14 Points

 

The Pro-Immigration Answers

 

I.) While only 15% of Mexican immigrants speak English well or fluently, some 20% from Central American and nearly 40% fromSouth America speak English well[4]. Overall, 33% of immigrants are proficient in English. This combined with two things insures that hysteria (represented in Congress by Tom Tancredo, R-CO) over a bi-lingual nation is ill-founded: 1) essentially all children of immigrants learn English fluently in schools; 2) ESL classes are extremely popular amongst those immigrants who don’t speak English, and in fact, there are national reports of long waiting lists to join classes. 10% or over 1 million of the 10 million foreign-born residents of the US who don’t speak English well are enrolled in English classes each year[5].

 

So, that still leaves roughly 9 million immigrants who don’t speak English, a significant percentage of the 36 million foreign-born residents living in the US, but only 3% of the entireUS population. If 25-50% could not speak English, we might worry, but with temporary and legal work visas, this number will not increase and will presumably decrease considerably as long-standing residents learn English by virtue of living in an English-dominated economy. There is no reason to fear that America will become bi-furcated by language.

 

II) Taxes and the Fiscal Effect

 

In 1997, The National Academy of Science wrote up an excellent and comprehensive book length report on the net fiscal effect of immigration[6]. I will borrow heavily from it. There is something in it for everyone on the issue, since while acknowledging that the average immigrant greatly improves the US budget, it points out that low-skilled immigrants have resulted in a net decrease in the fiscal budget of the US government. Yet, this result was calculated on the basis of the pre-1996 welfare reforms, which allowed undocumented workers to enjoy public transfers. This policy has been changed dramatically, as even anti-immigration advocates acknowledge, resulting in fewer public services consumed. Including welfare reform, the report shows this: immigrants who arrive with less than a high school education while in their twenties or younger make a positive net contribution to the budget over the course of their lifetime. The gain is small, between $65 and $12 per immigrant (Table 7B1, p 358). Still, no one can say that even the least educated immigrants are depleting US resources; indeed they are improving the budgetary position.

 

The result is much better for all other immigrants. An immigrant arriving with a high school education adds $126,000 to the US budget over his or her lifetime, net his or her consumption of public resources, and each of his or her children add $61,000 over their lifetime. The result is even better for those with college educations. A highly skilled immigrant arriving at age 21 contributes $332,000 to the budget when measured in net present value over the course of his or her lifetime (net present value takes into account the fact that current dollars are worth more than future dollars).

For the entire country, the report found the following:

“First, recall that immigrants (first generation) actually have a very positive fiscal impact in the cross section: the average immigrant pays $1,800 more in taxes than he or she imposes on the costs of benefits, and immigrants in total have a positive fiscal impact of $41 billion.”

 

Because of rapid educational mobility, when descendants are included, each immigrant increases the fiscal budget by a net of $88,000. There is no question that immigrants, legal and even illegal, contribute a net gain to government budgets.

 

More to the point, temporary low workers, under the proposed point system, will be more likely to have, amongst other fiscally beneficial characteristics, health insurance, English language skills, or the ability to demonstrate that they would be living at 1.5 times the poverty rate or higher.

 

A) Education Costs and Property Taxes

A reasonable estimate for the average per pupil annual cost of educating a child in a public school is $6,800,[7] and 14% of all illegal immigrants are children, presumably brought over by their parents[8]. If we assume that ¾ of these children are in public schools (the rest may be un-enrolled or in private schools, which are cheaper and impose no burden on tax payers), then the fiscal cost amounts to $5 billion or $719 per immigrant. George Borjas found, in a study of 2000 data, that 38% of Mexican immigrants owned homes in 2000, and 47.4% of all immigrants were homeowners (vs. 67.2% of native households);[9] yet all households pay property taxes either directly or indirectly through higher rents. 3.4% of income is the average burden for property tax payments per person in the US.[10] This amounts to $6.5 billion, $816 per immigrant, canceling out their school burden with $1.5 billion remaining for the treasury. Admittedly, however, the costs of community college and public universities would also have to be considered.

 

B) Government Benefit Programs

 

Most non-citizens, and so even legal immigrants, simply can not receive federal Medicaid. The law is strictly enforced under the Deficit Reduction Act of 2006, so much so that thousands of eligible Americans can not get Medicaid because they couldn’t prove citizenship.[11] Yet, many states offer Medicaid to immigrants. Borjas calculated that the percentage of immigrants receiving Medicaid was 13% in 2000 (vs. 10% of natives), with 52% of immigrants covered by employees (32% were uninsured)[12]. Average state Medicaid costs per person are $4,300[13](for 1998), which brings the cost of immigration to state health budgets to -$4.72 billion per year.

 

Though benefits at the federal level are banned for illegal immigrants, “In 1999, 3.2 percent of households with immigrants received TANF cash assistance and 6.7 percent received food stamps” (Fix and Passel 2002, Fremstad 2002). If we impute all of these costs to undocumented immigrants (which is clearly inaccurate), $3,600 is the average per un-documented immigrant cost of TANF per year, which amounts to another -$0.9 billion to cover these immigrants.

 

Typically immigrants have consumed less services than comparably poor members of the native population, even when legally eligible[14] (14.5% of immigrants with income less than 2X the poverty rate were receiving benefits vs. 17.9% of natives)[15]. While previously available, from 1996 to 2002 federal food stamps were not given to non-citizens. In 2002 legal immigrants could once again receive them, and yet those who were eligible were considerably less likely than native citizens to do so[16].

 

According to the USDA, the cost of the food stamp program in 2006 was $32 Billion, including administrative costs, and 3% of food stamp recipients are immigrants (though they are 8% of the population)[17] . That means -$0.96 billion of the federal budget goes to poor immigrants via food stamps.

 

C) Income and Payroll Taxes

 

Despite not receiving these benefits, illegal immigrants pay income taxes and payroll taxes in two ways. First, the IRS receives 8 million fake social security numbers every year (which is about equal to the estimated number of illegal immigrants, but some are inevitably mistakes made on the forms of legal workers). This is essentially bonus money for social security and Medicaid that will never be claimed.

 

Second, since 1996 roughly 11 million immigrants have used the IRS to legally file taxes. In 2005, 1.9 million illegal immigrants filed tax returns legally by using an IRS-issued Individual Taxpayer Identification Number (ITIN). This put $5 Billion in the treasury, with only $2.9 million given in returns. This amounts to a net gain for the treasury from income taxes of $1724 for each of the 1.9 million illegal immigrants who legally file taxes.

 

All told, it is safe to say that most illegal immigrants pay both payroll and income taxes, and since they can’t claim benefits for SSI or Medicaid, they greatly improve the federal budget.

 

 

F) Sales Tax

Without question, every illegal immigrant pays state sales taxes every time they buy something that has such a tax, including tobacco, alcohol, gasoline, leisure goods, and clothing. Taking the average per capita burden of state sales tax, which has been estimated at 4% of income[18], illegal immigrants contribute $960 per person or $7.7 billion a year to state government budgets. This is certainly enough to cover their personal consumption of infrastructure costs.

 

In the end, considering the only public resource that illegal immigrants consume without directly paying for is un-insured visits to the emergency room and publicly funded adult education. Considering that only a miniscule number of illegal immigrants ever go to the emergency room, these costs amount to almost nothing and are absolutely dwarfed by the giant contribution to tax revenue from other sources. As for English classes, the federal government spent roughly $261 million on English classes, and when state spending is included the total government spending goes up to at least $326 million (since states must spend at least 25% of the federal spending). This is still a pittance compared to the net billions of dollars immigrants contributed to the federal and state treasuries.

 

These are rough estimates, but the result shows that immigrants contribute billions of dollars each year to the budget. They are broadly consistent with the more thorough National Academy of Science estimates from 1997, but that study neglected the gains from ITIN, which had not been implemented during the study. Apropos this debate, the NAS shows that a point system would greatly improve budgetary matters, and if the least skilled workers were temporary, then the US would not have to pay for their retirement, which would also be a huge gift to the US economy.

 

Choking off illegal immigration would unquestionably lower net revenue for governments, and stopping legal immigration would harm the situation even more dramatically, since all legal immigrants pay their full share of taxes.

 

II.b The Economic Effect

 

According to the pro-immigration Manhattan Institute fellow Tamar Jacoby, illegal immigrants add an extra $144 Billion of economic activity every year with 8 million laborers employed for 2,000 hours a year for $9 an hour, which is the best estimate of their average wage. When she adds $10 billion for complementarity, meaning that extra labor expands business leading to an extra $10 billion, her estimate comes to 1.2% of GDP. If legal immigrants are included the number grows to 5.4% of GDP or $700 Billion. These numbers are a rough and inadequate guide to the benefits reaped by the US from immigration, but they are a start.

 

A good estimate for the median income for immigrants is $24,000[19], which amounts to roughly $9 per hour. Of that $24,000, we can assume that there is roughly a 5% profit made on those costs for the employer. So, on average, roughly $25,200 is funneled back into the economy (minus some remittances abroad) for each worker per year, which amounts to $200 billion, if we only include the 8 million illegal immigrants.

 

Opening the borders completely would be foolish and disruptive in the face of intense inequality between the US and Mexico, and it would greatly depress the wages of natives in the short-term, as well as lower the wages of current immigrants; more fundamentally, it would attenuate the political foundations of the republic, by having a large percentage of the population living precariously without citizenship or full legal obligation or protection. The senate bill would solve these problems, while raising aggregate living standards.

 

III) Labor Markets and Wages

 

Native workers are better off because of competition, because it compels them to innovate and to invest in their own skills, by driving them out of the lowest skilled jobs and into better paying positions. Considerable evidence for this was established by the economist Giovani Peri[20] in a 2006 article for the National Bureau of Economic Research.

 

But first some background is necessary. Of course, an increase in working immigrants decreases the wages of Americans in the short-run. Peri estimated that for each 10% increase in the relative share of immigrant workers in a given age and educational group, the short-run response to the wages of Americans was a 4% decrease. Labor economist George Borjas estimated a similar figure.[21] However, things are different in the long-run because businesses can use an increase in the supply of labor to expand production and thereby increase the demand for labor. Even Borjas and with his colleague Lawrence Katz calculate a 0.1% long-run wage gain for US natives from immigration,[22] but this is in spite of a 4% decline in the wages of natives with less than a high-school education. Peri’s estimates, with an arguably better methodology which considers state effects, are far more optimistic than that. He estimates a slight long-run gain to the least skilled Americans.

 

Peri used California as an important source of experimental data. As of 2004, Foreign-born workers make up 32% of California’s workforce, but only 14% of the US workforce. From 1990 to 2004, real wages changes depended heavily on one’s education status, and California’s immigrants were disproportionately high and low skilled with fewer in between. Predictably, wages for the lowest skilled native workers fell faster (a drop of -17.6%), but interestingly enough, wages for everyone else increased (even for who finished high school without college), and in some cases faster, the gains in California were higher than in the USA as a whole. The average worker saw a 10.7% real wage gain in California and a 9.7% gain in the USA from 1990 to 2004.

 

Peri’s estimates of the effect of immigration improve considerably under robust long-run assumptions. His best estimate is that wages for high-school dropouts increase by .2%, high school and college graduates both had wage gains of 3%, and college drop-outs gained 6%. Overall, the average worker in the US saw a 4% wage increase as a result of immigration. He gets this result by isolating the inflow effect of immigration from the “pull” effect of regional macroeconomic trends. Technically, he uses the supply of immigrants in the US for each education group to instrument for the supply in California. He then follows Borjas by estimating the percentage change in wages based on the percentage change in immigrant supply, controlling for the age and characteristics of immigrants, time effects common to all states and the unique characteristics of California that don’t vary over time.

 

Importantly, in an answer to Borjas’s criticisms of geographical studies (which tend to show a positive correlation between native wages and immigration), Peri finds that immigration leads to no significant change in native migration. That is to say, native workers with low skills did not move out of California as a result of immigration (or at least there was no correlation between the two factors), and in fact, high-skilled natives moved into California, benefiting greatly from the inflow of complementary high-skilled immigrants.

 

Here’s Peri’s unadorned explanation for how immigration increases the wages of natives:

 

“The motivation and interpretation for these results is that immigrants, among less educated workers, have filled those occupations, jobs and production tasks that use heavily manual skills (e.g. repairing, cultivating, cleaning, packing), leaving native workers to more interactive, language and communication-oriented jobs (e.g. selling, training, organizing, coordinating). The availability of manual workers has made the productivity and demand for the tasks supplied by natives higher. Correspondingly, the increasing supply of immigrants has partly crowded out previous immigrants who occupied similar jobs and occupations, implying an average loss in their productivity as large as 29%.”

 

At a more intuitive level, it’s obvious that hiring a low skilled immigrant to do low-skilled tasks, frees up American workers to make a more economically valuable contribution to the society they know best.

 

Said otherwise, there is no reason to expect minorities in the US to be our janitors, landscapers, and waiters. Rather we should encourage and expect all natives, whether they are black, Latino, or white, to become educated and free themselves from the burden of low-productivity work. This is one of the great benefits of growing up in an economically advanced and democratic society: opportunities for advancement. In this scenario, every wins if immigrants advance up from depressed countries (which they do) and natives advance up the skill-ladder (as they sometimes do), but we need to invest in social and educational programs to insure that all natives have this opportunity. The highest skilled natives have no right to complain about higher taxes to accomplish this, because the inflow of low-skilled natives provides a huge boost to their productivity and wages.

 

IV Gain to Immigrants

 

Harry Reid told the New York Times that he feared the immigration bill would create “a permanent underclass of people, who are here to work in low-wage, low-skill jobs but do not have a chance to put down roots.”

 

Consider this by way of analogy. Fraternities take in pledges and make them work without pay at odd hours; then they become brothers, and move out of the house after a few years. One could accuse fraternities of creating a permanent underclass of pledges (and indeed how else could one describe this hierarchy), but these pledges voluntarily join fraternities because it puts them on a path to obtain membership and benefits along the way. Similarly, a reasonable immigration policy doesn’t prevent the arrival of immigrants from fears of a “permanent underclass,” because each member of that underclass has an opportunity to eventually join the middle or upper-class. This is an especially valid observation if we give immigrants who enter with visas a path to eventual citizenship (unfortunately the political right has not allowed this to be included in the current bill). But even without the path to citizenship, immigrants come to the US, work for a few years, save money and return home. They gain from higher wages and we gain from cheaper prices, higher tax revenue, and economic growth.

 

Higher Wages

The wage premium reaped by Mexican immigrants in the US is largest for the least educated and becomes smaller for Mexicans with the highest education levels. For those with 5-8 years of education, the premium, when adjusted for the higher cost of living in the US, is $4/hr and $3.50/hr for a worker who graduated from high school. 68% of Mexican immigrants have not completed high school, but within Mexico the number was 81%, meaning that Mexican immigrants are relatively more educated than Mexicans who don’t migrate to the USA. That’s an extra $8,320 for an immigrant who works 40 hours every week of the year[23], but since the average Mexican immigrant labors for 56 hours each week, the premium amounts to an extra $11,648 each year for the lowest skilled Mexican workers.[24] This is not exploitation; it is an opportunity.

 

Unionization

In 2003, the latest year for which data is available, 11.3% of foreign-born workers are estimated to be in unions, which is down from 13.6% in 1996 (Migration Policy Institute). Meanwhile the corresponding percentage of unionized native workers was only slightly higher; in 2003 it was 14.8%. This belies the notion that immigrants are unable to organize.

 

Amnesty

If we applied the sweeping conservative logic on “amnesty,” we could just as well imagine the following scenario: a man walking down the street sees a child on the opposite side of a road fall into a lake and it appears that the child could drown. Though not standing at the crosswalk, the man runs across the street to save the child but is arrested by an officious policeman for jaywalking before he can save the child who then drowns. An alternative scenario would take place three years later and see the policeman arrest this man for having jaywalked to save the child years ago. Those who would dare protest on this man’s behalf would be accused of undermining the rule of law, and when these sympathizers tried to change the law to exempt those who crossed the street to save another, the conservative anti-amnesty coalition would wail and moan. In short, not all legal violations are equally deviant, and some may be a sign of character, as exemplified in the Greek tragedy Antigone, and more concretely, in civil rights movements in the US and South Africa.

 

More precisely, this bill imposes significant punishments on those current illegal immigrants who would want to gain legal status. The formerly illegal immigrant would have to go back to Mexico, admit guilt, demonstrate merit-based skill, fulfill English requirements, get back in line in for a visa behind those who legally applied, pay $4000 and any unpaid back taxes; this would take an estimated 13 years[25]. When Amnesty International calls for the release of “prisoners of conscience” this is not what they have in mind.

 

Enforcement

Enforcement at the border is a real issue, mostly because of the threat from drug trafficking or other forms of smuggling; moreover having non-citizens residents with vague legal status undermines a state and its institutions and exposes those who possess that status to a constant threat of arrest and deportation. That is why legalization of those currently here, enforcement of the new laws, and more visas for those who want to come is the best strategy.

 

This will involve disciplining employers and workers who break the law. This is already happening more as a result of political pressure. Here’s Eduardo Porter of the The New York Times on enforcement,

 

“Since Oct. 1, 2005, Immigration and Customs Enforcement has arrested more than 2,100 people in ‘work site enforcement investigations,’ compared with 1,145 for the entire previous fiscal year and 845 in fiscal 2004. It is also bringing more serious charges — such as harboring illegal immigrants and money-laundering of illicit profits — against employers who hire them[26].”

 

Conclusion

The Senate immigration bill deserves the support of all Americans. The only empirically valid argument against liberal immigration is that it will further attenuate the wages of low-skilled Americans, but as we see here, in the long-run, even those wages will benefit from immigration. In the short-run, American trade and immigration policy must be linked with improvements in publicly funded child care, health care, education, job-training, subsidized employment, and other government incentives to both businesses and workers to facilitate matching that will lead to skill upgrades and higher productivity. While all Americans ultimately benefit from immigration, the educated have a unique duty to smooth out the early loses for those with the least skills by paying more in taxes (which would still be lower due to immigration’s positive fiscal impact). For those to whom the most is given, the most is owed in return.

J.T. Rothwell, Executive Editor of 14 Points. The author would like to thank Elizabeth Lindsey for suggestions and edits. The remaining flaws are all his.