Tuesday, March 24, 2009
villains or voters?
I have recently seen Fred Suco about town wearing his police homicide shirt. He is wearing it to canvass the Springs. Is he canvassing for villains or voters? Has their been homicides all over town that he is investigating? It is certainly a political statement and shouldnt be allowed by law. I thought he was retired. Can he wear his official police shirt while out seeking votes? I doubt seriously that the County or the PBA would approve of this behavior. I have asked the City Clerk to investigate this, and she has assured me she will get back to me soon. Dr. Mel P. Johnson
astounding and miraculous terms
A neighbor has taken issue with my statement that Billys term has been unremarkable. He finds those terms to be astounding and miraculous. Astounding in its lack of vision, common sense, and oversight by the Council. Miraculous in the fact that nobody has been indicted yet for any felonies and that we are STILL solvent, in spite of Billy and Gym. He HAS a point, or three. Dr. Mel P. Johnson
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Illegal Immigration Costs California Over Ten Billion Annually
State's "cheap labor" costs average household $1,183 a year
By Robert Longley, About.com
Immigration History
Dateline: December, 2004
In hosting America's largest population of illegal immigrants, California bears a huge cost to provide basic human services for this fast growing, low-income segment of its population. A new study from the Federation for American Immigration Reform (FAIR) examines the costs of education, health care and incarceration of illegal aliens, and concludes that the costs to Californians is $10.5 billion per year.
Among the key finding of the report are that the state's already struggling K-12 education system spends approximately $7.7 billion a year to school the children of illegal aliens who now constitute 15 percent of the student body. Another $1.4 billion of the taxpayers' money goes toward providing health care to illegal aliens and their families, the same amount that is spent incarcerating illegal aliens criminals.
"California's addiction to 'cheap' illegal alien labor is bankrupting the state and posing enormous burdens on the state's shrinking middle class tax base," stated Dan Stein, President of FAIR. "Most Californians, who have seen their taxes increase while public services deteriorate, already know the impact that mass illegal immigration is having on their communities, but even they may be shocked when they learn just how much of a drain illegal immigration has become."
The Costs of Illegal Immigration to Californians focuses on three specific program areas because those were the costs examined by researchers from the Urban Institute in 1994. Looking at the costs of education, health care and incarceration for illegal aliens in 1994, the Urban Institute estimated that California was subsidizing illegal immigrants to the tune of about $1.1 billion. The enormous rise in the costs of illegal immigrants over the intervening ten years is due to the rapid growth in illegal residents. It is reasonable to expect those costs to continue to soar if action is not taken to turn the tide.
"Nineteen ninety-four was the same year that California voters rebelled and overwhelmingly passed Proposition 187, which sought to limit liability for mass illegal immigration. Since then, state and local governments have blatantly ignored the wishes of the voters and continued to shell out publicly financed benefits on illegal aliens," said Stein. "Predictably, the costs of illegal immigration have grown geometrically, while the state has spiraled into a fiscal crisis that has brought it near bankruptcy.
"Nothing could more starkly illustrate the very high costs of ‘cheap labor' than California's current situation," continued Stein. "A small number of powerful interests in the state reap the benefits, while the average native-born family in California gets handed a nearly $1,200 a year bill."
The Federation for American Immigration Reform is a nonprofit, public-interest, membership organization advocating immigration policy reforms that would tighten border security and prevent illegal immigration, while reducing legal immigration levels from about 1.1 million persons per year to 300,000 per year.
Illegal Immigration Costs California Over Ten Billion Annually
State's "cheap labor" costs average household $1,183 a year
By Robert Longley, About.com
Immigration History
Dateline: December, 2004
In hosting America's largest population of illegal immigrants, California bears a huge cost to provide basic human services for this fast growing, low-income segment of its population. A new study from the Federation for American Immigration Reform (FAIR) examines the costs of education, health care and incarceration of illegal aliens, and concludes that the costs to Californians is $10.5 billion per year.
Among the key finding of the report are that the state's already struggling K-12 education system spends approximately $7.7 billion a year to school the children of illegal aliens who now constitute 15 percent of the student body. Another $1.4 billion of the taxpayers' money goes toward providing health care to illegal aliens and their families, the same amount that is spent incarcerating illegal aliens criminals.
"California's addiction to 'cheap' illegal alien labor is bankrupting the state and posing enormous burdens on the state's shrinking middle class tax base," stated Dan Stein, President of FAIR. "Most Californians, who have seen their taxes increase while public services deteriorate, already know the impact that mass illegal immigration is having on their communities, but even they may be shocked when they learn just how much of a drain illegal immigration has become."
The Costs of Illegal Immigration to Californians focuses on three specific program areas because those were the costs examined by researchers from the Urban Institute in 1994. Looking at the costs of education, health care and incarceration for illegal aliens in 1994, the Urban Institute estimated that California was subsidizing illegal immigrants to the tune of about $1.1 billion. The enormous rise in the costs of illegal immigrants over the intervening ten years is due to the rapid growth in illegal residents. It is reasonable to expect those costs to continue to soar if action is not taken to turn the tide.
"Nineteen ninety-four was the same year that California voters rebelled and overwhelmingly passed Proposition 187, which sought to limit liability for mass illegal immigration. Since then, state and local governments have blatantly ignored the wishes of the voters and continued to shell out publicly financed benefits on illegal aliens," said Stein. "Predictably, the costs of illegal immigration have grown geometrically, while the state has spiraled into a fiscal crisis that has brought it near bankruptcy.
"Nothing could more starkly illustrate the very high costs of ‘cheap labor' than California's current situation," continued Stein. "A small number of powerful interests in the state reap the benefits, while the average native-born family in California gets handed a nearly $1,200 a year bill."
The Federation for American Immigration Reform is a nonprofit, public-interest, membership organization advocating immigration policy reforms that would tighten border security and prevent illegal immigration, while reducing legal immigration levels from about 1.1 million persons per year to 300,000 per year.
The High Cost of Cheap Labor
The High Cost of Cheap Labor
Illegal Immigration and the Federal Budget
Executive Summary
--------------------------------------------------------------------------------
This study is one of the first to estimate the total impact of illegal immigration on the federal budget. Most previous studies have focused on the state and local level and have examined only costs or tax payments, but not both. Based on Census Bureau data, this study finds that, when all taxes paid (direct and indirect) and all costs are considered, illegal households created a net fiscal deficit at the federal level of more than $10 billion in 2002. We also estimate that, if there was an amnesty for illegal aliens, the net fiscal deficit would grow to nearly $29 billion.
Among the findings:
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.
Among the largest costs are Medicaid ($2.5 billion); treatment for the uninsured ($2.2 billion); food assistance programs such as food stamps, WIC, and free school lunches ($1.9 billion); the federal prison and court systems ($1.6 billion); and federal aid to schools ($1.4 billion).
With nearly two-thirds of illegal aliens lacking a high school degree, the primary reason they create a fiscal deficit is their low education levels and resulting low incomes and tax payments, not their legal status or heavy use of most social services.
On average, the costs that illegal households impose on federal coffers are less than half that of other households, but their tax payments are only one-fourth that of other households.
Many of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth. Thus, greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them.
If illegal aliens were given amnesty and began to pay taxes and use services like households headed by legal immigrants with the same education levels, the estimated annual net fiscal deficit would increase from $2,700 per household to nearly $7,700, for a total net cost of $29 billion.
Costs increase dramatically because unskilled immigrants with legal status -- what most illegal aliens would become -- can access government programs, but still tend to make very modest tax payments.
Although legalization would increase average tax payments by 77 percent, average costs would rise by 118 percent.
The fact that legal immigrants with few years of schooling are a large fiscal drain does not mean that legal immigrants overall are a net drain -- many legal immigrants are highly skilled.
The vast majority of illegals hold jobs. Thus the fiscal deficit they create for the federal government is not the result of an unwillingness to work.
The results of this study are consistent with a 1997 study by the National Research Council, which also found that immigrants' education level is a key determinant of their fiscal impact.
A Complex Fiscal Picture
Welfare use. Our findings show that many of the preconceived notions about the fiscal impact of illegal households turn out to be inaccurate. In terms of welfare use, receipt of cash assistance programs tends to be very low, while Medicaid use, though significant, is still less than for other households. Only use of food assistance programs is significantly higher than that of the rest of the population. Also, contrary to the perceptions that illegal aliens don't pay payroll taxes, we estimate that more than half of illegals work "on the books." On average, illegal households pay more than $4,200 a year in all forms of federal taxes. Unfortunately, they impose costs of $6,950 per household.
Social Security and Medicare. Although we find that the net effect of illegal households is negative at the federal level, the same is not true for Social Security and Medicare. We estimate that illegal households create a combined net benefit for these two programs in excess of $7 billion a year, accounting for about 4 percent of the total annual surplus in these two programs. However, they create a net deficit of $17.4 billion in the rest of the budget, for a total net loss of $10.4 billion. Nonetheless, their impact on Social Security and Medicare is unambiguously positive. Of course, if the Social Security totalization agreement with Mexico signed in June goes into effect, allowing illegals to collect Social Security, these calculations would change.
The Impact of Amnesty. Finally, our estimates show that amnesty would significantly increase tax revenue. Because both their income and tax compliance would rise, we estimate that under the most likely scenario the average illegal alien household would pay 77 percent ($3,200) more a year in federal taxes once legalized. While not enough to offset the 118 percent ($8,200) per household increase in costs that would come with legalization, amnesty would significantly increase both the average income and tax payments of illegal aliens.
What's Different About Today's Immigration. Many native-born Americans observe that their ancestors came to America and did not place great demands on government services. Perhaps this is true, but the size and scope of government were dramatically smaller during the last great wave of immigration. Not just means-tested programs, but expenditures on everything from public schools to roads were only a fraction of what they are today. Thus, the arrival of unskilled immigrants in the past did not have the negative fiscal implications that it does today. Moreover, the American economy has changed profoundly since the last great wave of immigration, with education now the key determinant of economic success. The costs that unskilled immigrants impose simply reflect the nature of the modern American economy and welfare state. It is doubtful that the fiscal costs can be avoided if our immigration policies remain unchanged.
Policy Implications
The negative impact on the federal budget need not be the only or even the primary consideration when deciding what to do about illegal immigration. But assuming that the fiscal status quo is unacceptable, there are three main changes in policy that might reduce or eliminate the fiscal costs of illegal immigration. One set of options is to allow illegal aliens to remain in the country, but attempt to reduce the costs they impose. A second set of options would be to grant them legal status as a way of increasing the taxes they pay. A third option would be to enforce the law and reduce the size of the illegal population and with it the costs of illegal immigration.
Reducing the Cost Side of the Equation. Reducing the costs illegals impose would probably be the most difficult of the three options because illegal households already impose only about 46 percent as much in costs on the federal government as other households. Thus, the amount of money that can be saved by curtailing their use of public services even further is probably quite limited. Moreover, the fact that benefits are often received on behalf of their U.S.-citizen children means that it is very difficult to prevent illegal households from accessing the programs they do. And many of the programs illegals use most extensively are likely to be politically very difficult to cut, such as the Women Infants and Children (WIC) nutrition program. Other costs, such as incarcerating illegals who have been convicted of crimes are unavoidable. It seems almost certain that if illegals are allowed to remain in the country, the fiscal deficit will persist.
Increasing Tax Revenue by Granting Amnesty. As discussed above, our research shows that granting illegal aliens amnesty would dramatically increase tax revenue. Unfortunately, we find that costs would increase even more. Costs would rise dramatically because illegals would be able to access many programs that are currently off limits to them. Moreover, even if legalized illegal aliens continued to be barred from using some means-tested programs, they would still be much more likely to sign their U.S.-citizen children up for them because they would lose whatever fear they had of the government. We know this because immigrants with legal status, who have the same education levels and resulting low incomes as illegal aliens, sign their U.S.-citizen children up for programs like Medicaid at higher rates than illegal aliens with U.S.-citizen children. In addition, direct costs for programs like the Earned Income Tax Credit would also grow dramatically with legalization. Right now, illegals need a Social Security number and have to file a tax return to get the credit. As a result, relatively few actually get it. We estimate that once legalized, payments to illegals under this program would grow more than ten-fold.
From a purely fiscal point of view, the main problem with legalization is that illegals would, for the most part, become unskilled legal immigrants. And unskilled legal immigrants create much larger fiscal costs than unskilled illegal aliens. Legalization will not change the low education levels of illegal aliens or the fact that the American labor market offers very limited opportunities to such workers, whatever their legal status. Nor will it change the basic fact that the United States, like all industrialized democracies, has a well-developed welfare state that provides assistance to low-income workers. Large fiscal costs are simply an unavoidable outcome of unskilled immigration given the economic and fiscal realities of America today.
Enforcing Immigration Laws. If we are serious about avoiding the fiscal costs of illegal immigration, the only real option is to enforce the law and reduce the number of illegal aliens in the country. First, this would entail much greater efforts to police the nation's land and sea borders. At present, less than 2,000 agents are on duty at any one time on the Mexican and Canadian borders. Second, much greater effort must be made to ensure that those allowed into the country on a temporary basis, such as tourists and guest workers, are not likely to stay in the country permanently. Third, the centerpiece of any enforcement effort would be to enforce the ban on hiring illegal aliens. At present, the law is completely unenforced. Enforcement would require using existing databases to ensure that all new hires are authorized to work in the United States and levying heavy fines on businesses that knowingly employ illegal aliens. Finally, a clear message from policymakers, especially senior members of the administration, that enforcement of the law is valued and vitally important to the nation, would dramatically increase the extremely low morale of those who enforce immigration laws.
Policing the border, enforcing the ban on hiring illegal aliens, denying temporary visas to those likely to remain permanently, and all the other things necessary to reduce illegal immigration will take time and cost money. However, since the cost of illegal immigration to the federal government alone is estimated at over $10 billion a year, significant resources could be devoted to enforcement efforts and still leave taxpayers with significant net savings. Enforcement not only has the advantage of reducing the costs of illegal immigration, it also is very popular with the general public. Nonetheless, policymakers can expect strong opposition from special interest groups, especially ethnic advocacy groups and those elements of the business community that do not want to invest in labor-saving devices and techniques or pay better salaries, but instead want access to large numbers of cheap, unskilled workers. If we choose to continue to not enforce the law or to grant illegals amnesty, both the public and policymakers have to understand that there will be significant long-term costs for taxpayers.
Summary Methodology
Overall Approach. To estimate the impact of households headed by illegal aliens, we rely heavily on the National Research Council's (NRC) 1997 study, "The New Americans." Like that study, we use the March Current Population Survey (CPS) and the decennial Census, both collected by the Census Bureau. We use the March 2003 CPS, which asks questions about income, household structure, and use of public services in the calendar year prior to the survey. We control total federal expenditures and tax receipts by category to reflect actual expenditures and tax payments. Like the NRC, we assume that immigrants have no impact on defense-related expenditures and therefore assign those costs only to native-headed households. Like the NRC, we define a household as persons living together who are related. Individuals living alone or with persons to whom they are unrelated are treated as their own households. As the NRC study points out, a "household is the primary unit through which public services are consumed and taxes paid." Following the NRC's example of using households, many of which include U.S.-citizen children, as the unit of analysis makes sense because the presence of these children and the costs they create are a direct result of their parents having been allowed to enter and remain in country. Thus, counting services used by these children allows for a full accounting of the costs of illegal immigration.
Identifying Illegal Aliens in Census Bureau Data. While the CPS does not ask respondents if they are illegal aliens, the Urban Institute, the former Immigration and Naturalization Service (INS), and the Census Bureau have used socio-demographic characteristics in the data to estimate the size and characteristics of the illegal population. To identify illegal aliens in the survey, we used citizenship status, year of arrival in the United States, age, country of birth, educational attainment, sex, receipt of welfare programs, receipt of Social Security, veteran status, and marital status. This method is based on some very well-established facts about the characteristics of the illegal population. In some cases, we assume that individuals have zero chance of being an illegal alien, such as naturalized citizens, veterans, and individuals who report that they personally receive Social Security benefits or cash assistance from a welfare program or those who are enrolled in Medicaid. However, other members of a household, mainly the U.S.-born children of illegal aliens, can and do receive these programs. We estimate that there were 8.7 million illegal aliens included in the March 2003 CPS. By design, our estimates for the size and characteristics of the illegal population are very similar to those prepared by the Census Bureau, the INS, and the Urban Institute.
Estimating the Impact of Amnesty. We assume that any amnesty that passes Congress will have Lawful Permanent Residence (LPR) as a component. Even though the President's amnesty proposal in January seems to envision "temporary" worker status, every major legalization bill in Congress, including those sponsored by Republican legislators, provides illegal aliens with LPR status at some point in the process. Moreover, Democratic presidential nominee John Kerry has indicated his strong desire to give LPR status to illegal aliens.
To estimate the likely impact of legalization, we run two different simulations. In our first simulation, we assume that legalized illegal aliens would use services and pay taxes like all households headed by legal immigrants with the same characteristics. In this simulation, we control for the education level of the household head and whether the head is from Mexico. The first simulation shows that the net fiscal deficit grows from about $2,700 to more than $6,000 per household. In the second simulation, we again control for education and whether the household head is Mexican and also assume that illegals would become like post-1986 legal immigrants, excluding refugees. Because illegals are much more like recently arrived non-refugees than legal immigrants in general, the second simulation is the more plausible. The second simulation shows that the net fiscal deficit per household would climb to $7,700.
Results Similar to Other Studies. Our overall conclusion that education level is the primary determinant of tax payments made and services used is very similar to the conclusion of the 1997 National Research Council report, "The New Americans." The results of our study also closely match the findings of a 1998 Urban Institute study, which examined tax payments by illegal aliens in New York State. In order to test our results we ran separate estimates for federal taxes and found that, when adjusted for inflation, our estimated federal taxes are almost identical to those of the Urban Institute. The results of this study are also buttressed by an analysis of illegal alien tax returns done by the Inspector General's Office of the Department of Treasury in 2004, which found that about half of illegals had no federal income tax liability, very similar to our finding of 45 percent.
Illegal Immigration and the Federal Budget
Executive Summary
--------------------------------------------------------------------------------
This study is one of the first to estimate the total impact of illegal immigration on the federal budget. Most previous studies have focused on the state and local level and have examined only costs or tax payments, but not both. Based on Census Bureau data, this study finds that, when all taxes paid (direct and indirect) and all costs are considered, illegal households created a net fiscal deficit at the federal level of more than $10 billion in 2002. We also estimate that, if there was an amnesty for illegal aliens, the net fiscal deficit would grow to nearly $29 billion.
Among the findings:
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.
Among the largest costs are Medicaid ($2.5 billion); treatment for the uninsured ($2.2 billion); food assistance programs such as food stamps, WIC, and free school lunches ($1.9 billion); the federal prison and court systems ($1.6 billion); and federal aid to schools ($1.4 billion).
With nearly two-thirds of illegal aliens lacking a high school degree, the primary reason they create a fiscal deficit is their low education levels and resulting low incomes and tax payments, not their legal status or heavy use of most social services.
On average, the costs that illegal households impose on federal coffers are less than half that of other households, but their tax payments are only one-fourth that of other households.
Many of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth. Thus, greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them.
If illegal aliens were given amnesty and began to pay taxes and use services like households headed by legal immigrants with the same education levels, the estimated annual net fiscal deficit would increase from $2,700 per household to nearly $7,700, for a total net cost of $29 billion.
Costs increase dramatically because unskilled immigrants with legal status -- what most illegal aliens would become -- can access government programs, but still tend to make very modest tax payments.
Although legalization would increase average tax payments by 77 percent, average costs would rise by 118 percent.
The fact that legal immigrants with few years of schooling are a large fiscal drain does not mean that legal immigrants overall are a net drain -- many legal immigrants are highly skilled.
The vast majority of illegals hold jobs. Thus the fiscal deficit they create for the federal government is not the result of an unwillingness to work.
The results of this study are consistent with a 1997 study by the National Research Council, which also found that immigrants' education level is a key determinant of their fiscal impact.
A Complex Fiscal Picture
Welfare use. Our findings show that many of the preconceived notions about the fiscal impact of illegal households turn out to be inaccurate. In terms of welfare use, receipt of cash assistance programs tends to be very low, while Medicaid use, though significant, is still less than for other households. Only use of food assistance programs is significantly higher than that of the rest of the population. Also, contrary to the perceptions that illegal aliens don't pay payroll taxes, we estimate that more than half of illegals work "on the books." On average, illegal households pay more than $4,200 a year in all forms of federal taxes. Unfortunately, they impose costs of $6,950 per household.
Social Security and Medicare. Although we find that the net effect of illegal households is negative at the federal level, the same is not true for Social Security and Medicare. We estimate that illegal households create a combined net benefit for these two programs in excess of $7 billion a year, accounting for about 4 percent of the total annual surplus in these two programs. However, they create a net deficit of $17.4 billion in the rest of the budget, for a total net loss of $10.4 billion. Nonetheless, their impact on Social Security and Medicare is unambiguously positive. Of course, if the Social Security totalization agreement with Mexico signed in June goes into effect, allowing illegals to collect Social Security, these calculations would change.
The Impact of Amnesty. Finally, our estimates show that amnesty would significantly increase tax revenue. Because both their income and tax compliance would rise, we estimate that under the most likely scenario the average illegal alien household would pay 77 percent ($3,200) more a year in federal taxes once legalized. While not enough to offset the 118 percent ($8,200) per household increase in costs that would come with legalization, amnesty would significantly increase both the average income and tax payments of illegal aliens.
What's Different About Today's Immigration. Many native-born Americans observe that their ancestors came to America and did not place great demands on government services. Perhaps this is true, but the size and scope of government were dramatically smaller during the last great wave of immigration. Not just means-tested programs, but expenditures on everything from public schools to roads were only a fraction of what they are today. Thus, the arrival of unskilled immigrants in the past did not have the negative fiscal implications that it does today. Moreover, the American economy has changed profoundly since the last great wave of immigration, with education now the key determinant of economic success. The costs that unskilled immigrants impose simply reflect the nature of the modern American economy and welfare state. It is doubtful that the fiscal costs can be avoided if our immigration policies remain unchanged.
Policy Implications
The negative impact on the federal budget need not be the only or even the primary consideration when deciding what to do about illegal immigration. But assuming that the fiscal status quo is unacceptable, there are three main changes in policy that might reduce or eliminate the fiscal costs of illegal immigration. One set of options is to allow illegal aliens to remain in the country, but attempt to reduce the costs they impose. A second set of options would be to grant them legal status as a way of increasing the taxes they pay. A third option would be to enforce the law and reduce the size of the illegal population and with it the costs of illegal immigration.
Reducing the Cost Side of the Equation. Reducing the costs illegals impose would probably be the most difficult of the three options because illegal households already impose only about 46 percent as much in costs on the federal government as other households. Thus, the amount of money that can be saved by curtailing their use of public services even further is probably quite limited. Moreover, the fact that benefits are often received on behalf of their U.S.-citizen children means that it is very difficult to prevent illegal households from accessing the programs they do. And many of the programs illegals use most extensively are likely to be politically very difficult to cut, such as the Women Infants and Children (WIC) nutrition program. Other costs, such as incarcerating illegals who have been convicted of crimes are unavoidable. It seems almost certain that if illegals are allowed to remain in the country, the fiscal deficit will persist.
Increasing Tax Revenue by Granting Amnesty. As discussed above, our research shows that granting illegal aliens amnesty would dramatically increase tax revenue. Unfortunately, we find that costs would increase even more. Costs would rise dramatically because illegals would be able to access many programs that are currently off limits to them. Moreover, even if legalized illegal aliens continued to be barred from using some means-tested programs, they would still be much more likely to sign their U.S.-citizen children up for them because they would lose whatever fear they had of the government. We know this because immigrants with legal status, who have the same education levels and resulting low incomes as illegal aliens, sign their U.S.-citizen children up for programs like Medicaid at higher rates than illegal aliens with U.S.-citizen children. In addition, direct costs for programs like the Earned Income Tax Credit would also grow dramatically with legalization. Right now, illegals need a Social Security number and have to file a tax return to get the credit. As a result, relatively few actually get it. We estimate that once legalized, payments to illegals under this program would grow more than ten-fold.
From a purely fiscal point of view, the main problem with legalization is that illegals would, for the most part, become unskilled legal immigrants. And unskilled legal immigrants create much larger fiscal costs than unskilled illegal aliens. Legalization will not change the low education levels of illegal aliens or the fact that the American labor market offers very limited opportunities to such workers, whatever their legal status. Nor will it change the basic fact that the United States, like all industrialized democracies, has a well-developed welfare state that provides assistance to low-income workers. Large fiscal costs are simply an unavoidable outcome of unskilled immigration given the economic and fiscal realities of America today.
Enforcing Immigration Laws. If we are serious about avoiding the fiscal costs of illegal immigration, the only real option is to enforce the law and reduce the number of illegal aliens in the country. First, this would entail much greater efforts to police the nation's land and sea borders. At present, less than 2,000 agents are on duty at any one time on the Mexican and Canadian borders. Second, much greater effort must be made to ensure that those allowed into the country on a temporary basis, such as tourists and guest workers, are not likely to stay in the country permanently. Third, the centerpiece of any enforcement effort would be to enforce the ban on hiring illegal aliens. At present, the law is completely unenforced. Enforcement would require using existing databases to ensure that all new hires are authorized to work in the United States and levying heavy fines on businesses that knowingly employ illegal aliens. Finally, a clear message from policymakers, especially senior members of the administration, that enforcement of the law is valued and vitally important to the nation, would dramatically increase the extremely low morale of those who enforce immigration laws.
Policing the border, enforcing the ban on hiring illegal aliens, denying temporary visas to those likely to remain permanently, and all the other things necessary to reduce illegal immigration will take time and cost money. However, since the cost of illegal immigration to the federal government alone is estimated at over $10 billion a year, significant resources could be devoted to enforcement efforts and still leave taxpayers with significant net savings. Enforcement not only has the advantage of reducing the costs of illegal immigration, it also is very popular with the general public. Nonetheless, policymakers can expect strong opposition from special interest groups, especially ethnic advocacy groups and those elements of the business community that do not want to invest in labor-saving devices and techniques or pay better salaries, but instead want access to large numbers of cheap, unskilled workers. If we choose to continue to not enforce the law or to grant illegals amnesty, both the public and policymakers have to understand that there will be significant long-term costs for taxpayers.
Summary Methodology
Overall Approach. To estimate the impact of households headed by illegal aliens, we rely heavily on the National Research Council's (NRC) 1997 study, "The New Americans." Like that study, we use the March Current Population Survey (CPS) and the decennial Census, both collected by the Census Bureau. We use the March 2003 CPS, which asks questions about income, household structure, and use of public services in the calendar year prior to the survey. We control total federal expenditures and tax receipts by category to reflect actual expenditures and tax payments. Like the NRC, we assume that immigrants have no impact on defense-related expenditures and therefore assign those costs only to native-headed households. Like the NRC, we define a household as persons living together who are related. Individuals living alone or with persons to whom they are unrelated are treated as their own households. As the NRC study points out, a "household is the primary unit through which public services are consumed and taxes paid." Following the NRC's example of using households, many of which include U.S.-citizen children, as the unit of analysis makes sense because the presence of these children and the costs they create are a direct result of their parents having been allowed to enter and remain in country. Thus, counting services used by these children allows for a full accounting of the costs of illegal immigration.
Identifying Illegal Aliens in Census Bureau Data. While the CPS does not ask respondents if they are illegal aliens, the Urban Institute, the former Immigration and Naturalization Service (INS), and the Census Bureau have used socio-demographic characteristics in the data to estimate the size and characteristics of the illegal population. To identify illegal aliens in the survey, we used citizenship status, year of arrival in the United States, age, country of birth, educational attainment, sex, receipt of welfare programs, receipt of Social Security, veteran status, and marital status. This method is based on some very well-established facts about the characteristics of the illegal population. In some cases, we assume that individuals have zero chance of being an illegal alien, such as naturalized citizens, veterans, and individuals who report that they personally receive Social Security benefits or cash assistance from a welfare program or those who are enrolled in Medicaid. However, other members of a household, mainly the U.S.-born children of illegal aliens, can and do receive these programs. We estimate that there were 8.7 million illegal aliens included in the March 2003 CPS. By design, our estimates for the size and characteristics of the illegal population are very similar to those prepared by the Census Bureau, the INS, and the Urban Institute.
Estimating the Impact of Amnesty. We assume that any amnesty that passes Congress will have Lawful Permanent Residence (LPR) as a component. Even though the President's amnesty proposal in January seems to envision "temporary" worker status, every major legalization bill in Congress, including those sponsored by Republican legislators, provides illegal aliens with LPR status at some point in the process. Moreover, Democratic presidential nominee John Kerry has indicated his strong desire to give LPR status to illegal aliens.
To estimate the likely impact of legalization, we run two different simulations. In our first simulation, we assume that legalized illegal aliens would use services and pay taxes like all households headed by legal immigrants with the same characteristics. In this simulation, we control for the education level of the household head and whether the head is from Mexico. The first simulation shows that the net fiscal deficit grows from about $2,700 to more than $6,000 per household. In the second simulation, we again control for education and whether the household head is Mexican and also assume that illegals would become like post-1986 legal immigrants, excluding refugees. Because illegals are much more like recently arrived non-refugees than legal immigrants in general, the second simulation is the more plausible. The second simulation shows that the net fiscal deficit per household would climb to $7,700.
Results Similar to Other Studies. Our overall conclusion that education level is the primary determinant of tax payments made and services used is very similar to the conclusion of the 1997 National Research Council report, "The New Americans." The results of our study also closely match the findings of a 1998 Urban Institute study, which examined tax payments by illegal aliens in New York State. In order to test our results we ran separate estimates for federal taxes and found that, when adjusted for inflation, our estimated federal taxes are almost identical to those of the Urban Institute. The results of this study are also buttressed by an analysis of illegal alien tax returns done by the Inspector General's Office of the Department of Treasury in 2004, which found that about half of illegals had no federal income tax liability, very similar to our finding of 45 percent.
The Immigration Debate - WSJ
Illegal immigration has been painted as a costly problem, an economic necessity and a political football as the debate surrounding it has gathered steam.
The Wall Street Journal Online asked economists Gordon Hanson of the University of California, San Diego, and Philip Martin, of the University of California, Davis, to discuss the underlying causes of immigration (both legal and illegal), its historical roots and the nature of the current political uproar over the issue.
What do you think? Share your thoughts on our discussion board.
* * *
.Gordon Hanson writes: For all the heat that the debate about immigration has generated, the net economic impact of immigration on the U.S. economy appears to be remarkably small. First, some thoughts on legal immigration, before we address illegal immigrants.
By bringing new workers into the economy, immigration allows existing U.S. capital, land, and technology to be used more efficiently. Also on the plus side, immigrants pay property taxes, sales taxes, Social Security taxes, and income taxes.
About the Participants
Gordon Hanson obtained his bachelor's in economics from Occidental College in 1986 and his doctorate from the Massachusetts Institute of Technology in 1992. Before joining UCSD in 2001, he was on the economics faculty at the University of Michigan and at the University of Texas. He has written more than 50 publications in academic journals and other academic volumes. His current research focuses on causes and consequences of Mexican migration to the U.S., how and why multinational firms globalize their production activities and the factors that shape countries' export capabilities. His most recent book is "Why Does Immigration Divide America? Public Finance and Political Opposition to Open Borders."
Philip Martin is a professor of agriculture and resource economics at the University of California, Davis. He also chairs the University of California's Comparative Immigration & Integration Program and edits the monthly immigration newsletter, Migration News. He studied labor economics and agricultural economics at the University of Wisconsin, Madison, where he earned a Ph.D. in 1975. His research focuses on farm labor, labor migration, economic development, and immigration issues, and has testified before Congress and state and local agencies numerous times on these issues. His most recent book is "Managing Labor Migration in the Twenty-First Century."
.In the negative column, immigrants use public services in the form of public education, fire and police protection, government assistance, etc. Add the positive and negative elements together and you get what looks like a very small number.
We can calculate the gain to U.S. GDP due to immigration, known in econ parlance as the immigration surplus, using a simple formula that is a function of three things:
■The importance of labor to the U.S. economy
■The size of the immigrant labor inflow
■The change in U.S. wages due to immigration
Whether legal or illegal, immigration generates a gain in national income by making U.S. business more productive. George Borjas and Larry Katz have examined the specific consequences of immigration from Mexico for U.S. wages.
But illegal immigration differs from legal immigration in several important respects. First, illegal immigrants tend to have low skill levels, which means they end up in jobs in agriculture, construction, household services, landscaping, low-end manufacturing, or restaurants and lodging. Employers in these industries (and consumers of the goods these industries produce) are primarily the ones who benefit from illegal immigration. In a recent study, Patricia Cortes, a graduate student at MIT, finds that U.S. cities that have higher larger immigrant inflows have lower prices for housekeeping, gardening, and other labor intensive services. Ten percent more immigration lowers prices for these services by about 1.3%.
Second, illegal immigrants, by virtue of their low income levels and their tenuous attachment to the legal economy, don't pay all that much in taxes. Yet their kids still attend school and their U.S.-born kids still get access to Medicare. What does this mean for the net fiscal consequences of illegal immigration? The Center for Immigration Studies, an anti-immigration think tank, estimates that the short-run net fiscal impact of illegal immigration is negative, on the order of $10 billion in 2002, or 0.09% of U.S. GDP in that year. This is not a big number.
As with immigration overall, what upsets people is not the aggregate impact of illegal immigration, which, as with legal immigration, seems to be more or less a wash. It is that the benefits of illegal immigration are enjoyed by one group -- the employers who hire them (and the consumers of their services) -- while the costs are incurred by other groups -- low-skilled workers and taxpayers in states where illegal immigrants reside.
* * *
.Philip Martin writes: Gordon is right: Immigration, whether legal or illegal, adds workers, most of whom get jobs, which makes the U.S. economy larger. If there are economies of scale, as when producing more lowers the cost of production, the prices of some goods fall, benefiting those who buy those goods at home and abroad.
Most of the benefits of immigration go to the immigrants who earn higher wages in the U.S. than they would at home. In the standard triangle analysis, there are no net economic benefits to the U.S. economy (the triangle in the Hanson and Borjas papers above, as well as in my book "Promise Unfulfilled: Unions, Immigration, and Farm Workers") if wages do not fall with the addition of immigrant workers.
It has been very hard to agree on how much wages declined because of immigration, but the 3% estimate of Borjas is reasonable.
With migrants getting most of the gain from immigration in their wages, and owners of capital and land getting most of the rest in higher profits and rents, the surplus triangle is 1/10 of 1% of GDP. Pro-immigration people stress that immigration is positive, a net economic benefit, and in a $13 trillion economy, 1% is $13 billion. Anti-immigrant people stress that immigration adds $13 billion, or about two weeks' growth in an economy growing 2.5% a year.
Economists agree that the immigration generates a small net economic benefit for the U.S. and in doing so redistributes income from workers to owners of capital and land. Perhaps this is why immigration is such a political hot potato; it's mostly a distribution issue and, for governments that are in the business of redistributing income via taxes and subsidies, regulating immigration is another redistribution tool.
How many, from where and in what status are the core questions of immigration policy. Could the U.S. get a larger economic benefit if changed the mix of immigrants arriving?
The National Research Council data suggest the answer is yes. Making often heroic assumptions about how well immigrants and their children will fare in the U.S., the NRC calculated the present value of a typical immigrant arriving in the U.S. in the mid-1990s to be $89,000, that is, taking into account the taxes paid of immigrants and assuming that their children and grandchildren are like their U.S.-born counterparts, the NRC estimated that the present value of the taxes paid will exceed tax-supported benefits consumed by $89,000 over the next 50+ years.
However, the same study emphasized that the key to the benefits of immigration for the U.S. are their level of education. Those with more than a high-school education had a net present value of almost $200,000, while those with less than a high-school education had a net present value of negative $13,000.
* * *
.Gordon writes: I think few would argue with the statement that we are living through an unprecedented moment of immigration from Mexico and Latin America. Where disagreements might arise is over what brought this moment about and how long it might last.
If you go back to the middle of the 20th century, immigration from Mexico just wasn't a big deal. The share of Mexican immigrants in the U.S. labor force actually fell from the 1920s to the 1960s. Now, these numbers don't include temporary immigrants that entered the U.S. under the Bracero program from 1942 to 1964, but I think the importance of that program is easy to exaggerate. Since braceros had to return home at the end of each year, the program represented a one-time increase in the U.S. labor force of just a few hundred thousand workers. Even at its height in the late 1950s, when over 400,000 Braceros entered the U.S., these workers represented less than half a percent of the U.S. labor force.
Today, however, the scale is entirely different. Mexican immigrants now account for about 5% of the U.S. labor force (and 35% of the immigrant labor force), up from less than 1% in 1970. What happened?
I would cite two events. Since 1982, Mexico has had several major economic contractions and has been unable to string together more than a few years of solid growth. As a result, per capita income in Mexico has steadily fallen relative to per capita income in the U.S. Why stay in Mexico when incomes are rising faster in the U.S.?
Compounding migration pressures has been the entry of Mexico's baby boom into the labor force. While fertility rates in Mexico have dropped sharply in the last three decades (from five kids per woman in 1970 to three kids per woman in 2000), it wasn't that long ago that the typical Mexican woman had nearly a half dozen children. Mexico's high fertility years produced a demographic bulge, the members of which in the last 20 years have come of age and started to look for work. As luck would have it, Mexico's baby boom entered the labor force during Mexico's two decades of dismal economic performance and decidedly lackluster growth in labor demand. The result has been the surge in Mexican immigration that we have been witnessing.
What makes the current surge in Mexico-to-U.S. migration hard to slow is that today's generation of Mexican young people do not have a memory of good economic times in Mexico. Many may have lost faith in Mexico's ability to provide them with a decent future. Such a change in expectations is a powerful force because it implies that Mexico would have to produce unexpectedly strong economic growth for a sustained period to get Mexican workers to believe in the Mexican economy, again. In the meantime, Mexican labor will keep heading north.
* * *
.Philip writes: Gordon has nicely laid out the failure of Mexico to create jobs for its baby-boom generation and the challenge of generating stay-at-home development after repeated disappointments in Mexican economic development. I think that the Bracero experience has relevance for today's policy debate, in which both the House and Senate agree on more border and interior enforcement, and both seem to favor guest workers, but only the Senate offers a path to legal status.
The Bracero ("strong arm") program was very important in setting Mexico-U.S. migration in motion. There were actually two periods of programs, between 1917 and 1921 and again between 1942 and 1964. The second period was important for several reasons: It gave Mexicans experience migrating legally and illegally to the U.S., made farmers familiar with Mexican workers, and introduced the nemeses of guest-worker programs everywhere: distortion and dependence.
Opening legal channels for guest workers doesn't necessarily curb illegal immigration. Between 1942 and 1964, some 4.6 million Mexicans were admitted to do farm work; many Mexicans returned year after year, but between one million and two million gained legal U.S. work experience.
The Bracero program is another example of the maxim that there is nothing more permanent than temporary workers. The economic decisions of U.S. farmers became distorted as they made investment decisions that assumed Braceros would continue to be available. There was no need to raise the piece-rate wages that most Braceros earned, so it became profitable to plant orange and apple trees in remote areas. If the Bracero program were ended, these plantings would be unprofitable, explaining why farmers argued that they would go out of business without migrants. The program was nonetheless ended at the behest of President Kennedy, who believed that Braceros were "adversely affecting the wages, working conditions, and employment opportunities of our own agricultural workers."
Today, 75% of U.S. hired workers on crop farms were born in Mexico, and more than half are unauthorized. If we substitute "unauthorized Mexican farm worker" for "Bracero," we get the same debate as we had in the early 1960s and the early 1980s, before IRCA was enacted.
Perhaps the best way to minimize the distortion inherent in guest-worker programs is to charge employers for the privilege of employing legal migrants, and to use the taxes or levies collected to help them to mechanize and restructure jobs. In agriculture and many other U.S. industries that hire Mexican workers, it can be hard for an individual employer to mechanize, since, e.g., the crop must be packed or processed in a facility that is set up to handle machine-picked or hand-picked produce, but not both.
The other issue is the dependence of some areas of Mexico on the U.S. labor market. Economic theory suggests that areas sending and receiving migrants should see convergence in wages, but this anticipates higher wages in areas losing workers. Wages have risen in Mexico, but many of the rural areas from which most migrants come have been described as filled with nurseries and nursing homes, reflecting the fact that working-age adults are in the U.S. Remittances can lead to better housing and spending that generates multipliers and helps nonmigrants, too, but may not lead to the economic development that would keep young Mexicans seeking a brighter future at home.
The Bracero program sowed the seeds for subsequent Mexico-U.S. migration, which makes me cautious about beginning another large-scale guest-worker program. Second, if a new guest-worker program does not deal with the distortion that invariably creeps into the decision making of guest-worker dependent employers, there will be future "I will go out of business without migrant" protests. Third, if Mexico cannot absorb its labor force entrants in good or formal sector jobs, there will continue to be strong incentives to cross the border.
* * *
.Gordon writes: Where do we go from here? Congress is battling over how to manage illegal immigration, with a plan to expand a guest-worker program being the most popular current policy option. In a nutshell, the idea would be to convert illegal immigrants into guest workers, which the U.S. government could regulate.
A guest-worker program, at least how it is envisioned by Congress, would be a disaster. For as maligned as illegal immigration is, it has some attractive features in terms of economic efficiency. Illegal immigration delivers U.S. business the types of workers they need (low-skilled labor, which is increasingly in short supply), when they need them (during times when the U.S. economy is expanding), and where they need them (in regions where job growth is strong).
A guest-worker program would have none of these properties. Given the snail's pace at which the Department of Homeland Security operates, U.S. employers would likely have to apply for guest workers long in advance of when they actually need them. The flexibility and adaptability of current illegal inflows would be lost. In response, many employers would probably go back to what they are doing now, which is hiring illegal workers.
Successful policy reform would require rethinking both illegal and legal immigration in the U.S. Why not convert most family-sponsored immigration visas into visas awarded on the basis of skill? Why not make the number of immigrants awarded visas conditional on U.S. economic conditions? Why not have the price of a U.S. immigration visa be determined by market conditions? These are questions that in the current debate should be asked but sadly are not.
* * *
.Philip writes: I hate to think that illegal migration, with migrants dying in the desert and sometimes subject to unscrupulous employers, is the best we can do. I think the first priority is to agree that hiring unauthorized workers is a serious offense and devote the resources needed to change the behavior of employers and migrants. We can do this; we have done it for child labor, and we can make hiring unauthorized migrants just as unacceptable, as is true in northern Europe and Germany.
After 1986, both U.S. employers and Mexican migrants thought for a short time that the U.S. government was taking unauthorized migrants as seriously as child labor. But they soon realized that it wasn't, and they went back to hiring the unauthorized workers who showed up seeking jobs. There was also a layering in the labor market, with many employers turning to labor contractors to hire crews of workers on separate payrolls, cutting the link that allowed for some earlier Horatio Alger stories of ambitious workers climbing the ladder within a corporation when discovered by the right manager.
Labor migration is a process to be managed, not a problem to be solved. An effective migration-management process is one that uses economic incentives and disincentives to encourage employers and migrants to obey government-set rules, since we will never have enough enforcers to get compliance that goes against economic interests. In guest-worker programs, these economic incentives and disincentives involve payroll taxes; in general legal immigration, we have to answer the question whose interest migration is to solve.
If migration is to benefit natives, the key is to select immigrants most likely to be successful: young, healthy, well-educated English speakers. If migration is to allow the world's "huddled masses" to breathe free, there will be different selection criteria. The inability of policy makers to answer these questions may reflect American ambivalence about immigration.
The Wall Street Journal Online asked economists Gordon Hanson of the University of California, San Diego, and Philip Martin, of the University of California, Davis, to discuss the underlying causes of immigration (both legal and illegal), its historical roots and the nature of the current political uproar over the issue.
What do you think? Share your thoughts on our discussion board.
* * *
.Gordon Hanson writes: For all the heat that the debate about immigration has generated, the net economic impact of immigration on the U.S. economy appears to be remarkably small. First, some thoughts on legal immigration, before we address illegal immigrants.
By bringing new workers into the economy, immigration allows existing U.S. capital, land, and technology to be used more efficiently. Also on the plus side, immigrants pay property taxes, sales taxes, Social Security taxes, and income taxes.
About the Participants
Gordon Hanson obtained his bachelor's in economics from Occidental College in 1986 and his doctorate from the Massachusetts Institute of Technology in 1992. Before joining UCSD in 2001, he was on the economics faculty at the University of Michigan and at the University of Texas. He has written more than 50 publications in academic journals and other academic volumes. His current research focuses on causes and consequences of Mexican migration to the U.S., how and why multinational firms globalize their production activities and the factors that shape countries' export capabilities. His most recent book is "Why Does Immigration Divide America? Public Finance and Political Opposition to Open Borders."
Philip Martin is a professor of agriculture and resource economics at the University of California, Davis. He also chairs the University of California's Comparative Immigration & Integration Program and edits the monthly immigration newsletter, Migration News. He studied labor economics and agricultural economics at the University of Wisconsin, Madison, where he earned a Ph.D. in 1975. His research focuses on farm labor, labor migration, economic development, and immigration issues, and has testified before Congress and state and local agencies numerous times on these issues. His most recent book is "Managing Labor Migration in the Twenty-First Century."
.In the negative column, immigrants use public services in the form of public education, fire and police protection, government assistance, etc. Add the positive and negative elements together and you get what looks like a very small number.
We can calculate the gain to U.S. GDP due to immigration, known in econ parlance as the immigration surplus, using a simple formula that is a function of three things:
■The importance of labor to the U.S. economy
■The size of the immigrant labor inflow
■The change in U.S. wages due to immigration
Whether legal or illegal, immigration generates a gain in national income by making U.S. business more productive. George Borjas and Larry Katz have examined the specific consequences of immigration from Mexico for U.S. wages.
But illegal immigration differs from legal immigration in several important respects. First, illegal immigrants tend to have low skill levels, which means they end up in jobs in agriculture, construction, household services, landscaping, low-end manufacturing, or restaurants and lodging. Employers in these industries (and consumers of the goods these industries produce) are primarily the ones who benefit from illegal immigration. In a recent study, Patricia Cortes, a graduate student at MIT, finds that U.S. cities that have higher larger immigrant inflows have lower prices for housekeeping, gardening, and other labor intensive services. Ten percent more immigration lowers prices for these services by about 1.3%.
Second, illegal immigrants, by virtue of their low income levels and their tenuous attachment to the legal economy, don't pay all that much in taxes. Yet their kids still attend school and their U.S.-born kids still get access to Medicare. What does this mean for the net fiscal consequences of illegal immigration? The Center for Immigration Studies, an anti-immigration think tank, estimates that the short-run net fiscal impact of illegal immigration is negative, on the order of $10 billion in 2002, or 0.09% of U.S. GDP in that year. This is not a big number.
As with immigration overall, what upsets people is not the aggregate impact of illegal immigration, which, as with legal immigration, seems to be more or less a wash. It is that the benefits of illegal immigration are enjoyed by one group -- the employers who hire them (and the consumers of their services) -- while the costs are incurred by other groups -- low-skilled workers and taxpayers in states where illegal immigrants reside.
* * *
.Philip Martin writes: Gordon is right: Immigration, whether legal or illegal, adds workers, most of whom get jobs, which makes the U.S. economy larger. If there are economies of scale, as when producing more lowers the cost of production, the prices of some goods fall, benefiting those who buy those goods at home and abroad.
Most of the benefits of immigration go to the immigrants who earn higher wages in the U.S. than they would at home. In the standard triangle analysis, there are no net economic benefits to the U.S. economy (the triangle in the Hanson and Borjas papers above, as well as in my book "Promise Unfulfilled: Unions, Immigration, and Farm Workers") if wages do not fall with the addition of immigrant workers.
It has been very hard to agree on how much wages declined because of immigration, but the 3% estimate of Borjas is reasonable.
With migrants getting most of the gain from immigration in their wages, and owners of capital and land getting most of the rest in higher profits and rents, the surplus triangle is 1/10 of 1% of GDP. Pro-immigration people stress that immigration is positive, a net economic benefit, and in a $13 trillion economy, 1% is $13 billion. Anti-immigrant people stress that immigration adds $13 billion, or about two weeks' growth in an economy growing 2.5% a year.
Economists agree that the immigration generates a small net economic benefit for the U.S. and in doing so redistributes income from workers to owners of capital and land. Perhaps this is why immigration is such a political hot potato; it's mostly a distribution issue and, for governments that are in the business of redistributing income via taxes and subsidies, regulating immigration is another redistribution tool.
How many, from where and in what status are the core questions of immigration policy. Could the U.S. get a larger economic benefit if changed the mix of immigrants arriving?
The National Research Council data suggest the answer is yes. Making often heroic assumptions about how well immigrants and their children will fare in the U.S., the NRC calculated the present value of a typical immigrant arriving in the U.S. in the mid-1990s to be $89,000, that is, taking into account the taxes paid of immigrants and assuming that their children and grandchildren are like their U.S.-born counterparts, the NRC estimated that the present value of the taxes paid will exceed tax-supported benefits consumed by $89,000 over the next 50+ years.
However, the same study emphasized that the key to the benefits of immigration for the U.S. are their level of education. Those with more than a high-school education had a net present value of almost $200,000, while those with less than a high-school education had a net present value of negative $13,000.
* * *
.Gordon writes: I think few would argue with the statement that we are living through an unprecedented moment of immigration from Mexico and Latin America. Where disagreements might arise is over what brought this moment about and how long it might last.
If you go back to the middle of the 20th century, immigration from Mexico just wasn't a big deal. The share of Mexican immigrants in the U.S. labor force actually fell from the 1920s to the 1960s. Now, these numbers don't include temporary immigrants that entered the U.S. under the Bracero program from 1942 to 1964, but I think the importance of that program is easy to exaggerate. Since braceros had to return home at the end of each year, the program represented a one-time increase in the U.S. labor force of just a few hundred thousand workers. Even at its height in the late 1950s, when over 400,000 Braceros entered the U.S., these workers represented less than half a percent of the U.S. labor force.
Today, however, the scale is entirely different. Mexican immigrants now account for about 5% of the U.S. labor force (and 35% of the immigrant labor force), up from less than 1% in 1970. What happened?
I would cite two events. Since 1982, Mexico has had several major economic contractions and has been unable to string together more than a few years of solid growth. As a result, per capita income in Mexico has steadily fallen relative to per capita income in the U.S. Why stay in Mexico when incomes are rising faster in the U.S.?
Compounding migration pressures has been the entry of Mexico's baby boom into the labor force. While fertility rates in Mexico have dropped sharply in the last three decades (from five kids per woman in 1970 to three kids per woman in 2000), it wasn't that long ago that the typical Mexican woman had nearly a half dozen children. Mexico's high fertility years produced a demographic bulge, the members of which in the last 20 years have come of age and started to look for work. As luck would have it, Mexico's baby boom entered the labor force during Mexico's two decades of dismal economic performance and decidedly lackluster growth in labor demand. The result has been the surge in Mexican immigration that we have been witnessing.
What makes the current surge in Mexico-to-U.S. migration hard to slow is that today's generation of Mexican young people do not have a memory of good economic times in Mexico. Many may have lost faith in Mexico's ability to provide them with a decent future. Such a change in expectations is a powerful force because it implies that Mexico would have to produce unexpectedly strong economic growth for a sustained period to get Mexican workers to believe in the Mexican economy, again. In the meantime, Mexican labor will keep heading north.
* * *
.Philip writes: Gordon has nicely laid out the failure of Mexico to create jobs for its baby-boom generation and the challenge of generating stay-at-home development after repeated disappointments in Mexican economic development. I think that the Bracero experience has relevance for today's policy debate, in which both the House and Senate agree on more border and interior enforcement, and both seem to favor guest workers, but only the Senate offers a path to legal status.
The Bracero ("strong arm") program was very important in setting Mexico-U.S. migration in motion. There were actually two periods of programs, between 1917 and 1921 and again between 1942 and 1964. The second period was important for several reasons: It gave Mexicans experience migrating legally and illegally to the U.S., made farmers familiar with Mexican workers, and introduced the nemeses of guest-worker programs everywhere: distortion and dependence.
Opening legal channels for guest workers doesn't necessarily curb illegal immigration. Between 1942 and 1964, some 4.6 million Mexicans were admitted to do farm work; many Mexicans returned year after year, but between one million and two million gained legal U.S. work experience.
The Bracero program is another example of the maxim that there is nothing more permanent than temporary workers. The economic decisions of U.S. farmers became distorted as they made investment decisions that assumed Braceros would continue to be available. There was no need to raise the piece-rate wages that most Braceros earned, so it became profitable to plant orange and apple trees in remote areas. If the Bracero program were ended, these plantings would be unprofitable, explaining why farmers argued that they would go out of business without migrants. The program was nonetheless ended at the behest of President Kennedy, who believed that Braceros were "adversely affecting the wages, working conditions, and employment opportunities of our own agricultural workers."
Today, 75% of U.S. hired workers on crop farms were born in Mexico, and more than half are unauthorized. If we substitute "unauthorized Mexican farm worker" for "Bracero," we get the same debate as we had in the early 1960s and the early 1980s, before IRCA was enacted.
Perhaps the best way to minimize the distortion inherent in guest-worker programs is to charge employers for the privilege of employing legal migrants, and to use the taxes or levies collected to help them to mechanize and restructure jobs. In agriculture and many other U.S. industries that hire Mexican workers, it can be hard for an individual employer to mechanize, since, e.g., the crop must be packed or processed in a facility that is set up to handle machine-picked or hand-picked produce, but not both.
The other issue is the dependence of some areas of Mexico on the U.S. labor market. Economic theory suggests that areas sending and receiving migrants should see convergence in wages, but this anticipates higher wages in areas losing workers. Wages have risen in Mexico, but many of the rural areas from which most migrants come have been described as filled with nurseries and nursing homes, reflecting the fact that working-age adults are in the U.S. Remittances can lead to better housing and spending that generates multipliers and helps nonmigrants, too, but may not lead to the economic development that would keep young Mexicans seeking a brighter future at home.
The Bracero program sowed the seeds for subsequent Mexico-U.S. migration, which makes me cautious about beginning another large-scale guest-worker program. Second, if a new guest-worker program does not deal with the distortion that invariably creeps into the decision making of guest-worker dependent employers, there will be future "I will go out of business without migrant" protests. Third, if Mexico cannot absorb its labor force entrants in good or formal sector jobs, there will continue to be strong incentives to cross the border.
* * *
.Gordon writes: Where do we go from here? Congress is battling over how to manage illegal immigration, with a plan to expand a guest-worker program being the most popular current policy option. In a nutshell, the idea would be to convert illegal immigrants into guest workers, which the U.S. government could regulate.
A guest-worker program, at least how it is envisioned by Congress, would be a disaster. For as maligned as illegal immigration is, it has some attractive features in terms of economic efficiency. Illegal immigration delivers U.S. business the types of workers they need (low-skilled labor, which is increasingly in short supply), when they need them (during times when the U.S. economy is expanding), and where they need them (in regions where job growth is strong).
A guest-worker program would have none of these properties. Given the snail's pace at which the Department of Homeland Security operates, U.S. employers would likely have to apply for guest workers long in advance of when they actually need them. The flexibility and adaptability of current illegal inflows would be lost. In response, many employers would probably go back to what they are doing now, which is hiring illegal workers.
Successful policy reform would require rethinking both illegal and legal immigration in the U.S. Why not convert most family-sponsored immigration visas into visas awarded on the basis of skill? Why not make the number of immigrants awarded visas conditional on U.S. economic conditions? Why not have the price of a U.S. immigration visa be determined by market conditions? These are questions that in the current debate should be asked but sadly are not.
* * *
.Philip writes: I hate to think that illegal migration, with migrants dying in the desert and sometimes subject to unscrupulous employers, is the best we can do. I think the first priority is to agree that hiring unauthorized workers is a serious offense and devote the resources needed to change the behavior of employers and migrants. We can do this; we have done it for child labor, and we can make hiring unauthorized migrants just as unacceptable, as is true in northern Europe and Germany.
After 1986, both U.S. employers and Mexican migrants thought for a short time that the U.S. government was taking unauthorized migrants as seriously as child labor. But they soon realized that it wasn't, and they went back to hiring the unauthorized workers who showed up seeking jobs. There was also a layering in the labor market, with many employers turning to labor contractors to hire crews of workers on separate payrolls, cutting the link that allowed for some earlier Horatio Alger stories of ambitious workers climbing the ladder within a corporation when discovered by the right manager.
Labor migration is a process to be managed, not a problem to be solved. An effective migration-management process is one that uses economic incentives and disincentives to encourage employers and migrants to obey government-set rules, since we will never have enough enforcers to get compliance that goes against economic interests. In guest-worker programs, these economic incentives and disincentives involve payroll taxes; in general legal immigration, we have to answer the question whose interest migration is to solve.
If migration is to benefit natives, the key is to select immigrants most likely to be successful: young, healthy, well-educated English speakers. If migration is to allow the world's "huddled masses" to breathe free, there will be different selection criteria. The inability of policy makers to answer these questions may reflect American ambivalence about immigration.
Monday, March 23, 2009
commentary
Financials lead a huge rally as the Geithner plan to buy banks' toxic assets wins cheers. Techs and energy shares also jump. The S&P 500 may rally to 900; March could be the best month for the index since 1987. Existing-home sales unexpectedly rise. Nobody is saying the economy will not have occasional rallies on the way down. The news that energy stocks are up because energy prices are going back up is GOOD NEWS? Not to the consumers. Dr. Mel P. Johnson
total agreement
Billy has been taking lessons at the Dubya School of Public Speaking again. He said tonight that his experience as Mayor over the past 6 years has been "unremarkable". I couldnt agree more. See, there ARE times I agree with Billy. This is one of those times. Dr. Mel P. Johnson
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