation of their identification and Mexican birth.

Consul officials have persuaded many banks to accept consul IDs in lieu of Social Security cards so foreign nationals can open U.S. bank accounts. According to Mill-man, the consuls cited concern for migrant safety. Most migrants have no secure place to keep large amounts of money, and keeping cash in their wallets or in their homes makes them targets for theft.

Transmitting Remittances

The effectiveness of such consular campaigns can be seen in migrants' increased use of banks or credit unions to transmit remittances to their families back home. The Inter-American Development Bank (IADB) reports in Sending Money Home: Leveraging the Development Impact of Remittances (2006, http://www.iadb.org/news/docs/remittances_EN.pdf) that from 2004 to 2006 remittances sent through banks rose from 8% to 19%. Sixty-three percent of migrants used commercial money transmitters in 2006, whereas 8% still entrusted cash remittances to friends or acquaintances traveling back to their homeland. (See Figure 6.2.)

Value of Remittances to Families Back Home

In Remittances 2005: Promoting Financial Democracy (March 2006, http://www.iadb.org/am/2006/doc/StatisticalComparisons.pdf), the IADB states that "one out of every ten persons around the globe is directly involved with remittances." The IADB estimates that 125 million economic migrants (those who migrate seeking jobs as distinguished from refugees, students, and so on) sent financial support to 500 million family members back home in 2005. Latin America and the Caribbean (LAC) was the largest region receiving remittances. In 2005 about 75% of remittances to LAC were sent from the United States. Other significant sources were western Europe, Japan (primarily to Brazil and Peru), and Canada (primarily to Jamaica and Haiti).

International remittances doubled between 2000 and 2005 to an estimated total of $167 billion, according to the World Bank in Global Economic Prospects: Economic Implications of Remittances and Migration (2006, http://www-wds.worldbank.org). The World Bank suggests that the true amount of remittances is even greater because money is often sent in cash or not reported in the receiving country.

IMMIGRANT PROFILES AND OPINIONS

According to the IADB, in the Public Opinion Research Study of Latin American Remittance Senders in the United States (October 18, 2006, http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=826095), over half (55%) of the migrants did not have jobs before they left their homeland. (See Figure 6.3.) Thirty percent earned less than $200 per month, and the average monthly wage for the group surveyed was $150. Within a month after arriving in the United States, more than half of the migrants surveyed had found jobs. The majority (65%) earned $500 or more per month at their first U.S. job. (See Figure 6.4.) The average monthly wage of these new migrants was $900. More than half (61%) of migrants surveyed sent money home each month. (See Figure 6.5.) The average remittance was $300 per month.

DOLLARS FLOW SOUTH

The volume of remittance dollars appears to support the argument of immigration opponents that when people move north by the millions, money moves south by the billions. The IADB suggests that $45 billion in remittances were sent to Latin America in 2006. Figure 6.6 shows the total estimated remittances sent to Latin America by state in 2006. California migrants sent home $13.2 million, more than double the $5.2 million sent from Texas. The smallest amount of remittances—$9 million—came from Vermont.

How Much Money Stays in the States?

In Sending Money Home, the IADB calculates the combined annual incomes of the estimated 12.6 million Latin American migrants in the United States at more than $500 billion. Less than 10% of these wages left the United States as remittances in 2006. The remainder was spent in the states and towns where the migrants lived. For example, the IADB estimates that migrants in Texas sent home $5.2 billion in remittances but contributed $52.8 billion to local economies. (See Table 6.12.)

NATIVE AND IMMIGRANT COMPETITION FOR JOBS

In "Cost of Illegal Immigration May Be Less Than Meets the Eye" (New York Times, April 16, 2006), Eduardo Porter considers the impact of illegal immigrants on U.S. workers. He reports that the immigrants who poured into California over the past twenty-five years competed for jobs with the least educated among the native population: high school dropouts. Between 1980 and 2004 wages of high school dropouts in California fell 17%. However, Porter cautions readers not to jump to conclusions. In Ohio, a state relatively free of illegal immigrants according to Porter, high school dropout wages declined 31% during the same period.

Porter cites the work of two Harvard economists, George J. Borjas and Lawrence F. Katz, that drew attention to the impact of immigrants on U.S. workers. In 2005 Borjas and Katz estimated that illegal Mexican immigrants who arrived between 1980 and 2000 had reduced the wages of U.S. high school dropouts by 8.2% percent. Porter notes that factors other than immigration affected low-skilled jobs available to dropouts.

Fewer Dropouts and More College Degrees

During the last quarter-century education levels in the United States increased and high school dropout rates fell. The total dropout rate in 2004 was 10.3%, compared with 14.6% in 1972. (See Table 6.13.) Dropout rates for African-American students declined more dramatically during that period, from 21.3% to 11.8%. Porter suggests that increased educational levels further reduced the number of dropouts competing for low-skilled jobs. According to "Special Report: Inequality in America" (The Economist, June 15, 2006), the share of U.S. workers with college degrees rose from 20% in 1980 to 30% by 2005.

Technology and Outsourcing

Between 1980 and 2005 technology revolutionized the workplace. Many routine jobs were automated—replaced by more efficient computerized machines. As the number of routine jobs declined, the need for workers with specialized education and computer skills increased. Employers found that some jobs could be done more cheaply in other countries where workers could be paid lower wages. However, many low-skilled jobs such as cleaning, food preparation and delivery, or construction still required onsite workers.

Porter suggests that the availability of low-wage immigrant workers helped new businesses start and existing businesses expand. He cites as an example the Nebraska poultry industry, where an influx of low-wage workers allowed companies to invest in new equipment and create new jobs.

Immigrant Impact on Native Wages

The Congressional Budget Office (CBO) states in The Role of Immigrants in the U.S. Labor Market (November 2005, http://www.cbo.gov/ftpdocs/68xx/doc6853/11-10-Immigration.pdf) that "with the projected slowdown in the growth of the native workforce as the baby-boom generation reaches retirement age, immigrants are likely to hold an even greater share of jobs in the future." Between 1994 and 2004 the native workforce grew 7%, whereas the foreign-born workforce grew 66%. The CBO indicates that "the presence of an increasing number of immigrant workers clearly reduces overall earnings growth … simply because foreign-born workers earn less than native workers … [which] lowers the average earnings of the U.S. workforce as a whole." However, the CBO notes that the increased presence of foreign-born workers can distort earnings growth particularly among workers at lower educational levels. Table 6.14 compares average weekly earnings of all male workers (both foreign and native born) to that of native-born male workers at four educational levels. Average wages of all workers with no high school diploma grew just 2.3% between 1994 and 2004. However, wages of native-born workers with no high school diploma grew 5.4% in that period. The differences in wage growth narrowed as educational levels increased.

The CBO states that various studies across many local markets find little if any adverse effect on native workers. In particular the CBO cites David Card's "Is the New Immigration Really So Bad?" (August 2005, http://www.phil.frb.org/econ/conf/immigration/card.pdf), in which he studied the effect of immigrant workers on native workers in three hundred metropolitan areas. Card, an economist at the University of California, Berkeley, concluded, "Although immigration has a strong effect on relative supplies of different skill groups, local labor market outcomes of low skilled natives are not much affected by these relative supply shocks." Critics argue that foreign-born workers go where the job opportunities are best. Had foreign-born workers not arrived, workers already present in a community might have enjoyed greater benefits.

Finally, the CBO notes that the long-term impact of immigration on the U.S. workforce will include the children of current immigrants. With many of these children educated in the United States, their work-related characteristics are more likely to resemble those of native-born workers. For example, the Center for the Continuing Study of the California Economy, in The Impact of Immigration on the California Economy (September 2005, http://www.labor.ca.gov/panel/impactimmcaecon.pdf), reveals that children of immigrants (second-generation workers) have occupational profiles similar to native-born workers. In 2004 a greater percentage of second-generation workers (39%) were found in management and professional occupations than native workers (37%). (See Figure 6.7.) Immigrant workers (first-generation) represented only 26% of this occupational group. On the other end of the scale, second-generation workers had the lowest representation in construction occupations.