How Immigration Affects the U.S. Economy – 11 Myths to Dispel
Immigration has long been a controversial subject for Americans, despite the country’s reputation as the world’s melting pot. In times of economic uncertainty, emotions run especially high, and partisans on both sides of the political divide use immigration controversy for their own gain.
Knowing what’s fact and what’s fiction is particularly tricky in the unregulated, anonymous world of social media. In order to separate the truth from our fears, it’s important to know the facts behind the issues. Here’s how immigration affects several aspects of the U.S. economy.
According to the Migration Policy Institute (MPI), there are approximately 45 million immigrants in the United States today, making up about 13.5% of the population. Immigrant children born in the country almost double the figures to 87 million and 27%, respectively. Over 80% of immigrants have lived in the country for more than five years, and almost one in three owns a home.
Yet while immigrants are a part of our neighborhoods, schools, and workplaces, misconceptions about them abound. Here are some of the most common.
Many Americans believe that immigrants predominately come from Latin America by sneaking over the border. While Latin Americans accounted for 37.2% of immigrants in 2016, the composition of immigrants has changed significantly in the past half-century. In 1960, the largest immigrant groups were from Italy, Germany, the U.K., and Canada, according to the MPI. European countries accounted for almost one-half (48.5%) of the total, and the Soviet Union (7.1%) had a higher share than Mexico (5.9%).
In 2016, most immigrants came from Mexico (26.5%), India (5.6%), and China (4.9%). Mexico and Central American countries, including Cuba, accounted for the largest proportion of legal and illegal immigrants, but not the majority. Asia represented slightly more than 20%, with the rest of the world comprising 42.5%.
Some Americans believe most foreigners are in the United States illegally. That is not true. Illegal immigrants account for about 24.5% of the immigrant population but a meager 3.4% of the U.S. population in total, according to Pew Research.
Some Americans assume immigrants are uneducated, unskilled, low-wage workers. However, the MPI found that one-half of immigrants have a high school diploma or higher education. Two-thirds of immigrants over the age of 16 are employed, with almost a third (31.6%) in management, business, science, and the arts, compared to 38.8% of native-born citizens.
It’s true that a higher proportion of immigrants (24.1%) are engaged in low-wage service jobs than native-born citizens (16.8%). However, the libertarian-leaning Cato Institute, citing statistics from the U.S. Office of Homeland Security and others, states that immigrants are “generally much better educated than U.S.-born Americans are … [and] 62 percent more likely than U.S.-born natives to have graduated college.”
Foreigners who work in the United States with H-1B visas have bachelor’s degrees or higher and work in specialized fields such as IT, engineering, mathematics, and science. President Trump and others have complained that H-1B visa holders compete with Americans for high-paying jobs. However, the visa program was created to allow companies to hire foreign workers to work for three years or more in specialty occupations for which there are not enough skilled Americans to fill the positions.
Most discussions about illegal immigrants focus on the country’s southern border, a 1,954 mile-long stretch between the Pacific Ocean and the Gulf of Mexico. However, illegal southern border crossings have declined over the past decade, according to Department of Homeland Security (DHS) statistics. Undetected, unlawful entries into the United States have fallen from almost 850,000 in 2006 to less than 100,000 in 2016. The DHS estimates that they’re successful in detecting an illegal entry more than 90% of the time.
The illegal border crossings that have become increasingly popular occur between Canada and the United States, according to a 2018 CBS News report. While the 5,525-mile-long boundary features more difficult terrain and includes many businesses and buildings that straddle the line between the two countries, Border Patrol along this stretch lacks the resources of the southern border.
Contrary to popular opinion, the majority of illegal residents (66%) did not surreptitiously cross a vulnerable border in the dead of night, according to the Center for Migration Studie. Rather, they landed at a major airport and cleared customs with a visa. When it was time to leave, they simply stayed instead of returning home. As Republican Senator Marco Rubio states, “In Florida, 70 percent of the people here illegally came on an airplane. They overstayed a visa.”
In 2016, 42.7 million individuals crossed the border with visas, according to the MPI. While the majority of these visitors return to their home countries, even a small percentage of overstays would dwarf the more-emphasized southern border crossing.
Congress has passed multiple pieces of immigration legislation over the centuries, including:
While tweaks have occurred in immigration policies through riders and regulations since 1990, Congress has been unable to agree on a comprehensive reform of the nation’s immigration laws. The issue is particularly contentious between political parties, who have failed to reach a compromise acceptable to each.
Many immigration critics presume that new immigrants burden the economy and reduce legal citizens’ share of the GDP pie. However, economists across the political spectrum generally agree that immigration and the economy are positively related; as immigration increases, the economy grows. Moody’s Analytics estimates that for every 1% increase in immigration, GDP rises by 1.15%.
Even undocumented aliens contribute to the country’s growth. According to a 2016 study by economists Ryan Edwards and Francesc Ortega, undocumented immigrants contribute about 3%, or $5 trillion, to the GDP over a 10-year period. The pair also calculated that deporting the 11.3 million illegals then in the country would be “an almost $8 trillion hit to the economy over the next 14 years.”
A 2017 University of Pennsylvania study projected that President Trump’s plan to reduce immigration by half, with a priority for those with college degrees who speak English, would decrease GDP by 2% over the long term and cost 4.6 million jobs. The Tax Foundation estimates that adopting proposed and enacted tariffs would have only 10% to 20% of the negative impact of implementing the President’s immigration plan, which they project would cause a decline of 0.59% in GDP, reduce wages by 0.38%, and cost 459,816 U.S. jobs.
More people means more buyers of goods and services, which increases the size of the market. As a consequence, the economy enjoys more consumption, more production, and higher savings. Consumer spending accounts are the primary driver of economic activity, accounting for approximately two-thirds of the U.S. economy.
Heightened demand for goods and services stimulates greater production — which, in turn, requires greater productivity, typically resulting in more jobs, higher wages, and higher profits. The higher wages go, the more people spend, and the cycle repeats.
Why can’t we rely on the country’s natural birth rates for population growth? There are several reasons:
While the total U.S. population will continue to increase for some years, the annual percentage of population increase, as well as the rate of economic growth, will decline. A decrease in the number of domestic customers will reduce market demand, generate idle productive capacity, and decrease profits — if not result in losses. Unemployment rates will increase as wages become stagnant. Domestic profits will likely decline, and international companies will transfer potential investments from America to growing foreign markets.
While immigration is a solution for lower birth rates, some U.S. leaders worry over the cultural consequences of a significant wave of new immigrants. However, immigration — both legal and illegal — has been shown to be a positive influence on the nation’s economy.
Immigration critics including President Trump and former Republican Senator Rick Santorum link legal immigration to fewer jobs for Americans, accusing businesses of employing large numbers of unskilled laborers to lower their costs. The facts, however, do not back this up.
Some, like former chairman of Breitbart News Network Steve Bannon, claim that immigrants take jobs that might otherwise be filled by U.S. citizens. Research suggests that such claims are incorrect. According to CNN Money, the contention that immigrants take jobs away from hardworking Americans is disputed by “an overwhelming number of economic studies and data.”
According to a U.S. Chamber of Commerce report, “Immigrants typically do not compete for jobs with native-born workers … native-born workers and immigrant workers tend to possess different skills that often complement one another, and are therefore not interchangeable.” A 2016 report from the National Academies of Sciences, Engineering, and Medicine found “little evidence” that immigration significantly reduces the employment rate for native-born workers.
A 2015 study by Drs. Gihoon Hong and John McLaren, economics professors at Indiana University and the University of Virginia, respectively, found that each immigrant creates 1.2 local jobs, most of which go to native workers. Their report concluded that domestic workers benefit from the arrival of more immigrants.
According to Peter Cappelli, a professor at the Wharton School of the University of Pennsylvania, most open jobs are not new jobs created by a strong economy, but rather positions vacated by workers leaving their jobs. The lack of employment for young college graduates and unskilled laborers, he says, is due more to employers’ reluctance to hire inexperienced workers than to immigrants taking available jobs.
In 2018, The Wall Street Journal reported that there were more job openings (6.7 million) than unemployed Americans (6.3 million). These openings spanned categories from food service and retail to accounting and software developers. To attract workers, employers have raised wages and relaxed standards on dress, tattoos, and body piercings, yet these jobs remain unfilled.
While each case is different, the statistical and anecdotal evidence indicates that immigrants have minimal, if any, effect on Americans being hired to fill particular jobs.
The anti-immigration group Federation For American Immigration Reform (FAIR) claims that immigrants’ willingness to accept low pay and poor working conditions has made certain jobs unattractive to Americans. A 2017 Gallup poll found that 72% of Americans believe that immigrants take jobs Americans don’t want. This view has been consistent since 1993, but is it correct?
Daniel Griswold of the Cato Institute argues that while immigrants may fill less-desirable jobs in retail, agriculture, landscaping, hotels, and restaurants, this allows their employers to expand and create middle-class jobs for Americans in fields such as management, bookkeeping, and marketing.
The evidence seems to indicate that most immigrants do work in occupations that native workers tend to avoid due to physical labor at low pay in uncomfortable environments. Whether natives would be willing to take those jobs at a higher wage is unknown. Also unknown is whether companies in industries like agriculture could survive with the higher prices necessary to cover a higher labor cost.
Research by the Independent Institute suggests that immigrants and native-born citizens don’t compete with one another since immigrants tend to be either high-skilled or low-skilled, while Americans are more in the middle of the skill distribution. Thus, immigrants are not substitutes for American labor, but rather free up natives to do more productive, higher-paying work.
In 2017, a group of 1,470 economists representing past presidents of both political parties — including Nobel Prize winners, former chairmen of the Council for Economic Advisers, and former chairmen of the Office of Management and Budget — sent an open letter to President Trump stating that “immigration is one of America’s significant competitive advantages in the global economy … [It] represents an opportunity rather than a threat to our economy and to American workers.”
In 2017, President Trump’s senior policy adviser, Steven Miller, told reporters that, as a result of immigration, the United States has seen “significant reductions in wages for blue-collar workers, massive displacement of African-Americans and Hispanic workers, as well as the displacement of immigrant workers from previous years who often compete directly against new arrivals who are being paid much less.”
Miller based these comments on research by professor and economist George Borjas of the Harvard Kennedy School, who claimed that workers who compete with immigrants — many of whom are low-skilled Americans — are essentially sending a $500 billion check annually to employers as a consequence of the lower wages caused by immigrants. However, Dr. Borjas’s conclusions have been found faulty for a number of reasons, including reliance on decades-old information and ignoring an earlier, broader study by Princeton economist David Card.
Harvard economist Lawrence Katz, a co-author on Borjas’s 2007 paper, subsequently disagreed with Borjas’s findings, writing that “the effects of immigration range from 0 to a few percentage points and are swamped by the impacts of [a] slowdown in U.S. education supplies, technological change, and eroding labor market institutions (unions, minimum wages, rising outsourcing/fissuring of the workplace).”
Some economists, such as Pia Orrenius, the Senior Economist of the Federal Reserve Bank in Dallas, claim that immigration increases the productive capacity of the economy. While this greater capacity primarily benefits immigrants, a small share spills over and generates higher incomes for American workers. This “immigration surplus” amounts to $36 to $72 billion annually. Furthermore, Orrenius claims that immigrants “grease the wheels of the labor market” by eliminating labor bottlenecks and shortages that might slow the economy.
America’s largest labor organization has changed its position on immigration after years of considering it a threat to American labor. In 2013, Richard Trumka, president of the AFL-CIO, announced a major effort to enlist tens of millions of non-union workers, including immigrants who had previously been excluded, to boost declining membership numbers.
Opinions continue to vary regarding the effect that immigrants have on wage rates; however, the consensus seems to be that immigration has either a positive or a negligible impact. While blue-collar wages have undoubtedly been depressed for more than a decade, most experts believe the real culprits are increased automation, globalization, declining unionization, and government overtime policies.
A common perception is that immigrants, especially illegal ones, increase the tax burden on American citizens due to the following factors.
According to a 2016 Pew poll, half of President Trump’s supporters believed that undocumented workers were more likely than U.S. citizens to commit serious crimes, and 59% associated illegal immigrants with dangerous criminal behavior. The president reinforced these attitudes in a June 2018 speech to Angel Families, or Americans with a family member killed by an illegal alien.
In the president’s words, “According to a 2011 government report, the arrests attached to the criminal alien population included an estimated 25,000 people for homicide, 42,000 for robbery, nearly 70,000 for sex offenses, and nearly 15,000 for kidnapping.” He went on to say that in Texas alone, more than 250,000 illegal aliens had been arrested and charged with over 600,000 criminal offenses during the last seven years. According to CNBC, the president stated that illegal immigrants have killed more than 63,000 Americans since 9/11.
According to subsequent fact checks, the president’s statements were either misinterpreted or misinformed. Over the years, multiple studies by credible authors and institutions have found that immigrants, whether legal or illegal, are less likely than native-born citizens to commit a crime.
A report on immigration and crime published in 2017 by Dr. Frances Bernet of the Department of Criminology and Criminal Behavior at Texas A&M International University concluded that “the urban crime problem is not generated by immigrants, legal or undocumented, and that immigrants are not increasing crime rates. Socially disadvantaged neighborhoods may, however, make immigrant groups more susceptible to crime victimization when social support networks do not exist or are lacking.”
A 2018 report by senior analyst and economist Alex Nowrasteh of the Cato Institute found that the criminal conviction rate of illegal immigrants was 50% below that of native-born Americans, and the criminal conviction rate of legal immigrants was 66% below natives. A 2018 study by Michael Light of the University of Wisconsin and Ty Miller or Purdue University found that “rather than causing higher crime, increased undocumented immigration since 1990 is generally associated with lower rates of serious violence.” Another study, conducted by University of Massachusetts sociology professor Bianca Bersani, found that immigrants are no more prone to crime than native-born citizens.
In short, there are no credible statistics indicating that immigrants disproportionately increase crime rates.
According to the Southern Medical Association, there is a “growing health concern over illegal immigrants bringing infectious diseases into the United States.” In 2015, then-presidential-candidate Trump released a statement claiming that “tremendous infectious disease is pouring across the border.”
It’s true that, unlike legal immigrants who undergo medical screening before entry, illegal aliens undergo no medical screening to ensure they’re not introducing contagious disease into the country. Accordingly, there is some risk that infected illegals could bring an infectious disease across the border.
However, the source of infection is more likely to be “population mobility” due to one of the over 300 million foreigners that temporarily visit the country annually for business or vacations, or the 15 million Americans who travel internationally each year. While pets, luggage, and agricultural products are inspected at the border, U.S. travelers are not.
President Trump did not respond to PolitiFact when asked for relevant statistics to back up his 2015 claim. Experts approached by the fact-checking organization stated:
Experts agree that the risk of a significant outbreak of an infectious disease is mainly due to international travel. Any solution that focuses solely on legal and illegal immigrants is likely to be ineffective and will not significantly reduce this risk.
The claim that immigrants use the American health care system without payment is exaggerated. In 2016, approximately 56% of immigrants in the United States had private health insurance, according to MPI, and 30% had public health insurance coverage. About 20% were uninsured.
Since most immigrants are relatively young and healthy, their inclusion in the actuarial pool of health insurance actually lowers the cost for older and less-healthy Americans in private and public insurance programs like Medicaid. A 2018 report in the International Journal of Health Services found that immigrants make up 12% of the population but only account for about 8.6% of health care costs.
Furthermore, a 2016 Cato Institute study found that immigrants are less likely to use welfare benefits than native-born Americans — and if they do use benefits, they usually use “a lower dollar value.” Legal immigrants must spend five years in the United States before they can apply for federal assistance. Illegal immigrants are ineligible for entitlement and means-tested welfare programs except for emergency medical care.
The evidence from various studies, and the opinions of most health care experts, is that immigrants subsidize America’s health care system, rather than abuse it.
Undocumented immigrants pay sales taxes and property taxes, even if they rent housing. More than half have federal and state income, Social Security, and Medicare taxes automatically deducted from their paychecks. As a consequence, undocumented immigrants provide an enormous subsidy to the Social Security system in particular, although they aren’t able to benefit from it.
According to Stephen Goss, Chief Actuary of the Social Security Administration, undocumented immigrants pay $15 billion in payroll taxes into the Social Security Trust Fund with no intention of ever collecting benefits. Goss told CNN Money, “Without the estimated 3.1 million undocumented immigrants paying into the system, Social Security would have entered persistent shortfall of tax revenue to cover payouts starting in 2009.”
A 2015 report from the American Immigration Council found that the “the average immigrant contributes nearly $120,000 more in taxes than he or she consumes in public benefits (measured in 2012 dollars).”
Steven A. Camarota, Director of Research for the anti-immigration Center for Immigration Studies, wrote that “[f]oreign-born militant Islamic terrorists have used almost every conceivable means of entering the country. They have come as students, tourists, and business visitors. They have also been Lawful Permanent Residents (LPRs) and naturalized U.S. citizens. They have snuck across the border illegally, arrived as stowaways on ships, used false passports, and have been granted amnesty. Terrorists have even used America’s humanitarian tradition of welcoming those seeking asylum.”
According to the White House, “Our current immigration system jeopardizes our national security and puts American communities at risk.” In particular, the Trump administration blames chain migration (the preference for family members to receive entry) and the visa lottery program (which allows for the random selection of foreign nationals with no consideration for education or skills). In 2015, FAIR proposed the suspension or elimination of the Visa Waiver Program. Initially passed in 1986 at the urging of the tourist industry, this program allows visitors from 38 countries with a low rate of visa refusals to be admitted into the U.S. for business or pleasure without a visa.
The desire for security in a dangerous world is especially strong in light of terrorist attacks such as 9/11. It’s not surprising that the first reaction of many is to close the borders. However, this reaction ignores the fact that many terrorists are either native-born or foreign visitors who entered the nation legally. According to PolitiFact, 85% of those accused of terroristic attacks since 9/11 were either U.S. citizens or legal residents, about half of whom were native-born.
Furthermore, as Dr. Mark Stout, director of Global Security Studies at Johns Hopkins Kreiger School, points out, immigrants have supported the United States through its history by fighting in its wars and conducting espionage work. Stout notes that immigrants add significantly to the nation’s “hard power,” or the ability to exert military and security measures across the globe.
For example, 10,000 qualified non-citizens serve in the Military Accessions Vital to the National Interest (MAVNI) program, a program authorized by the Secretary of Defense to allow non-citizens to serve in the military as medical personnel or translators. While specific details and statistics are considered top security, it’s likely that the FBI and CIA employ immigrants as confidential informants to learn of potential attacks on U.S. citizens around the world.
According to the Cato Institute, the risk to national security arises from failures in the U.S. visa system rather than its immigration system. The chance of an American being killed in a terrorist attack on American soil by a tourist with an H-1B visa is 1 in 3.9 million, while the possibility of being murdered by an illegal immigrant is 1 to 10.9 billion. While the immigration vetting process needs improvement, the actual risks from immigration are not significant enough to warrant extreme actions such as a moratorium on immigration.
In times of economic or cultural stress, there is a tendency to wrongly blame immigrants for the troubles. At the same time, every nation needs to control its borders as a matter of security. The challenge is to find the balance between an effective immigration policy and protecting a nation’s people, assets, and ideals.
According to a June 2018 Gallup poll, more than half of Americans believe that immigration should be kept at its present level (39%) or increased (28%), compared to those who think it should be decreased (29%). Three out of four Americans believe that immigration is a good thing for the country. Both political parties agree on the need for comprehensive immigration reform, but they have been unable to reach an agreement on specifics.
The problem is unnecessarily complicated by public misconceptions about immigration. Advocates on both sides promote positions that are good for their political party or group but are not in the long-term interests of the country as a whole. Rather than being part of the problem by passing on unsubstantiated claims, check the data, form your own opinion, and let your legislator know the approach you think is best.
What are your thoughts on immigration? Do you believe it helps or hurts the U.S. economy?
Updated: October 12, 2018
Categories: Economy & Policy
Michael R. Lewis is a retired corporate executive and entrepreneur. During his 40+ year career, Lewis created and sold ten different companies ranging from oil exploration to healthcare software. He has also been a Registered Investment Adviser with the SEC, a Principal of one of the larger management consulting firms in the country, and a Senior Vice President of the largest not-for-profit health insurer in the United States. Mike’s articles on personal investments, business management, and the economy are available on several online publications. He’s a father and grandfather, who also writes non-fiction and biographical pieces about growing up in the plains of West Texas – including The Storm.
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