Economic impact of illegal immigration to the United States

The economic impact of illegal immigration to the United States is a matter of study and debate relating to the nation's economy and politics. Undocumented immigrants contribute both benefits and costs to the U.S. economy. At the most basic level, undocumented immigrants purchase goods and services and contribute labor and tax dollars while requiring services such as healthcare, education and law enforcement. The participation of undocumented immigrants in the U.S. economy also has more complex systemic impacts. For example, their participation can depress both wages for lower-skilled native U.S. workers and prices for all consumers buying U.S. goods and services. The evidence suggests that the overall costs imposed on the U.S. economy by undocumented immigrants are equivalent to or outweighed by the benefits. However, this issue remains contentious in part because the costs of illegal immigration are not often borne by the people and institutions benefiting from illegal immigration.

Geographic Origins of Undocumented Immigrants

The undocumented immigrants are all foreign-born non-citizens who are not legal residents. Most of them either entered the United States without inspection or were admitted temporarily and stayed past the date they were required to leave.

See also Illegal immigration to the United States

About three-quarters (75%) of the nation's unauthorized immigrants are Latino. The majority of undocumented immigrants (59%) are from Mexico. Significant regional sources of unauthorized immigrants include Asia (11%), Central America (11%), South America (7%), the Caribbean (4%) and the Middle East (less than 2%). Undocumented immigrants constitute 4% of the nation's population. Approximately two-thirds have been in the U.S. for 10 years or fewer.

The Market for Undocumented Labor

Theoretical Frameworks

Arguments about low wage labor hinge on this relationship: as the labor supply increases, wages go down.

Labor is a key economic factor of production. There are many lenses through which one can view the mobility of factors of production, such as labor, across borders as part of international trade. These models are not very useful for examining illegal immigration because they tend to either disallow international labor mobility or assume perfect labor mobility, when neither is true in reality.

The minimum wage in the U.S. also plays a role from a theoretical perspective, with people arguing on both sides that the minimum wage is linked to immigration. Some argue that were the minimum wage higher, more U.S. natives would be willing to take the riskier jobs that are held by many immigrants. Others believe that because the U.S. has a minimum wage an illegal market for jobs is created for work that pays below the minimum wage, which fuels migration to the U.S.

Illegal Immigration Tied to U.S. Economic Performance and Employer Demand

Ernesto Zedillo, former President of Mexico and current Director of the Yale Center for the Study of Globalization, argues that the US economy has a crucial need for migrant workers, and that the current debate must acknowledge this rather than just focus on enforcement. Peter Andreas, Professor of Political Science and International Studies at Brown University, asserts that illegal immigration is spurred on by periods of high demand for labor. According to analyses by Zedillo and Andreas, greater demand for low-wage labor leads to higher illegal immigration. The numbers seem to support this analysis. Standard & Poor's estimated in April 2006 that, at that time, the U.S. was home to 11 million undocumented immigrants. The Pew Hispanic Center estimated that the population of undocumented immigrants grew from 1990 to a high of 11.9 million in 2006, then dropped during the following recession. The change was noticeable by 2008, and was sharply down by 2010. In 2007, a decade-long trend reversed and the overall number of undocumented immigrants fell below the number of legal permanent resident immigrants.

If considering the 2007 data for immigrant migration by the United States rate , the highest numbers of immigrants entered between 2000 and 2007 at high demand for constriction labor at real estate market growth. Then because of the economy slow down in late 2007, the number of undocumented immigrants decreased.

Numbers and Role in the Workforce

Historically immigrants have played a very large role in growth in the US population and economy. Even if laws and regulations are constantly changing and will change in near future again, opportunities available in America continue to draw immigrants from around the world. Only during the Great Depression of the 1930s did the number of people leaving the United States exceed the number coming in.

In 2006 the Pew Hispanic Research Center indicated that illegal immigrants account for about 4.9% of the civilian labor force, or 7.2 million workers out of a total U.S. labor force of 148 million. 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.

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.

Between 2000 and 2007 the fastest growth rate was in Georgia where the immigrant population grew by 152% between 2000 and 2007. California, the state receiving the greatest number of immigrants, grew by 10.2%, Florida by 16.7%, and Texas by 32.7%.17.

Short-term undocumented workers account for about 40% of all undocumented workers and they are very beneficial to seasonal job types like farming and construction services. Arizona has the highest number of undocumented immigrants than other states in US. They contribute about 12% a share of the workforce. The undocumented immigrants are filling gaps in fields where there is a low job demand among Americans workers because of a low pay. Per Georgia Fruit and Vegetable Growers Association 2010 report GA farmers suffered because of new state regulation for reporting and not hiring any undocumented immigrant. GA farmers lost more than 50% of the labor and crops because of limited labor force.

Most undocumented immigrants pay sales, federal and state income taxes. In addition they also spend millions per year which support US and helps create new jobs. The Texas State Comptroller report in 2006 that the 1.4 million undocumented immigrants in Texas alone added almost $18 billion to the state's budget, and paid $1.2 billion in state services they used.

Economic Benefits of Undocumented Immigrants

Consumer Demand

Reverse migration of illegal immigrants from the US back to Mexico has reduced the overall population of the US.

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.

Approximately 0.5 million dwellings have become permanently vacant as a result of a reduction in the illegal immigrant population.

The reduced demand for housing created permanent unemployment for hundreds of thousands of building contractors, realtors, and mortgage brokers.

Economic decline caused by reduced spending by illegal immigrants in the US occurred at the same time as a rise in unemployment of approximately 1 million legal US workers that provide goods and services for the illegal immigrant population.

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.

Undocumented Taxpayers

Most arguments against illegal immigration begin with the premise that the undocumented 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. 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.

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.

Undocumented Workers Subsidize Social Security

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 undocumented workers who will never claim their benefits."

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 (TY) 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 TY 2003.

Undocumented Workers May Depress Prices for all US Consumers

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.

Economic Costs of Undocumented 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 native low skilled workers' wages

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. Undocumented workers certainly do take jobs that would otherwise go to legal workers. But undocumented 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."

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. 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%.

Education

Spending for public education of undocumented immigrant children in K-12 public education in Minnesota for 2003-2004 was a total of $78.76 million to $118.14 million.

For the same time period, total spending in New Mexico at the state and local levels for undocumented immigrant schoolchildren was about $67 million.

During April 2006, Standard & Poor's analysts wrote: "Local school districts are estimated to educate 1.8 million undocumented 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."

Undocumented immigrants who have attended school in California for three years are eligible for reduced in-state tuition for public colleges.

Health care

Texas estimated its 2006 costs at $1.3 billion. They account for less than 2% of national medical spending.

Effect on Medicaid

Reuters reported that undocumented 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.

Insured vs. Uninsured

The Pew Hispanic Center estimated in 2005 that 59% of the nation's undocumented immigrants are uninsured, compared with 25% of legal immigrants and 14% of U.S. citizens. Undocumented immigrants represent about 15% of the nation's 47 million uninsured people — and about 30% of the increase since 1980.

Effect on Hospitals

Uncompensated care generates a cost on hospital emergency departments and cost-shifting to insured and paying patients. 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 undocumented 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 undocumented immigrants.

At least two research studies have been done which attempt to discover the cost of health care for undocumented immigrants by asking the undocumented 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% undocumented 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 undocumented 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.

Weighing Benefits against Costs

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:

• 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.

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 "undocumented 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."

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, documented and undocumented, 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 undocumented immigrants use less than half the amount of federal services that households headed by documented immigrants or citizens make use of."

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.

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." One survey conducted in the 1980s (before the current wave of illegal immigration) found that 76 percent of economists felt recent illegal immigration had a positive effect on the economy.

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."

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."

See also

• Proposition 187
• Gallegly amendment
• DREAM Act
• Plyler v. Doe