How Unskilled Immigrants Hurt Our Economy

Steven Malanga For City Journal Part IV of VI)
A handful of industries get low-cost labor, and the taxpayers foot the bill.

As foreign competition and mechanization shrink manufacturing and farmworker jobs, low-skilled immigrants are likely to wind up farther on the margins of our economy, where many already operate. For example, although only about 12 percent of construction workers are foreign-born, 100,000 to 300,000 illegal immigrants have carved a place for themselves as temporary workers on the fringes of the industry. In urban areas like New York and Los Angeles, these mostly male illegal immigrants gather on street corners, in empty lots, or in Home Depot parking lots to sell their labor by the hour or the day, for $7 to $11 an hour.

That’s far below what full-time construction workers earn, and for good reason. Unlike the previous generations of immigrants who built America’s railroads or great infrastructure projects like New York’s bridges and tunnels, these day laborers mostly do home-improvement projects. A New York study, for instance, found that four in ten employers who hire day laborers are private homeowners or renters wanting help with cleanup chores, moving, or landscaping. Another 56 percent were contractors, mostly small, nonunion shops, some owned by immigrants themselves, doing short-term, mostly residential work. The day laborer’s market, in other words, has turned out to be a boon for homeowners and small contractors offering their residential clients a rock-bottom price, but a big chunk of the savings comes because low-wage immigration has produced such a labor surplus that many of these workers are willing to take jobs without benefits and with salaries far below industry norms.

Because so much of our legal and illegal immigrant labor is concentrated in such fringe, low-wage employment, its overall impact on our economy is extremely small. A 1997 National Academy of Sciences study estimated that immigration’s net benefit to the American economy raises the average income of the native-born by only some $10 billion a year—about $120 per household. And that meager contribution is not the result of immigrants helping to build our essential industries or making us more competitive globally but instead merely delivering our pizzas and cutting our grass. Estimates by pro-immigration forces that foreign workers contribute much more to the economy, boosting annual gross domestic product by hundreds of billions of dollars, generally just tally what immigrants earn here, while ignoring the offsetting effect they have on the wages of native-born workers.

If the benefits of the current generation of migrants are small, the costs are large and growing because of America’s vast range of social programs and the wide advocacy network that strives to hook low-earning legal and illegal immigrants into these programs. A 1998 National Academy of Sciences study found that more than 30 percent of California’s foreign-born were on Medicaid—including 37 percent of all Hispanic households—compared with 14 percent of native-born households. The foreign-born were more than twice as likely as the native-born to be on welfare, and their children were nearly five times as likely to be in means-tested government lunch programs. Native-born households pay for much of this, the study found, because they earn more and pay higher taxes—and are more likely to comply with tax laws. Recent immigrants, by contrast, have much lower levels of income and tax compliance (another study estimated that only 56 percent of illegals in California have taxes deducted from their earnings, for instance). The study’s conclusion: immigrant families cost each native-born household in California an additional $1,200 a year in taxes.

Immigration’s bottom line has shifted so sharply that in a high-immigration state like California, native-born residents are paying up to ten times more in state and local taxes than immigrants generate in economic benefits. Moreover, the cost is only likely to grow as the foreign-born population—which has already mushroomed from about 9 percent of the U.S. population when the NAS studies were done in the late 1990s to about 12 percent today—keeps growing. And citizens in more and more places will feel the bite, as immigrants move beyond their traditional settling places.

From 1990 to 2005, the number of states in which immigrants make up at least 5 percent of the population nearly doubled from 17 to 29, with states like Arkansas, South Dakota, South Carolina, and Georgia seeing the most growth. This sharp turnaround since the 1970s, when immigrants were less likely to be using the social programs of the Great Society than the native-born population, says Harvard economist Borjas, suggests that welfare and other social programs are a magnet drawing certain types of immigrants—nonworking women, children, and the elderly—and keeping them here when they run into difficulty.

Not only have the formal and informal networks helping immigrants tap into our social spending grown, but they also get plenty of assistance from advocacy groups financed by tax dollars, working to ensure that immigrants get their share of social spending. Thus, the Newark-based New Jersey Immigration Policy Network receives several hundred thousand government dollars annually to help doctors and hospitals increase immigrant enrollment in Jersey’s subsidized health-care programs. Casa Maryland, operating in the greater Washington area, gets funding from nearly 20 federal, state, and local government agencies to run programs that “empower” immigrants to demand benefits and care from government and to “refer clients to government and private social service programs for which they and their families may be eligible.”

Pols around the country, intent on currying favor with ethnic voting blocs by appearing immigrant-friendly, have jumped on the benefits-for-immigrants bandwagon, endorsing “don’t ask, don’t tell” policies toward immigrants who register for benefits, giving tax dollars to centers that find immigrants work and aid illegals, and enacting legislation prohibiting local authorities from cooperating with federal immigration officials. In New York, for instance, Mayor Michael Bloomberg has ordered city agencies to ignore an immigrant’s status in providing services. “This policy’s critical to encourage immigrant day laborers to access . . . children’s health insurance, a full range of preventive primary and acute medical care, domestic violence counseling, emergency shelters, police protection, consumer fraud protections, and protection against discrimination through the Human Rights Commission,” the city’s Immigrant Affairs Commissioner, Guillermo Linares, explains.