A $116 Billion Burden: The Economics of Illegal Immigration

By | 2017-09-29T13:05:47+00:00 September 29th, 2017|
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Illegal immigrants and their children cost American taxpayers $135 billion annually—or $8,075 per alien per year, according to the Federation for American Immigration Reform’s (FAIR) new 2017 report.

The costs are partially offset by taxes collected from illegal aliens, which total $19 billion. Taken together, the net cost of illegal immigrants to American taxpayers is an astonishing $116 billion annually.

While high, this number is not an outlier: a recent study by the Heritage Foundation found that low-skilled immigrants (including those here illegally) cost Americans trillions over the course of their lifetimes. My own research for the National Economics Editorial found that illegal immigration costs America more than $140 billion a year. Suffice to say, illegal immigration has real economic consequences—whatever the Left may tell you.

The FAIR report also details how those billions are spent. Unsurprisingly, state and local governments bear the majority (two-thirds) of the costs, spending $88 billion annually. The federal government gets off relatively easy, spending just $45 billion—ironic, given the federal government created the problem in the first place. What’s more, the federal government receives the lion’s share of taxes paid by illegal aliens ($15.4 billion), although obviously, this does not begin to cover their costs. State and local governments receive just $3.5 billion in annual taxes from illegal immigrants, FAIR found.

The single greatest cost is education at $46 billion a year; behind this are $29 billion in medical care costs; $23 billion for law enforcement; and $9 billion in welfare. The report does not include the value of remittances sent by illegal aliens, which would push the net fiscal loss higher by some $38 billion annually.

California spends the most on illegal immigration: $30.3 billion per year, or about 17.7 percent of the state’s budget. Texas is a distant second, although the costs are likewise significant: $12.4 billion annually, or roughly 10 percent of the state’s budget. In third place comes New York, which spends around $7.4 billion on illegal immigration.

The data could not be clearer: illegal immigration costs American taxpayers big-time. But taxes are only part of the story. Illegal immigration hurts America’s economy in other ways: it distorts the labor market, causing wage stagnation and unemployment, and saps our economic vitality.

Illegal Immigration Decreases Wages and Boosts Unemployment
Ever hear of the law of supply and demand? It’s how the free market determines prices: when demand increases, prices increase (more people bid-up the price); conversely, when supply increases, prices decrease (less scarcity means less urgency), and vice versa. Supply and demand underpin the price of everything from gasoline to apples to the value of a person’s labor. Surgeons command high prices because surgeons are in relatively short supply, whereas store clerks make minimum wage because anyone can be a store clerk.

According to Pew Research, illegal immigration has flooded America’s labor market with at least 12 million workers. The dramatic and rapid increase in the labor supply has therefore decreased wages for American workers. The evidence for this fact is overwhelming. For example, before Hurricane Harvey, President Trump’s crackdown on illegal aliens had already caused wages for construction workers to rise by 30 percent (half of the construction workers in Texas were illegal aliens). In light of recent events, those workers’ wages will likely rise even higher—but we can still attribute a significant portion of the rise to labor market constrictions.

Likewise, towns in Maine were forced to hire American workers after the availability of visas for temporary foreign workers declined. What happened? Unemployment decreased, wages increased, and working conditions improved in order to attract American workers—all good things. Illegal labor has completely undermined America’s labor markets, and hurt the bulk of our population; the only people benefiting are the very rich.

And if this were not bad enough, many illegal aliens also work under-the-table, making less than minimum wage and foregoing expensive employer-provided health insurance plans. This undercuts the labor market’s mandated floor, making it more difficult for American workers to compete. For these reasons, the impact of illegal aliens on American wages is far larger than that of legal immigrants—who also negatively distort wages for natives.

Illegal immigration also causes unemployment for American citizens. Why? Employers often prefer to hire illegals because they have leverage over them: aliens have no recourse for termination without cause and must tolerate poor working conditions. This leverage, combined with lower wages, prices many Americans out of the labor market. How can a citizen earning minimum wage who has legal protections compete with a legal ghost making two bucks an hour? It’s impossible. This is part of the reason the youth unemployment rate is so high—the service industry used to be the province of teenagers; today, they have been replaced with illegals. The same goes for Americans without college degrees, particularly blacks and Hispanics.

Debunking Economic Myths About Illegal Immigrants
Liberals often justify their fetish for illegal immigration along economic lines, arguing “we need illegals to do the jobs Americans won’t do,” and “the economic benefits of illegal immigration outweigh the costs.” Of course, neither of these claims is true.

The first myth is easily debunked by the simple fact that America’s labor market is far from saturated. In fact, fewer than 150 million Americans (out of a population of 320 million) are employed—either part- or full-time. Further, 23 million Americans currently are looking for work, that is, twice the number of illegal aliens in the country. Even if we assume that every illegal alien was employed, replacing them with American workers would still leave 11 million Americans unemployed.

Beyond the raw numbers, it is also patently false that “illegals do jobs Americans won’t do”—they simply cannot do them because they are out-competed with cheap, unlawful labor. If you read this document published by the Bureau of Labor Statistics, you will find that millions of Americans—of all races—currently work as janitors, laborers, and agricultural workers. In fact, only four percent of American agricultural workers are illegal aliens, according to a report in the National Review, putting to bed the myth that we would starve without illegal laborers. Americans will do the jobs, provided they are paid a fair wage.

Believe it or not, states without large populations of illegal aliens, such as Montana or Ohio, are not economic backwaters with exorbitantly high costs of living—people in Idaho can still afford McDonald’s and Starbucks; they just pay teenagers to work the drive-thrus. In reality, the cost of living in those states is often lower, because their governments do not require high taxes to subsidize legions of illegal aliens.

The second myth that “the benefits of illegal immigration outweigh the costs” is also absurd. Why? First, the evidence is overwhelming that illegals are a massive net cost to taxpayers. Not only do they cost the government $116 billion annually, but these additional expenditures result in higher taxes and more borrowing—taxes and debt impede economic growth far more than the “cheap labor” may spur it. Second, illegals transfer some $38 billion abroad every year as remittances, which has the same economic impact as a federal tax.

Finally, we must consider the opportunity costs—what else could those tax dollars buy? Rather than spending billions on illegals, we could rebuild our ailing infrastructure. According to the American Society of Civil Engineers, America’s infrastructure deficit will reach $3.6 trillion by 2020. Furthermore, poor infrastructure also costs the economy money. For example, Americans lose $124 billion a year idling in traffic—almost as much as we lose to illegals aliens. If the government stopped spending on illegal immigrants, it could cut our infrastructure deficit in half by 2020, and save the economy hundreds of billions on traffic jams and airport delays—not to mention the headaches.

It is also worth mentioning that America is the only Western nation, until very recently, that imports millions of illegal immigrants to work in its service sector—other rich nations, like Japan and Canada, do not. Despite this, the GDP per capita of Japan has actually grown faster than America’s during the same period. The same is true of Canada and Australia. If illegal immigration is such a boon to America, why are Americans being left behind by countries without this “advantage”? Perhaps because illegal immigration is not an advantage. Perhaps the elites are lying.

University professors, Silicon Valley CEOs, senators, and news anchors are not losing their jobs to illegals—they are hiring them as gardeners, nurses, and even as cheap coders. Ordinary folk pay the price for elite decadence. If a critical mass of illegal immigrants were Pulitzer Prize-winning writers, the country would look like the gated communities of Washington D.C. or Los Angeles—it would have a wall and a security detail.

About the Author:

Spencer P. Morrison
Spencer P. Morrison is a writer and author of Bobbins, Not Gold. He is the editor-in-chief of the National Economics Editorial. Follow him on Twitter @SPMorrison_.