Illegal Immigration and the Economy

A major national debate rages over U. S. government control of immigration and the impact foreign workers exert on the country's economy. Sometimes the rhetoric reflects on the benefits but more often it focuses on the burdens being forced on society. While conversations range from bland indifference to outright hostility, the loudest and most incendiary opinions drown out the more moderate voices and dominate the tone and tenor of the dialog.

Americans are uncertain about how immigration is affecting the US economy and this is apparent in the conversation. Most analysts, after considering all aspects, agree both legal and illegal immigrants produce a slight, yet positive, net gain of about one tenth of 1 percent in the gross domestic product. The most significant benefits come from lower labor costs and this translates into reduced prices for every commodity they handle. Consumers save on hundreds of purchases from produce and food products to new homes. The nation's GDP gets a boost when visiting workers replace the growing number of retired seniors. And, the contributions from today's expanded work force make it easier for Social Security to pay benefits to future retirees.

Economists say immigrants are not a drag on the economy. So, the question is not whether they are detrimental to the country. The bigger mystery is why many people do not see all of the positive economic benefits and choose to blame immigrants for so many of the country's woes. Why did 74% of the respondents in a New York Times/CBS News poll mistakenly think illegal immigrants weaken the economy?¹ Why, in discussions about the pros and cons, is there a huge gap between the public's perception and the established reality.

Politics, resentment, ignorance, demographics and the economy all converge to create an atmosphere of animosity directed at immigrants. Under the yoke of the Great Recession, people feel threatened by the sudden explosion of foreigners.They hold immigrants responsible for the strain on public services and community resources like schools and hospitals. And, in these uncertain economic times, Americans reject diversity and target foreigners to calm the nation's collective insecurity. There is no doubt all of these issues have some merit but hardly enough to explain the negative attitudes expressed by a growing segment of society.

To explain current sentiments, it is necessary to explore how the benefits and costs are unfairly distributed to different and separated levels of society. Companies and shareholders enjoy cost reductions from lower wages, pass some to unaware consumers whom, in turn, pocket their share of the profits gained from the sweat of resident foreign laborers. This lack of consumer awareness adds to an immense perceptual disconnect between the benefits and costs of immigration especially when the laborers and the consumers are in different parts of the country.

Reduced labor costs have a downside for America's least-skilled workers and this leads to opposition to immigration. In the two decades prior to 2000, wages of high school dropouts fell 9% due to competition from immigrant laborers. There is evidence this increases anti-immigration sentiment. A study in 2005 discovered a link between low-skilled workers and opposition to immigration due to competition in the work place. Surveys reveal the most intense opposition to immigration comes from Americans who did not finish high school.²

Taxpayer animosity toward immigrants also depends on factors like immigrant density and the availability of public assistance. Attitudes based on resentment of competition blend with those based on resentment of an added tax burden. Among better-educated, more skilled workers, the greatest opposition flourishes in areas with large immigrant populations and lots of available social services. But, studies indicate measurable declines in this sentiment after various welfare reforms in the 1990s reduced access to some public assistance programs.³

The economic imbalance between benefits and burdens is amplified by payroll deductions. Thousands of undocumented aliens contribute to Social Security and pay income taxes through regular payroll deductions and the federal government reports most get very little in return. Billions deposited into the Social Security Trust Fund go unclaimed. While undocumented workers contribute to FICA and accumulate credits for retirement, they must be "legal" to claim benefits. On the local and state level, however, immigrants also contribute through property and sales taxes but, contrary to the federal windfall, they tend to absorb far more in services, benefits, and assistance. In the final accounting, the U.S. Treasury and Social Security both enjoy a huge surplus and leave state and local governments on their own to fund the overwhelmed regional services.

Beyond the economic issues, there is a geographical component to the debate as well. The last two decades have witnessed the spread of immigrants from New York, Texas and California to most of the states in the interior. Between 1990 and 2008, California's share of undocumented immigrants fell from 42% to 22% while 28 other states, North Carolina and Georgia among them, saw their share double.⁴ The debate once confined to rural areas in a few coastal states has made its way into towns and villages across the nation's heartland.

An old joke that says a lot goes like this, "Of course I read the New York Times. How else would I know what to think?" Politics and the news media mold attitudes and both, through the years, have played major roles in shaping the U.S. immigration debate. There have been subtle and audible warnings of a "Latino threat" for the past 70 years. President Ronald Reagan introduced immigration as a matter of "national security" in the 80s. A racist image of immigrants-as-freeloaders began to circulate in the 90s. And even Lou Dobbs, in his pursuit of ratings and wages, added to the inflammatory rhetoric of the last decade with rants about an "invasion of illegal aliens" waging "war on the middle class." ⁵

All of these factors are woven into the tapestry of the national immigration debate. It continues to rage without any constructive dialog about redistribution of the benefits to reduce the disproportionate burden carried by some localities. The debate needs to acknowledge this as the major issue. Foreign workers did not create the system nor are they responsible for the inequities within it. Immigrants pay taxes, consume products, and yearn for a better life. It is hard to find praise for the visiting workers who perform real tasks for pay they deem to be fair but Americans consider, to a large degree, an unacceptable wage. The Federal government and our senior citizens reap huge benefits from a sizable work force known to typically claim far less than what is deducted from their pay. Consumers are generally unaware of the impact immigrant laborers have on lowering prices or how they supplement the ranks of American workers as they age and retire.

There is a glaring need to elevate the quality of the national debate. Within the dialog, innuendo needs to be replaced by reality. Hard facts need to be substituted for anecdotes. Blame for taking jobs away from Americans needs to yield to the prevailing conditions. The legions of unemployed workers are not filled with farm workers, food processors, landscapers, or low skilled workers but actually with factory workers, autoworkers, secretaries, and salesmen. Responsibility for America's mortgage foreclosures should not be shifted to foreign workers by those unwilling to explore the real causes. Widespread hostility should give way to the truth. Immigrant workers, whether they are documented or not, produce a slight, yet positive, increase for the economy and a fair measure of benefits to retail and service consumers. The conversation needs to include a hint of gratitude.

Notes:
¹http://s3.amazonaws.com/nytdocs/docs/330/330.pdf
² Kenneth Scheve and Matthew Slaughter, Globalization and Perceptions of American Workers (Peterson Institute, 2001)
³ gps.ucsd.edu/_files/faculty/hanson/hanson_publication_immigration_divide.pdf
⁴http://www.pewhispanic.org/2009/04/14/a-portrait-of-unauthorized-immigrants-in-the-united-states/
⁵ Douglas S. Massey and Magaly Sanchez R., Brokered Boundaries, (Russell Sage Foundation, June 2010).

gps.ucsd.edu/_files/faculty/hanson/hanson_publication_immigration_divide.pdf