Can we still benefit from immigration?

Published 11:00 pm Wednesday, May 11, 2016

Immigrants can provide significant benefits by doing jobs that few Americans want.  I have written recently about two such cases, low skilled jobs in agriculture and Ph.D.’s in science and engineering.  These significant potential economic contributions do not guarantee that immigration benefits America, because factors like assimilation and security also matter.  A properly designed immigration system, however, could capture the benefits while limiting the social costs.

For almost 150 years, America had nearly open borders.  Immigration from Europe still was not easy, as the costly voyage by ship took weeks.  Furthermore, in the 1800s America offered individuals economic freedom, with no social welfare safety net.  Only people seeking economic or religious freedom would incur the cost to move, so consequently immigrants made enormous contributions to America’s economy.

Immigration also changed the face of America.  In retrospect, the fears of contemporary commentators that Irish or German immigrants would change America for the worse seem amusing.  That immigration in the 1800s did not fundamentally change America I think is not a surprise.  Novelist Ayn Rand noted that America was the first nation in history founded on an idea, namely freedom.  People from across the world who yearned for freedom were in a sense already Americans even before they arrived.

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Any characterization of America’s founding based on freedom that ignored slavery would be grossly remiss.  There is no defense for slavery, ever.  Sadly throughout human history, the holding of slaves was deemed moral.  The Declaration of Independence’s dramatic statement of freedom, I think, helped America abolish the evil of slavery within 90 years.

America has limited legal immigration since the 1920s.  Given today’s extensive welfare state, an assessment must now consider the financial impact on government as well as the economic contribution of immigrants.  Assessing financial impact involves carefully examining changes in tax revenue and spending due to immigrants.  Economists have done so, and immigration’s financial impact is more positive than you might expect.

Legal and illegal immigrants definitely pay taxes.  Many illegals work using fake or stolen Social Security numbers, so payroll taxes get paid.  Immigrants pay sales and gasoline taxes on purchases and increase business taxes.  Finally, immigrants significantly boost real estate values (by $3.7 trillion nationally according to one study), increasing property taxes.

On the spending side, illegal immigrants are not generally eligible for government assistance, and legal immigrants are only eligible after five years.  The children of legal and illegal immigrants (who are citizens if they were born here) are eligible for Medicaid and to attend public schools.  Immigrants enroll in government programs at lower rates than native-born citizens, limiting the current financial cost but creating the potential for a spike if current illegal immigrants receive amnesty.

Highly educated immigrants pay considerably more in taxes than they or their families receive in benefits.  Low skilled immigrants impose a financial burden on state and local governments, primarily due to education.  If immigrants’ children stay to work and pay taxes in the U.S. as adults, this offsets the financial cost.

That immigrants are not overwhelming our welfare state might come as a surprise, but it shouldn’t.  Immigrants clearly came to America for freedom in the 1800s.  Today we offer both freedom and welfare, but immigrants still come largely for the opportunity to improve their lives.  After all, who is likely to make a long, costly, and hazardous journey from Central America, the lazy or the ambitious?

Immigration today I think still benefits Americans.  But the concerns of many Americans also reflect a reasonable fear and not just xenophobia.  Policy evolves over time, and a nation’s driving vision shapes these changes.  America’s founding vision of freedom helped end slavery.  America’s welfare state has been expanding for nearly a century.  Future expansion of entitlements programs could render today’s immigration highly costly, with millions of illegal immigrants as potential future welfare recipients.

A better path forward can be found.  The Bracero guest worker program of the 1940s and 1950s, under which 4.5 million Mexican migrant workers came to the U.S., offers a guide for reform.  But this part of the story will have to wait for another day.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.  Respond to him at and like the Johnson Center on Facebook.

About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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