Research Paper: How Has Immigration Helped the US Economy

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Immigration in the U.S.: An Economic Engine

There are few issues that are more controversial than immigration in America. Current efforts to reform immigration policy have fostered heated dialogue, and many of the loudest arguments are based on the perceived economic impact of the immigrant population. Opponents of legalizing immigration argue that immigrants strain the U.S. economy. Illegal immigrants, in particular, are faulted for failing to pay taxes and still enjoying the benefits of American education, health care, transportation and other services. Supporters of immigration, some of whom also advocate for policy reform to allow illegal immigrants to become American citizens, argue that contributions made by immigrants to the U.S. economy far outweigh costs. While both sets of opinions are sincere and have visible supporters in the halls of political power, only one has the advantage of evidence to support its views. Immigrants contribute to the economy through payroll and property taxes, they do not utilize more social services than native-born residents, they tend to take jobs that don't have a large native applicant pool, and ultimately, their descendents become educated, productive members of American society.

This essay begins with an overview of immigration in the U.S., including a summary discussion of popular misconceptions. From there, the essay provides a detailed analysis of the economic impact of immigration. Attention is paid to two factors in particular: the impact of immigrants on workforce and wages, and the impact of immigrants on taxes and services. Popular myths are debunked here. In the process, it becomes clear that immigrants have an overwhelmingly positive impact on the U.S. economy.

Immigration in the U.S.

There are an estimated 21 million legal immigrants in the U.S. And another 11.5 million undocumented (Lowenstein, 2006). They constitute approximately 15% of the labor force. Objections to immigration in America run the gamut from outright racism to measured concern about the impact of so many foreign-born workers on wages, jobs, and the tax revenue base. Many argue that an influx of immigrants, mostly Mexican and largely un-educated, creates unfair competition for lower-income and less well-educated Americans in particular. This argument makes intuitive sense. However, as the discussion in the next section illuminates, the economic and social science paints a more complex and ultimately more positive picture of the economic impact of immigrants on both the U.S. job market and on the economy more broadly.

Immigration & the Economy

In order to understand the impact of immigrants on the economy, a quick review of basic economic principles is helpful. Whenever a new person is added to the labor force -- whether the new person is a recently graduated American or an immigrant -- the impact of that person is two-fold. The person functions both as a wage earner and as a consumer. In theory, the impact is a net zero. That is, the economy grows as the population increases but the mere addition of a new person does not necessarily weigh down one side of the equation over the other.

In the case of immigration, however, there is a kink in this neat theory. The majority (but by no means all) of immigrants are working in a single category of the workforce. They are not evenly spread out into different fields, where they might be more smoothly absorbed into the many layers of the U.S. economy. Instead, they overwhelmingly work in lower wage jobs such as labor, service, and manufacturing. Average incomes reflect this condition: native-born workers earn an average $45,400 while immigrants earn $37,000. The average income of Mexican immigrants in particular is even more striking: $22,300 (Lowenstein, 2006).

These trends bring up a common refrain, that Mexican immigrants are doing jobs that Americans won't do. The evidence, in fact, supports this cliche. Americans are unlikely to accept jobs as seasonal farm laborers or hotel maids, mostly because far more native-born workers are educated and can access higher paying work. No matter where a person originates, education leads to higher wages. Data is conclusive: "contrary to popular belief, immigrants do not take away jobs from American workers. Instead, they create new jobs by forming new businesses, paying taxes and raising the productivity of U.S. businesses," (ACLU, 2002).

A related myth is that so many entry-level workers serve to bring down wages for the entire country. The data fails to support this contention, and there is broad consensus that "no negative effects of immigration on the wages or unemployment of native-born workers, including minorities and those with little education," (Holzer, 2006). It is also clear from the data that immigrants as a category of the workforce do not drag down aggregate income levels. Analyzing average state income and cross-referencing that data with the number of immigrants underscores this point. States with high immigrant populations, such as New York, have higher average incomes; states with low immigrant populations include Mississippi, the lowest income earning state in the union.

The contention that illegal immigrants don't pay taxes and are a net drain on services has also been shown to be a myth. As a whole, immigrants pay more than $90 billion in taxes every year and receive only $5 billion in welfare (ACLU, 2002). Many illegal immigrants operate in the workforce through the use of false identification numbers; the result is that they pay into the system through payroll taxes just like every other legal worker in the country. Similarly, most contribute to public school districts through property taxes whether they rent or own their home. Fewer than 3% of immigrants -- both legal and illegal -- receive food stamps (Lowenstein, 2006), and individual immigrants don't have more of an impact on health or education services than any other individual person. Indeed, "research into this subject reveals a consensus: over time, immigrants and their descendants collectively provide more to the government in taxes then they receive in benefits," (Anrig, 2004).

Not only do immigrants pay into the system at a greater rate than they take from it; their very existence likely has a positive effect on prices for all Americans. Having such a wealth of entry-level workers means childcare, gardening, and food preparation -- just to name a few -- cost less than they would with a more competitive labor pool. These price pressures do not benefit all Americans equally: "lower-income Americans likely benefit disproportionately from lower prices on food, housing, and even some medical services associated with immigrant labor in agriculture, construction, and health support occupations," (Holzer, 2006). Thus, the very category of American citizens who have been the subject of the most concern on this issue, lower income workers, may in fact be the ones who reap the most substantial economic benefits.

Over the long-term, new immigrants to the U.S. will have an even more dramatically positive impact on the economy. Descendents of, for example, poorly educated Mexican immigrants, are more likely to become educated, productive professionals. They will contribute not just money but expertise, innovation, and diversity to the workforce. These new workers will also be able to contribute to the shrinking revenues of entitlement programs such as Social Security and Medicare (Holzer, 2006). In that way, second and third generation citizens who come from immigrant forebears are likely to be pillars of their communities, supporters of their own families, and assets to the American economic system as a whole.

As is true of any controversial issue, both sides claim to have the facts behind their position. In this case, however, the balance of the evidence clearly tilts in one direction: "You can find economists to substantiate the position of either [viewpoint], but the consensus of most is that, on balance, immigration is good for the country," (Lowenstein, 2006). Those who continue to advance the myths debunked here are likely to be confusing the causes of a host of social… [END OF PREVIEW]

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