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Created by: Leon Basin
Illegal Immigration and Its Effects on the US Economy
Illegal immigration has been a trend in United States since the first settlers set foot on this land. United Sates has always been built on the foundation of immigrants. With the immigrants help, our economy is one of the most powerful countries in the world. Immigrants, especially the illegal immigrants work hard because they know that both theirs and their children’s only chance of survival is to work harder than the natives. As a result, many illegal immigrants are willing to take any job regardless of the working conditions. Even if these jobs pay so low that none of the natives are willing to accept them. In the mean time, many businesses’ only chance to stay open is to hire illegal immigrants who are willing to work for less than minimum wage. The US government has been fighting to keep illegal immigrants out by building walls at the border, increasing border patrols, tighten security check points at the borders and the airports, and passing immigration reform legislations. Meanwhile, the heated debates about illegal immigrants’ presence in the US continue to take place. This report attempts to answer the trivial questions about the effects of illegal immigrants on the US economy: Do illegal immigration aids the US economy or drains its valued resources and how? Upon visiting numerous websites and obtaining many journal articles debating about the positive and negative effects of illegal immigrants on our economy, our report concludes that the illegal immigrants’ presence cost this country a large sum of money. Yet, the work they provide and the opportunities that arise as the result of their existence are far exceeding that initial cost.
Recent proposed laws on the subject of illegal immigration in the US are causing much debates and division in the country. The exact number of illegal immigrants is unknown since they are unwilling to participate in any survey. Most economists agree that the number of illegal immigrants in the US is approximately 10 to 11 million. However, “a recent study by Bear Stearns Asst Management Company (BSC) concluded that data on housing permits, school enrollment, and foreign remittances suggests there could be as many as 20 million” (Grow, et al, 2005). There are numerous arguments on both the positive and negative effects of illegal immigration on the US economy. This report’s objective is to conclude whether or not illegal immigration benefits or harms our economy.
Authorized immigrants are refugees who entered the US with proper documentation such as a green card, legal resident card such as I-94, or any other legal temporary visas. Cuban-Haitian and parolees from Northern Iraq are qualified for immediate asylum upon their arrival on US soil, pending investigation to verify their identity. Illegal immigrants are anyone who either entered the US without temporary visas or violated the term of their admission to the US by staying past the expiration date indicated on their temporary visas. Illegal immigrants also include asylum applicants pending approval.
The pie chart below—created by the Pew Hispanic Center (PHC)—reflects the data collected as of March 2004 and shows that 75% of illegal immigrants are from Latin America and Mexico.
Chart 1: Illegal immigrant population by nation of origin. Source: PHC
According to the Public Policy Institute of California (PPIC) the majority of illegal immigrants come to the US for economic reasons and to reunite with family members living in the US. A smaller number of illegal immigrants come to the US to have US born children who inherit citizenship.
Definitions of Terms
The table below lists several terms being used throughout the literature review.
Illegal Immigrant Fiscal Deficit Foreign Remittances Matricula Consular
A non citizen who had entered the US without government permission or stay beyond the termination date of a visa. Refers to government debt, expenditures and revenues. Money transfers by foreign workers to their home countries. An identification card issued by the Government of another country through its consulate offices. The official purpose of the card is to demonstrate that the bearer is a Mexican national living outside of Mexico. Individual Tax Identification Number issues by the US government allows illegal immigrants to work in the US, pay taxes like any US citizen and eventually have a home mortgage.
Jobs “on the Jobs legally obtained by using false social security numbers. book” Table 1: Definition of Terms.
Below are several categories of the most debated economic issues regarding illegal immigration. The data shows below are obtained from government websites, third party bipartisan organization websites, and various other sources.
The key impacts of illegal immigrants are the fact that they accept jobs few natives are willing to employ, they pay taxes, they contribute to the growth of the economy by creating demand for more jobs, and they help keeping the cost of many products low as well as retain them in US production.
They accept unappealing jobs
Illegal immigrants are willing to work at occupations that are not being filled by native citizens. Even though it’s impossible to determine the exact number because illegal immigrants are unlikely to participate in surveys, experts agree that the majority of illegal immigrants are low educated and low skilled. These workers take jobs few native born Americans in the same educational level are willing to accept. According to the Department of Labor approximately 1 million illegal immigrants are farm workers in the US. Half of all farm workers are illegal immigrants. The PHC reported this number only makes up of 19% of all illegal immigrants in the US (See chart 2) However, the majority of illegal immigrants work in low skills occupations. Many of them concentrate in other sectors such as cleaning, construction, food preparation, production, and transport. The chart below provides a list of industries and occupations that employ the majority of illegal immigrants.
Chart 2: Percentage of illegal immigrant in the workforce by industry. Source: PHC
They pay taxes
All illegal immigrants are consumers who pay sales tax and tenants whose rent turns into property tax. However a large percentage of these people are paying income taxes either through jobs “on the books” or legal worker status based on two forms of identifications. The Matricula Consular issued by their native government and US issued Individual Tax Identification Number (ITIN) card.
False Social Security workers
According to a study by the Center for Immigration, about 55% of the 11 million illegal immigrants are living in the US under false identity and work at jobs “on the books”. They’re employed legally via false Social Security numbers. They pay Federal and States income as well
as payroll taxes, but they don’t file a tax return. However, since the majority of their incomes are so low—less than $13 thousands annually—the amount they pay into Federal and States taxes are insignificant.
Chart 3: Illegal immigrant average income per person. Source: PHC
The US economy benefits from the fact that illegal immigrants carry the equal share of payroll taxes that supports our social security system. However, the illegal immigrants are unlikely to cash out on the contributed amount because many don’t stay in the US long enough to retire. They come to work, earn the money and go back. As the result, approximately $6 billion in annual payroll taxes are collected from non-existing social security numbers. The graph below shows that the number of illegal immigrants reduces dramatically at around age 64 and 65 perhaps to retire in their homelands.
Chart 4: Percentage of illegal immigrants by age group. Source: PHC
Matricula Consular and ITIN workers
The Mexican Foreign Ministry stated they issued 1,040,934 matricula consular in the year 2002 to Mexicans in the US. This card is a legal identification for foreigners living aboard. It can be used to obtain a bank account, driver’s license, home mortgage, a business loan, a cellular phone. Many businesses in the US accept this form of identification, but not all. The IRS began to issue the ITIN card in July 1996 and more than 5,500,000 have been issued since then. Individuals who have both the matricula card and an Individual Tax Identification Number (ITIN) can legally work and pay taxes like any US citizens or legal immigrant aliens. Although taxes paid under the ITIN category are calculated differently than that of the US natives. These two forms of identifications are used as temporary permissions to stay and work in the US, thus, help to further reduce the risk of being arrested and deported.
They create more jobs and opportunities
Illegal immigrants use many Federal, States and city services. They contribute into creating more jobs for US economy to satisfy demand. For example, without the illegal immigrants, the demand would be much less for positions such as hospital staffs and personnel, manufacture managers, police officers, prison guards, bus drivers, border patrol officers, INS and IRS agents, etc. The more educated US natives have been hiring the illegal immigrants to work for them. The immigrants work around the house doing jobs such as mowing the lawn, cleaning, cooking or babysitting the children so the US natives can obtain a higher paying job outside their home and earn more money. The fact that US native population looses out in competing with illegal immigrants on low wage jobs seems detrimental at first but in the long term may not be a bad thing. When companies hire illegal immigrants to perform low skilled jobs, they are able to hire more workers for less. They also don’t have to provide health insurance for this group of employees. The business of hiring illegal immigrants saves companies money to hire more managers to supervise the illegal worker. The US natives, who already have good English language skills, become eligible for the supervisor positions if they have some skills pertain to the job or the industry and are more educated than the immigrants they supervise. Therefore, it seems that many US natives are not dropped out of high school or they may go back to school and earn the education and/or skills that enable them to find higher paying jobs. Between 1980 and 2004, the number of high school drop-outs in California decreases by 17%, while in Ohio its decreases by 31%. Contrary to common misassumption, data shows that unlike California, Ohio is a state that almost free of illegal immigrants, which means illegal immigration competing for job did not cause the decrease in high school dropouts. However, regardless of what might be the main cause of the shrinkage of high school drop out phenomenon, the US does not produce enough low wage workers to fill all the jobs that are currently employed by illegal immigrants. If all illegal immigrants are taken out of this equation, the US would end up with a big hole in the economy due to the enormous insufficient number of low end workers in the workforce.
They keep the price of products low
The cheap labor the illegal immigrants provide is essential to the U.S. farm industry. This industry worth approximately $30 billion and cannot survive without a large population of workers who are willing to work hard and earn less. The American consumers are happy to be able to purchase fresh vegetables all year round at low costs. Some suggested that the real threat to this economy isn’t between the US natives and illegal immigrants in the job market. There is a bigger threat lurking in the horizon at the southern border. This threat is a potential competition between domestic productions and foreign imports of food
products to satisfy consumer demand. If the illegal immigrants did not enter this country and work at low paying jobs, we would have to import more produce from Mexico and other countries.
As illegal immigration continues to be on the rise for the past two decades, so does the concern about its impact on American taxpayers. While other consequences are clearly important, the fiscal impact of illegal immigration is one of the biggest areas of concern. Illegal immigrants undeniably impose some costs on our government by deciding to live on American soil. The immigrants use many of the same services as do the rest of the legal citizens. These services include but are not limited to sending their children to school, driving on US vast network of roads, which the government provides and maintains, and using services provided by our healthcare system without health insurance. The fact that they pay taxes also does not mean that they are a fiscal benefit. According to a Census Bureau survey obtained in the year 2002, results showed that illegal households imposed more than $26.3 billion on the federal government but paid only $16 billion of that through taxes. This action results in a net fiscal deficit of $10 billion, or $2,700 per illegal household. The table below provides details on the impact of illegal immigrants on the US budget and illustrates the different areas which caused the net fiscal deficit.
Table 2: Itemize estimate fiscal year deficit due to illegal immigration. Source: the US Census Bureau.
The following sections explain these deficits in further detail.
They impose costs of imprisonment
Criminal aliens—illegal immigrants who committed crimes—are a growing threat to public safety and national security. More importantly, these criminals are a drain on our criminal justice resources. These prisoners represent the fastest growing segment of the federal prison population. In 1980, our federal and state prisons fostered less than 9,000 criminal aliens. However, by the end of 1999, these same prisons had over 68,000 criminal aliens. According to the Center for Immigration Studies, in 2002, almost 17% of inmates in federal prisons were illegal immigrants. Thus, 17% of the $4.1 billion prison budget can be accredited to keeping illegal immigrant criminals in jail. Administering justice to these criminal aliens costs the taxpayers heavily. Although illegal immigrants account for only about 3.6% of the nation's total population of inmates, they now account for almost one-fifth of those in federal prison and others processed by the federal courts. Thus, they impose costs on the system that are disproportionate to their share of the total population. According to the Bureau of Justice Statistics, imprisonment of criminal aliens cost an estimated $624 million to state prisons in 1999 and $891 million to federal prisons in 2002. The cost of incarcerating illegal immigrants who have been convicted of crimes is an unavoidable price that the US taxpayers will have to pay. As long as the illegal immigrants remain, so will the costs thus constantly increasing our country’s fiscal deficit.
They impose costs in education
With many States straining under gaping budget shortfalls, public schools throughout the country are facing some of the most significant decreases in State education funding in decades. In some States, drastic cuts mean lay-offs for teachers, larger class sizes, fewer textbooks, eliminating sports, music, language programs, and after-school activities. While these massive budget deficits cannot be blamed on any single source, the enormous impact of illegal immigration cannot be ignored. The total K-12 school expenditure for illegal immigrants costs the States nearly $12 billion annually, and when the children born here to illegal aliens are added, the costs more than double to $28.6 billion. Additionally, Washington gives schools some assistance in paying for children with limited English and for the children of agricultural workers. Not surprisingly, illegal households account for a disproportionate share of these programs. Illegal households impose very significant costs on the federal education budget, however, mainly because illegal households have more school-age children on average. If the federal government remains modest about taking serious action towards the United States’ immigration laws, it will eventually be forced to provide massive federal education funds to the states. A far more logical and cost effective move would be to substantially reduce illegal immigration. According to the Immigration Studies Program, the 1.5 million school-aged illegal immigrants residing in the United States and their 2 million U.S.-born siblings can be divided among the states using government estimates of the illegal immigrant population. The cost estimates for educating illegal immigrants in each state is shown in the table below using each State’s per-pupil expenditure reported by the U.S. Department of Education.
Table 3: Estimated costs of educating illegal immigrants and their children by State. Source: US Department of Education.
A study by a UC Berkeley economist, David Card, comparing the low wage jobs between two cities, showed that one had lots of less educated immigrants while the other had very few. Card found no difference between the incomes from both cities and concluded that the lack of low wage jobs is not attributed by illegal immigrants. When carefully examining the US economy since the mid 1980s, Card found that the income inequality of the bottom half of the low wage population has not grown, and the evolution of technology plays a more significant role in decreasing low wage jobs.
Discussion of findings
The US taxpayers carry a huge burden when it comes to crimes and punishments of the illegal immigrants. The cost of incarcerating illegal immigrants is an unavoidable cost. Deporting criminals back to their homelands is not an option because they would come back in within days of deportation. Thus, if we want to avoid the costs, we must look to alternatives other than trying to cut them off from public services. While the challenges associated with educating America's diverse immigrants have existed since the beginning of the immigration process, the continued arrival of illegal immigrants to the United States is expanding these difficulties from an economic point of view. Nonetheless, all of the illegal immigrants children, native-born and foreign born, should receive adequate education. As the result a big portion of the taxpayer’s money continues to go towards educating illegal immigrants. Some believe this would soon cause insufficient funding for the future generations. However, the US could not close its borders and this government’s serious commitment to down size the rate of illegal immigrants has not been successful. The open borders and lax enforcement that allow millions of illegal aliens to enter the U.S. each year will continue to occur. Although the presence of large numbers of unskilled workers lowers prices for some goods and services but increases the responsibility on taxpayers are undeniable facts. The positive aspect of illegal immigrants outweighed the negative effects. Illegal immigration contributed in the creation of many jobs for US citizens as well as legal residents, many of whom are eligible for welfare and unemployment without such jobs. The Federal and States government would have paid more into these two social services programs if many jobs were not created as the results of illegal immigration. It is true that many US natives at the same education level are loosing out in the competition for jobs. Mostly because they are unwilling to accept jobs that does not pay enough for a decent living. Instead of competing for job with the illegal workers and loose out, the US natives have a better chance of becoming the workers’ supervisors or managers since they already speak English fluently. This issue opens new doors to people who see that the economy is changing and life is more difficult when they don’t have good education or skill sets that are in demand. The US consumers are delighted to find low cost produces in their shopping isles. The low cost vegetables are results of the flexible and cheap labor force provided by the illegal immigrants on US farm. Many businesses and/or farms would not exist without the illegal immigrants who are willing to work so hard for less. Without the illegal immigrants, the overall US economy would be poorer. Cost of food and living would rise while family income would decrease. Some people would not be able to earn dual income because a spouse has to stay home with the young children. People would not be able to earn more and spend less. Many offices would be dirty because people can’t afford higher cost of cleaning services. Crops in the fields would be spoiling rotten because we wouldn’t have enough workers to harvest them. What sounds like a domino effect of an economy downfall is nothing but that: The domino effect of a slumbering economy. Would we have the money to import products we can no longer produce? Would we be able to balance the lack of low wage workers, if so, at what cost?
The current policies against illegal immigration are not effective in reducing the number of illegal immigrants from entering and work in the US. Granting amnesty is not an option either because with amnesty, many of these people are eligible to receive welfare and disability benefits. Moreover, granting amnesty to the illegal immigrants currently living in the US would further encourage more people to enter this country illegally.
Based on overall statistics found in the literature reviews, the most promising solution to the high cost of illegal immigration is to allow them to work legally in the US by providing an ITIN card as long as they have the proper identification issued by their native governmental consulates. Allowing the illegal immigrants to legally compete for jobs with the US natives and pay all applicable taxes would help with the tax versus governmental services imbalance. In the mean time, businesses can legally provide services to illegal immigrant consumers without the fear of stigma or jail term based on recently passed legislation but has yet to become law. Most American business would not turn away the potential 20 million customers. Businesses such as home loan mortgage, cellular phone companies, and health insurance would likely to benefit from the population of customers that have been illusive due to their legal status in the US. Furthermore, the acceptance of the Matricula Consular card in the US would lead to less victim of crime for the illegal immigrants. Many of whom were robbed in their homes because they have a large amount of cash but were unable to open a bank account.
The US relies on illegal immigrants more than we care to admit. The issue of illegal immigration provokes responses that often go to extremes. Debates from both sides of this affair often initiate argument for topics such as “there are too many illegal immigrants, and they're taking our jobs and draining our social services” or “They do the jobs most Americans won't”. After endless research and reading, we found that illegal immigration—on an economic scale—does not harm the American economy. The undeniable facts are that illegal immigrants are willing to work in occupations and working conditions in which many Americans are not and the US does not have enough workers perform all the jobs in the farm. The collected data on illegal immigration indicates that putting the workers and employers at the focus of illegal immigration reform is a highly inadequate action. According to the Center for Immigration Studies, these same illegal immigrants aid our economy by paying over $6 billion in taxes through non-existing social security numbers. Although it is assumed that they drain our citizens of social services and jobs, quite the opposite is true. Not only do they pay more in taxes than the amount of social services that they use, but as a result of using these same services, they are creating more jobs throughout the country. As far as the negative aspects go regarding illegal immigration, it is apparent that they are outnumbered by the positive ones. The current net fiscal deficits are minuscule compared to what they potentially could be if we did not have illegal immigrants to aid our labor force.
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