In the past year, two publications have stoked the fires of nativism and the anti-immigration movement. The first is a Los Angeles County study; the second, a paper written for a population control organization by Rice University professor emeritus Donald Huddle.
The writings raise important questions: whether immigrants nip off the welfare system, and whether immigration increases native unemployment. My economic analyses and those of others during the past 15 years convince me that the answer to both questions is a resounding no, Immigrants do not abuse the welfare system, nor do they steal jobs from native born Americans.
Start with the welfare system. The most important fact about immigrants is that they typically arrive when they are young and healthy. Hence they use fewer welfare services on average than do native families. New cohorts do not receive expensive Social Security, Medicare and other aid to the aged. And for its first several decades in America, the average immigrant family pays more taxes than does the average native family. Altogether, the immigrant family contributes yearly about $2,500. More in taxes to public coffers than it obtains in services. These findings are based on massive Census Bureau data for 1970s earnings, family composition and public services used. They are corroborated by a similar study using 1980s data for Canada by St. Mary’s University economist Ather Akbari, and by recent tentative studies by me and others for Germany and Switzerland.
Anti-immigration activists claim that the Los Angeles County report showed that immigrants take more than they put into our system. In fact, the report didn’t say that. The report stated that recent immigrants “generate 18 times more revenue to the federal government, nine limes more revenue to the state of California, and about two and one-half times more revenue to other local government entities than to the County of Los Angeles.” What the studies said The L.A. County report calculated immigrant related revenues to the county of $139 million vs. costs of $947 million. This is misleading, if only because it reveals more about our system of taxation and distribution than about immigrants, the federal government receives most of the taxes immigrants pay, while local communities cough up most of their welfare and education costs. But even if the numbers were correct, they imply that total taxes paid by this group—$4.3 billion in federal, state and local taxes—are quadruple their local costs.
The L.A. study has another shortcoming: It considers only those immigrants who arrived after 1980, It lumps earlier immigrants —those who make the largest tax contributions—into the same category as natives. This group of earlier immigrants is particularly productive and puts a great deal more into the system than it takes out. The report is further flawed because it gives no apparent source for crucial income estimates. In another study, immigrants in Los Angeles County were studied by Rebecca Clark and Jeffrey Passel of the Urban Institute. They, too, estimated tax revenues from recent immigrants and reached a far different conclusion, they found that this group pays more property taxes, more FICA, more unemployment insurance, and more federal and state income taxes than the L.A, County study said they did.
On the cost side hot button issues like public social services and health services Clark and Passel found that the county’s statistical work overestimated Outlays. They also found that the study didn’t look at a crucial number— the balance of payments for nonimmigrants. “The various immigrant groups may be no different from other groups,” says Clark. Indeed, she and Passel note that numbers from the L.A. report itself suggest that not only immigrants but also natives cost more than they pay in taxes at the county level—a near absurdity.
The other major publication fueling the anti-immigration debate that of the Rice University’s Donald Huddle, also asks whether immigrants cost the U.S. more than they give.
The first bulleted item in his summary reads:”11.8 million legal immigrants…present in the U.S. in 1992 cost all levels of government that year more than $45 billion above and beyond the taxes they paid.” But Huddle builds on the flawed L.A. County numbers —for example, one of his fundamental tables, “tax payments by flow of legal immigrants for 1992,” is based largely on those county figures. He also adduces numbers from other sources and proceeds with calculations that I challenge anyone to make sense of. Moreover, Huddle bases much of the work on “legal immigrants for 1992” who cannot possibly be representative of all immigrants. Issue two in the current anti-immigration clamor is unemployment a solid body of studies shows that, contrary to Huddle’s assertions, immigrants do not increase native unemployment:
Thomas Muller of the Urban Institute compared labor market conditions in Los Angeles with those in the rest of the U.S. The influx of immigrants in Southern California in the 1970s affected native unemployment “little, if at all,” he says.
* Thomas Espenshade of Princeton and Muller found that in West unemployment rates are not increased—if anything they are lowered—by a rise in the proportion of Mexican immigrants.”
«Kevin McCarthy and R. Burciaga Valdez of the RAND Corporation found in the 1980s that, in California, immigrants’ “negative labor market effects have been minor and concentrated among the native-born Latino populations.”
+ Using 1980 Census data, Gregory DeFreitas of Hofstra University showed that Hispanic immigrants, many of them illegal, had no “discernible negative effect” on unemployment.
*Joseph G. Altonji of Northwestern and David Card of Princeton studied the effect of immigrants on less skilled natives in various cities in 1970. And 1980. They concluded: “We find little evidence that inflows of immigrants are associated with large or systematic effects on the employment or unemployment rates of less skilled natives.”
+ Stephen Moore, Richard Sullivan and I studied the relationship between the rates of immigration and the unemployment rates among U.S. cities during all the years for which data exist—1960 to 1977. (The government ceased to collect data in this fashion after 1977.) Conclusion: The effect was at most insignificant; it is likely that there was no effect at all. Now contrast this consensus with the work by Donald Huddle, Ac» cording to one of Huddle’s publications he sent students to construction sites in the Houston Galveston area. Wherever they observed illegal immigrants, Huddle simply assumed that they had displaced natives. He then projected that onto the U.S. as a whole, arriving at the assumption that one million natives on construction programs alone were permanently unemployed because of immigration.
Static analysis Huddle uses a static analysis that does not take into account the dynamics of employment: Few workers remain permanently unemployed even if they lose jobs, and as some native workers move up the job ladder they leave behind opportunities for the less skilled, who may be immigrants.
And his method counts only the jobs at which immigrants work, disregarding the other side of the equation: As workers—immigrants or native youths enter the labor force they not only “take” jobs but also make new jobs by spending their earnings on the output of other workers. That generates employment.
Both the L.A. County report and Huddle’s work have received a great deal of attention, especially in recent months as the headlines are full of stories about Chinese boat people and foreigners who are supposedly abusing America’s lenient system of political asylum. Anti immigrationists have used both studies as “evidence,” calling tor the U.S. to cut back substantially the number of immigrants it accepts. If this is the best evidence they can find, they: have’ no case.
Julian L Simon, who teaches business at the University of Maryland, is the author of “The Economic Consequences of Immigration” (Blackwell, 1989). Courtesy of the Wall Street Journal.
Article extracted from this publication >> August 20, 1993
