The Costs of Illegal Immigration:
The Impact of Illegal Aliens on the Federal
Panel Discussion Transcript
August 25, 2004
National Press Club
Mark Krikorian, Executive Director, Center for Immigration
Steven Camarota, Director of Research, Center for Immigration
B. Lindsay Lowell, Director of Policy Studies, Institute for the
Study of International Migration, Georgetown University
Robert Rector, Senior Research Fellow, The Heritage Foundation
KRIKORIAN: Good morning. My name is Mark Krikorian. I'm
executive director of the Center for Immigration Studies, a think tank
here in town that examines and critiques the impact of immigration on
the United States. Let me get the plug in at the beginning: all of our
work, including the report we're releasing today, is online in its
entirety at our website.
Last night the draft Republican Party platform was released in
preparation for debate and discussion and the general convention -- the
Republican Convention next week -- and the platform echoed President
Bush's call earlier this year for, among other things, widespread
illegal alien amnesty. Senator Kerry, the Democratic candidate, has also
called for a different, speedier version of an amnesty for a large
number of the 10 million illegal aliens in the United States, and there
are a variety of other proposals introduced by Republicans and Democrats
that also call for amnesty as the solution to illegal immigration, in a
sense to define it away.
None of the discussion, though, of an amnesty in the illegal population
has looked at the fiscal fallout -- the budgetary consequences of doing
this. The last amnesty, which Congress passed in 1986, had enormous
fiscal fallout. In the first 10 years we had published an estimate of
direct and indirect costs of something like $70 billion. No one has
conducted a similar examination of the current and likely future costs
of illegal immigration, and this is what the report we're releasing
today does. There are a couple of caveats. Steve, the author, will make
them. But let me emphasize, this looked only at the taxes paid and the
services used at the federal level, not at the state and local levels.
There are a variety of both taxes and services at those levels that
would be relevant to a broader look at it. This is looking at -- sort of
the first look at the national issue, at the federal issue. And it was
actually quite striking to me that no one has even raised the question
as to what effect this is going to have. The discussion has been -- even
for Washington -- has been remarkably superficial and frivolous. And so
to try to remedy that we're releasing today a report that is really the
first detailed look at what taxes illegal alien-headed households pay
and what services they use, to try to come up with an estimate of what
the impact is and what the likely impact would be if illegals were
The author of the report is going to speak first. Steve Camarota, the
director of research at the center, has become one of the best-know
commentators on the effects of immigration in the United States, and has
written -- we've published a variety of reports that he's written, all of
which are on our website. Then we'll have comment from two experts --
outside experts on this subject. Lindsay Lowell, he is director of
policy studies at Georgetown University's Institute for the Study of
International Migration. He's written on this subject for years and in
fact was research director at the Barbara Jordan Commission, the
commission on immigration reform in the 1990s. And the other commentator
is Robert Rector, a senior research fellow at the Heritage Foundation
who has written widely on issues focusing on welfare policy, low-income
populations and the underclass, including on immigration-related topics.
So what we'll do is Steve will make his presentation first. We'll have
some comment from the two discussants, and then we'll open it up to Q&A
for all of the panelists from the audience.
STEVEN CAMAROTA: Thank you, Mark.
Let me just reiterate what Mark said, that the report that we are
releasing today is available at our website.
Now, obviously, concern over illegal immigration spans a wide range of
issues, from national security to the rule of law to the risks illegal
aliens take to enter the United States. However, with perhaps 10 million
illegal aliens now living in the country, concern about their impact on
American taxpayers has become, obviously, a very big issue. Of course,
putting aside the fiscal costs, many Americans are understandably
outraged at the very idea that millions of people can cross our borders
illegally or overstay temporary visas and live here with little
difficulty and the federal government doesn't seem to do much to stop
them. And while other issues are clearly important, again, the effect
illegal aliens have on public coffers is at the center of the ongoing
debate about illegal immigration.
Now, of course, almost all observers agree that illegal immigration is a
problem, but there's less agreement on the size and scope of the fiscal
costs. But this is an important question because if there are large
fiscal costs then this should have some impact -- and almost certainly
will -- on the kinds of services that can be offered to natives or
illegal immigrants, or on the other hand, the tax burden on Americans.
Thus, policymakers need to take into account the fiscal impact when
formulating their response to illegal immigration.
As Mark also pointed out, surprisingly few studies have attempted to
measure the total fiscal impact of illegal immigration. Several studies
have focused on all immigrants, making no distinction by legal status.
Other research has examined only costs or only tax payments. And most
work has focused on the state and local level, giving little attention
to the federal government.
We undertook this study to correct some of these previous shortcomings.
We attempt to answer in this report two related questions. First, what
is the fiscal balance at the federal level? That is, if you take all the
taxes illegal aliens pay and all the services that illegal aliens use at
the federal level, what is the balance between those two things?
Second -- and a closely related question -- what would happen to that
fiscal balance if illegal aliens were given amnesty? Now, again, it's
important to note that the study being released today deals only with
the impact of illegal immigration on the federal budget. Costs at the
state and local level are not considered.
Now, how do we do this? How can we come up with these estimates? Well,
to estimate the impact of households headed by illegal aliens, we rely
heavily on the approach used by the National Research Council in its
1997 study The New Americans. The panel that conducted that study
included most of the top people in the immigration field, including
economists and demographers and sociologists.
Now, although that study did not separate out illegal immigrants, it did
provide a model on how to approach the impact of immigration on the
United States in terms of fiscal effects. Like that study, we mainly
used the March Current Population Survey collected by the Census Bureau,
and we used the March file from 2003 of that survey, and that survey
asks people about their use of welfare and the taxes and their income
and so forth in the previous year. So all the estimates I'm going to
give you today are from 2002.
Now, like the National Research Council, we assume that illegal aliens
have no impact on defense-related expenditures, and therefore those
costs are assigned only to native-headed households. We also follow the
National Research Council's example and define households as persons
living together who are related.
Now, the reason that we use "household" -- we use it for the same reason
that the NRC, the National Research Council, did. "A household is the
primary unit through which public services are consumed and taxes are
paid," in the words of the NRC. Thus it makes perfect sense to estimate
the tax payments and services by household, but it should be pointed out
that by calculating cost by households we are including the U.S.-born
children of illegal aliens who are American citizens. Because the
presence of these children and the costs they create are a direct result
of their parents having been allowed to enter and remain in the country
illegally, counting services used by these children allows for a full
accounting of the costs of illegal immigration.
While the Census Bureau does not ask people, of course, whether they are
illegal aliens, lots of outside researchers, including the Urban
Institute, the Immigration Service, and the Census Bureau itself have
actually used the characteristics of people in the survey to identify
illegal aliens, and we follow their example. This method of course is
based on some very well established facts about the illegal population.
I won't go into all the details. It may surprise some people that
illegal aliens actually respond to the Census or to government surveys,
but it turns out they have such little fear of enforcement that when
sent a form they generally send it back, or when someone knocks on the
door they answer questions.
Now in some cases we assume that an individual will have zero chance of
being an illegal alien, such as someone who says he's a naturalized
citizen, someone who says he's a veteran, someone who says that he
personally receives Social Security or cash from welfare programs, or
that he personally is enrolled in Medicare. However, other members of
the household, mainly their U.S.-born children, can and often do receive
Now, we estimate that in March of 2003 there were roughly 9 million
illegal aliens in the current population survey. By design, our
estimates for the size and characteristics of the illegal population are
very similar to those prepared by the Census Bureau, the Immigration
Service, and the Urban Institute.
Now, in terms of tax payments, we follow the example of previous
research and assume that about 55 percent of illegal aliens are paid on
the books; that is, that they have income tax withheld. Again, that may
surprise people, but you have to understand how lax the system is to
understand why that happens. If you go in and just give a made-up Social
Security number to an employer, it will take quite some time, if ever,
before Social Security and/or the IRS ever get back to the employer. So
you can actually go in as long as you've got a drivers license or some
other documentation that you can buy on the street that says that's your
Social Security number, [and] you can pay taxes on that number.
Now, to estimate the impact of giving illegal aliens amnesty, we assume
that any amnesty that passes Congress will have lawful, permanent
residence as a component. Lawful permanent resident status is also
called a green card. It allows you to live in the United States for as
long as you like and get citizenship after five years. Now, to estimate
what would happen if illegals got legal status, we assume that illegals,
if given this green card, they would begin to pay taxes and use
services, like households headed by legal immigrants, with the same
characteristics in terms of educational attainment. We also control for
whether the household is from Mexico.
So what did we find? Looking first at households headed by illegal
aliens, we found that they paid on average $4,200 a year to the federal
government for a total of about $16 billion a year in 2002 -- certainly
not a trivial sum. However, we also found that they imposed costs on the
federal government of nearly $7,000 a year, or $26.3 billion. This means
that the net fiscal deficit created by illegal households was $10.4
billion, or $2,700 per household. Put differently, illegal aliens
imposed $10.4 billion more in costs than they paid in taxes.
Among the largest costs were Medicaid, $2.5 billion; cost to treat the
uninsured, $2.2 billion; food assistance programs, $1.9 billion; the
federal prison system and court system, $1.6 billion, and federal aid to
local schools, $1.4 billion in costs. And one of the most troubling
statistics in the report is the discovery, based on prior research, done
actually at the Urban Institute, that roughly 17 percent of the prison
population at the federal level is illegal aliens. That's a huge number
since illegal aliens only account for about 3 percent of the total
Now, why do illegal aliens create a net cost at the federal level? Well,
it's really pretty straightforward. With nearly two-thirds of illegal
aliens lacking a high school degree, the primary reason they create a
fiscal deficit is their low education levels and resulting low incomes
and tax payment, not their legal status or even particularly heavy use
of most social services. Nor is it caused by an unwillingness to work.
The vast majority of adult illegals in fact hold jobs. But their low
education levels mean their incomes are very low, and there is no single
better predictor of income and economic well being than one's education.
And of course, income is the primary determinant of one's tax payments
and also one's eligibility for many social services.
Now, when we try to estimate what would happen to this $10 billion
deficit, if we gave illegal aliens legal status and they began to pay
taxes like similarly skilled legal immigrants, we find the costs go up
dramatically. If illegal aliens were given amnesty and began to pay
taxes and use services like households headed by legal immigrants with
the same education levels, the net fiscal deficit would go up from
$2,700 per household to $7,700 a household. And the total net cost would
rise from $10.4 billion to $19 billion. In other words, if we gave
illegal aliens legal status, they would become basically unskilled, for
the most part, legal immigrants. And as a consequence, the costs, the
net fiscal deficit, would nearly triple.
Now, how do we know this? Well, we know this because legal immigrants
with the same education levels as illegal immigrants make extensive use
of public services but still tend to have very modest incomes reflecting
their low levels of education. Thus, even though we estimate that
average tax payments would rise by 77 percent per household on average,
we estimate that costs per household would rise 117 percent.
To understand why costs go up it might be helpful to consider a program
like the earned income tax credit, which pays cash to low-income
workers. Now, illegals currently account for only 1.5 percent of the
credit because they need a valid Social Security number and then they
have to file an income tax return, so the vast majority don't. But if
they were legalized they would begin to use this program, and in fact,
the cost for that program would go up 10-fold.
Now, remember, this dramatic rise in cost is not due to laziness on the
part of the illegal aliens. In fact, only those who get the credit -- and
to get the credit you have to work. The dramatic rise in costs simply
reflects the low education levels of illegal aliens and their resulting
low incomes. It must be remembered that legalizing illegal aliens will
not change their education levels or the fact that the modern American
economy offers very limited opportunities to unskilled workers, whatever
their legal status, nor will it change the basic fact that the United
States, like all industrialized democracies, has a well-developed
welfare state that provides assistance to low-income workers. Large
fiscal costs are simply the unavoidable outcome of unskilled
immigration, given the economic and fiscal realities of modern America.
Now, of course, many native-born Americans often observe that, hey, my
ancestors came to America, they'll say, and they didn't place huge
demands on government services. Perhaps this is true, but the size and
scope of government was dramatically smaller during the last great wave
of immigration, not just welfare programs, which were virtually
nonexistent, but expenditures on public schools and even roads were only
a fraction of what they are today. Thus, the arrival of unskilled
immigrants in the past did not have negative fiscal implications in the
way that it does today. Moreover, the American economy has changed
dramatically since the last wave of immigration.
Education is now the key determinant of economic success. In the past
you could come to America, 100 years ago, with little formal education
and still find work in mining, agriculture, or primarily in industry.
Put simply, large-scale unskilled immigration is incompatible with the
economic conditions in the United States.
What does all this mean? Well, I think it's fair to say that it is -- one
of the key conclusions is that it is grossly inadequate for policymakers
and politicians in both political parties to say that all that matters
is matching a willing worker with a willing employer. The arrival of
unskilled workers has enormous implications for taxpayers. While
businesses can be counted on to ignore these costs, policymakers must at
least consider them. This study makes clear that looking even just at
the federal level and ignoring the local level, those costs are
Now, assuming that the fiscal status quo is unacceptable, one set of
options to deal with this problem might be to try to, well, reduce the
costs illegal alien families impose, but doing so would be extremely
difficult. Illegal alien households already impose only about 46 percent
as much in costs on the federal government as other households. The
problem is they only pay about 28 percent as much in taxes. But the
bottom line is the amount of money that can be saved by curtailing their
benefits would probably be quite limited. Moreover, the fact that
benefits are often received on behalf of their U.S. citizen children
means that it is very difficult to prevent illegal alien households from
accessing what programs they do because their citizen children always
So if you were to say -- and we do -- that illegal aliens can't use
Medicaid, but if the illegal alien has three U.S.-born children and his
incomes qualifies -- if the income is low enough -- those three children
can be enrolled as full members of Medicaid, and there is no way under
existing law, which awards citizenship to the children of illegal
aliens, to prevent that from happening. So talking about how we would
try to cut back illegal aliens' use of public services is likely to have
very limited impact. It's not likely to provide large savings.
And many of the programs, it should be pointed out, that illegal aliens
use most extensively are politically very difficult to cut. Such
programs as, for example, the Women Infants & Children program -- now,
that name should tell you right there why there would be an enormous
outcry if you tried to cut that program, even though illegal aliens are
making very extensive use of it. And other costs, such as incarcerating
illegal aliens who have been convicted of crime, seem to be obvious and
unavoidable if the illegal aliens are allowed to stay.
Put simply, it seems almost certain that if the illegals are allowed to
remain in the country, so will the fiscal costs. If we are serious about
avoiding the fiscal costs of illegal immigration, the only real option
is to enforce the law and reduce the number of illegal aliens in the
country. First, this would involve much greater efforts to police the
border, both the land border and the sea borders. At present, fewer than
2,000 agents are on duty at any one time on the Mexican and Canadian
borders. Second, much greater effort must be made to ensure that those
allowed into the country on a temporary basis such as tourists and guest
workers return to their home country, as they agreed to, and not remain
in the United States as illegal aliens. Of the roughly 10 million
illegal aliens who are now in the United States, probably somewhere
around a fourth to a third are visa overstays. That is, they came in on
a temporary visa and they just never went home.
Now, the centerpiece of any enforcement effort in terms of illegal
immigration must be to enforce the ban on hiring illegals in the United
States. At present it is unlawful to employ an illegal alien, but the
law remains entirely unenforced. Now, this would require things like
using existing databases to make sure that all new hires are authorized
to work in the United States, and levying heavy fines on businesses
which employ illegal aliens.
Finally I would add that a clear message must come from policymakers in
both political parties, especially, though, senior members of whoever is
in charge in terms of the administration, that enforcement of the law is
valued and vitally important to the nation. This would dramatically
increase the extremely low morale of those who currently are involved in
Consider the effect on people who work in the immigration services that
enforce the law . . . of both the president and the leading challenger,
John Kerry, both saying that, well, the way to deal with illegal aliens
is we are going to give them legal status. That is like the head of the
DEA saying, the way to deal with illegal drugs is we should legalize
them. Now, but you go out and enforce the law. That is a critically
important component -- doesn't involve spending more money, though that
would be needed, but it would have an enormous impact on what would
Now, of course, policing the border, enforcing the ban on hiring illegal
aliens, denying temporary visas to those likely to remain permanently,
as well as all the other things necessary to reduce illegal immigration,
would take both time and money. However, since the costs of illegal
immigration are very significant, that also means that significant
resources could be devoted to enforcing the law and still might leave
taxpayers with a nice net savings. Again, I should add that it must be
remembered that the negative -- the net negative impact of illegal aliens
on the federal government of over $10 billion does not include costs at
the state and local level, where the costs are likely to be even higher.
Now, enforcement not only has the advantage of reducing the cost, it is
also very popular with the general public. Nevertheless, policymakers
can expect strong opposition from interest groups, especially ethnic
advocacy groups and those elements of the business community that do not
wish to pay their workers more or invest in labor-saving devices and
techniques, and instead just want access to a lot of unskilled workers.
If, instead, we choose not to enforce the law or we decide to grant
illegal aliens amnesty, both the public and policymakers have to
understand that these latter two choices involve a significant and
unavoidable long-term cost for taxpayers.
MARK KRIKORIAN: Thank you, Steve. We
will first go to Lindsay and then to Bob.
B. LINDSAY LOWELL: Good morning. I'm
going to make some general comments on two issues, one of which is the
reliability of the report, and the other is what is the value of the
report? On the reliability, to cut to the chase, the precision of the
estimate can be debated, but I think most reasonable experts would
concur that a net fiscal balance is what happens with this population.
As for the value of the report, I think we should call attention to the
obvious fact that there is never a free lunch. Amnesties will introduce
costs to the U.S. policies that should be considered, but there other
aspects of U.S. policy that are important here as well -- not just
immigration policy, but our labor market policy has created much of the
So how reliable is the estimate? The report points some things out that
are in the favor of unauthorized aliens. The use of cash assistance
programs is low. Even compared to otherwise similar natives, we know
that immigrants often tend to use welfare at lower rates. This is true
of illegal residents as well. And over half of unauthorized aliens pay
taxes of at least $4,200 per household. That is a significant tax for
these often very poor households. Furthermore, about $7 billion flow
into Social Security and Medicare from this population. This reinforces
the observation, among other things, that we know these people come to
work, as Steve has just said.
The report also mentions some surprising and little-discussed costs: 17
percent, according to best estimate, of those in federal prisons are
illegal aliens and they run up a substantial cost. This isn't news at
all to the states that seek reimbursement. A roughly similar cost is
found in federal courts. And payment for the treatment of the uninsured
may run as high as $2.2 billion. Again, this is no surprise to hospitals
and states that are trying to get federal reimbursement for these costs.
There is a shadow side to the population that needs to be considered.
Now, as to the line items, it's kind of tedious to go through but it's
worthwhile because that's where many of the questions come. Experts will
argue about various sides of the ledger but let's talk about some
specific things, what I would call uniquely allocated costs. So for
example, should the former INS actually be -- should its costs be
attributed to the illegal population? Wouldn't, in fact -- suppose all
unauthorized aliens were to leave tomorrow, wouldn't you still need
border enforcement? I would think so. In fact, it's often the case that
it's greater enforcement that leads to the absence of crime, or illegal
entry in this case, so might not even costs go up higher? I think that's
reasonable to say, but that just argues in fact that maybe this cost
item should be put into the "all other expenses" that are also
attributed to natives, for example, but if that's done it's unlikely to
change the story.
There is what I would say, what's the true amount of something? This is
the problem of marginal versus average cost. The marginal cost is -- it
doesn't cost as much to add an additional person to a school system as
the first person, or an additional person in terms of infrastructure and
roads, and that's where the "all other expenses" in this particular
estimate really has some issues because we will probably want to see
marginal costs here. And this is a big item. In fact, most of the
deficit in the illegal population estimate here is this other-expenses
item -- line item.
Well, let's assume that the true cost here is not an average cost; it's
a little bit lower than what we've got there, so we reduce that
estimate. I mean, is it reasonable to keep that estimate? Yes. Illegal
residents incur costs and we should allocate costs to them for living in
our nation. But even a significant reduction of those costs would still
leave us at the same place, with a net fiscal deficit as the likely
story that we've got here.
There's a public investment issue. Wouldn't the cost of not educating a
child or not providing health care even be greater than providing the
costs in the first place? Unhealthy people are a public health hazard.
Well, that really is a serious issue and it's not simply philosophical.
And there are probably ways to kind of figure out what the net costs are
that would, again, reduce these estimates a little bit, but nowhere in
the report is there a suggestion that these costs should be eliminated,
that these services should not be provided to this population. And at
any rate, states are currently suing the federal government for cost
sharing and a lot of different things. It seems sensible, once again, in
the way we're operating in this nation, to assign these costs to illegal
Well, then there's misplaced costs. The citizen children of illegal
parents are eligible for the benefits they receive. They are eligible.
Should these items then go on a line-item cost against the illegal
population? Well, at the same time, citizen children who have left the
household aren't assigned costs, so it really does seem reasonable that
as the NRC panel concluded, that the children of the household are a
charge against their parents, and so it makes sense in many ways, I
think, to go ahead and put the cost for while they're in the household
onto the unauthorized household.
Aren't we singling out illegal aliens in many cases? In fact, low-income
households, including those of legal immigrants, as we've just heard,
and even of the native born, generate a net negative fiscal balance.
Well, that's true enough but at the same time, until national boundaries
fall we haven't chosen, under the color of law, to have unauthorized
aliens. And so in that regard I think it's quite reasonable to separate
their cost out as a different kind of cost to the nation.
What's the bottom line? The exact amount of the net negative fiscal
balance is something that one should not probably take to the bank, but
there is error in the estimate. But economic theory and logic shouldn't
make the basic findings surprising. Poorly educated workers don't earn
much, they can't pay much in taxes, yet these are precisely the
households that often live in poverty and need public benefits. The cost
is likely, no matter how calculated, to be negative and somewhat
Well, having said that, what's the value of the report? As I said, it
points out that there is no such thing as a free lunch. In a post-modern
industrial economy, this population runs up costs. The earned amnesty
and guest worker programs being discussed on the Hill may not come to
pass this year, and maybe not even next. So is it a red herring? I don't
think so. There has been more interest in this issue expressed in the
last three or four years than in the previous decade, and for the first
time, many different actors in the debate are willing to entertain the
notion, not simply of earned amnesty for sizable populations of 500,000
per million workers, but indeed for the entire population.
As that debate goes forward it's very reasonable to entertain the costs
that will arise. And they're not just fiscal costs. More, at the same
time I should also point out, are the costs themselves the reason for
not taking certain kinds of actions like granting amnesty, but they
should enter into the debate and they should give some reason for pause.
From my point of view, what a broader reading of this report should also
make clear is that there are some disturbing trends that create the
context in which we find ourselves. Low-skilled workers in the United
States for the past few decades have been seeing their earnings erode
relative to more skilled workers. That paused a little bit during the
new economy in the late 1990s, but in fact there is still a lowering of
the relative wage of earners on the low-end side.
There seems to be a consensus in the research community that this has to
do with an increased demand for knowledgeable workers in a
technology-advanced society. But there are also those who point out that
there has been a simultaneous reduction, or erosion, in the
institutional support for the wages of low-skilled workers. Some of
these are fairly easy to see. The minimum wage has kept nowhere near the
inflation rate since the 1960s. A living wage is variously calculated to
be $12 to $14 an hour. At the same time, we know that newly arrived
unauthorized workers generally earn maybe $7 to $8 and hour, max.
We also know that especially since the 1980s -- but it's a part of a
longer-term trend -- that both worker and union clout has suffered in the
United States. So there is less ability for these workers to stand up
for their rights and get paid what we would probably want to pay them,
all other things being considered.
U.S. immigration policy, along with these other developments, has, with
a wink and a nod, encouraged the growth of a low-rate sector that is
supplied to a large degree by unauthorized workers. And in that regard,
perhaps employers and consumers benefit, but as citizens we're abetting
the growth of an underprivileged class, and as taxpayers, we are
MARK KRIKORIAN: Okay, thanks,
And Bob Rector.
ROBERT RECTOR: Thank you very much.
I find it to be an excellent report and I think the numbers are quite
accurate, particularly with regard to the central issue of the receipt
of welfare benefits. I think the underlying principle here is a fairly
simple one: that a society which has an advanced welfare state for the
economically disadvantaged will incur considerable costs when it imports
large numbers of low-skilled individuals, that those individuals will
inevitably end up being a substantial and significant fiscal drain on
the rest of society as well as possibly creating social problems, which
I will get into later.
Just for example, the total cost of means-tested welfare assistance in
the United States last year -- means-tested welfare are programs that go
only to low-income persons -- was $530 billion. That is over five percent
of total personal income. Some people think that we ended welfare in the
mid-1990s. It would be interesting to know what this cost would be if we
hadn't ended it. In fact, I think we did modestly slow down the growth
of these programs, but only modestly, and they continue to absorb a very
significant portion of our economy. We spend a considerable amount of
time and effort essentially taxing upper middle-class families in order
to transfer very, very large amounts of economic resources to those that
are less fortunate. The question is, what happens in that type of system
when you import people who inherently are going to be less fortunate
within that system? Another issue I think that is tied in here is that
the welfare system maybe 20 years ago may have significantly involved
families where the single mother didn't work at all. It's changing now,
and the most expensive cash program is the earned income tax credit,
which is designed as a wage supplement for low-income parents.
So whether or not the individual works somewhat during the year is
largely irrelevant to the type of welfare costs that are going to come
in. In fact, if you look at the 1996 welfare reform, what in effect
actually happened in that reform was that we largely curtailed welfare
payments that consisted of sending out monthly welfare checks to single
mothers who didn't work over long periods of time, and we took virtually
all of that money and put it into various types of subsidies for working
low-skilled parents, particularly daycare, but there is a huge expansion
to the earned income tax credit, creation of state-earned income tax
credits and so forth.
So the system is, I think, rationally designed to take parents who have
a difficult time supporting families according to our standards by their
earnings and to supplement them and to bolster them. And then in
addition, these families -- all of these kids would be getting a free
education or a highly subsidized education at the state level, which is
probably an even greater cost that is not considered in this report. And
these -- when you look at large numbers of workers coming in without a
high school degree, anyone who understands the nature of welfare,
understands the nature of the underclass and the semi-underclass, can
see that essentially you are importing future clientele for these
programs. It's not surprising that you find that even with an illegal
status that they are receiving considerable benefits under these
programs, and if legalized, that the receipt of and the cost would go up
I think it's important to note that this is a static report. It assumes
no behavioral response to periodic granting of amnesty. Of course we all
know that each amnesty that will be offered is absolutely the last
amnesty that will ever be offered, but in fact, if the nation gets into
a policy of serial amnesty, which seems to be the direction that we are
moving in, it's very difficult to believe that that would not have a
significant effect on future behaviors on people seeking to come into
the United States specifically to benefit from the next installment of
the last amnesty we're ever going to give. And in particular, if you
look at visa overstays, it's very difficult to imagine that people
wouldn't be inclined to -- more likely to overstay on visas if they felt
that they would, some time down the future, benefit from another
installment of the last amnesty ever.
Another behavioral response here that I think is very important, and is
a little subtle, is the impact of socially marginal families, of
families that have a difficulty in educational attainment, families that
have difficulty in marital structure and things like that -- the sort of
compounding effect that these families have on each other. When you look
at studies of the underclass or of the near-underclass, it's a continuum
of behaviors. One of the things that we seem to know is that if you
compound -- you compound the effect by putting large numbers of similar
families together in a single neighborhood, and that seems to intensify
the behavior. So that for example, if you add in additional families
that have children out of wedlock, that have low educational attainment
and other things like that into a neighborhood, I would argue that that
probably intensifies those problems and increases a negative behavioral
response of everyone in that neighborhood -- that there are compounding
effects here, or tipping effects, that the more people that have
essentially difficulty in maintaining normal middle-class status in our
society, the more you bring in, the more in fact you are likely to
intensify those problems within certain sections of the native-born
population as well.
I also think that this report doesn't allude to -- but it's very
difficult in my mind to believe that the very large number of
low-skilled workers here coming in illegally has no significant effect
on the wage levels of low-skilled native-born workers. That can be
highly debated, but intuitively this would seem to be one effect. And
therefore, by depressing -- if you are having the effect of depressing
the wages of low-skilled native-born workers, then you are also
incurring social and economic and fiscal costs on that population as
well. I mean, there is a certain ambiguity in this of saying, ah, well,
these workers are taking jobs that no one else will do, but on the other
hand it's having no effect on wages. Those two things don't go together.
It's one or the other. And if they are in fact taking jobs that no one
else will do, then they also are undoubtedly keeping the wages of those
jobs down well below where they would be otherwise.
There is also, I think, a political feedback effect to illegal
immigration. Basically these figures would indicate, for example, that
about one-tenth of the poor people in the United States are illegal
non-citizens. Now, tomorrow the Census Bureau is going to be releasing
the annual poverty estimate and the annual estimate of the medically
uninsured in the United States, and I can assure you that no place in
that release is it going go say that, by the way, one-tenth of the poor
people we found here happen to be illegal people who weren't supposed to
be in this country at all in the first place, or a similar percentage of
the uninsured. And the very magnitude, in effect, of saying, ah, we have
over 35 million poor people -- some of whom are illegals but that is
never acknowledged -- is in fact used as an impetus for increasing
spending in these programs in general and therefore has another indirect
fiscal consequence as a result of it.
I think that if you look back on the debate about welfare and
immigration over the last 10 years, there was a naive expectation among
some conservatives that somehow you could do away with welfare, and that
is simply not going to happen. For example, if you have individuals who
are advocates of an open border, they would recognize that if you have
open borders or semi-open borders and that you bring in large numbers of
low-skilled people, they will take up welfare. But the response to that
was, aha, well, let's do away with welfare. Well, guess what? It didn't
happen, it shouldn't have happened, and it's not going to happen in the
future. The welfare state is going to remain here. The welfare state can
be somewhat more rational than it has been in the past but the fact of
the matter is that it seems inevitable that we are going to have a
system, and continue to have a system, where if you import large numbers
of low-skilled individuals they are going to participate in that system
and they are going to impose a direct fiscal cost on the government, and
welfare reform will have no impact or very little impact in reducing
A couple of other points. I mentioned this is a federal-only study. My
intuitive sense would be that if you added in state and local [data]
that you would get considerably more fiscal -- negative fiscal impacts on
that, and considerably larger.
And I also would reference -- I found very striking in here the
statistics that close to one out of five individuals in federal prisons
are illegal aliens, and as I understand it, they are not there for
immigration-related offenses; they are there for some other type of
substantive criminal offense. That is a very shocking figure. Now, I
don't know whether that figure would correspond to state and local
imprisonments, but let's say that at the state and local level the
figure was not one in five but, say, one in ten -- we don't know what
that number is but to throw a number out to kind of get an assessment of
what this might mean. The total cost of crime -- economic costs as well
as psychological costs -- is over $450 billion a year in the United
States. So one-tenth of those costs, minimum you're talking $40, $50
Now, again, we only know the federal imprisonment rate, we don't know
the state and local rate, but if there is a disproportionate crime
involvement by illegal immigrants and a disproportionate amount of crime
being performed, then the social costs of that criminal activity would
probably -- would almost certainly dwarf the smaller fiscal governmental
impacts that are talked about in this report.
Overall I think this is a very good report. It seems to be quite
accurate, and it is a very useful contribution to the public policy
MR. KRIKORIAN: Thank you, Bob.
Let me have Steve -- give Steve just a minute or two to address a couple
of points that were brought up and then we'll throw it to the audience.
MR. CAMAROTA: Yeah. On the question
of how to assign costs, I should point out that the report tries to be
as conservative as possible. Let me give one example. Federal aid to
education goes primarily, though not exclusively, to low-income
districts and low-income students, but in the report we just assigned
costs for federal education based on the number of kids in each
household, not controlling for the fact that those kids in illegal
households obviously are disproportionately in low-income districts and
are themselves very low-income. If we did that, the costs would rise
very dramatically. So, in general, we try to have pretty conservative
estimates of what -- you know, the costs.
Let me just touch very briefly on two other points. There probably is a
significant effect on low-wage workers in the United States. As Mr.
Rector pointed out, you can't have it both ways. You can't say that
illegal aliens only take jobs Americans don't want but there is no
impact on wages because the very implication of that is that the jobs
are not allowed to rise in terms of their wages, benefits, and working
conditions because you're constantly bringing in more unskilled
immigrant workers to fill them. It seems certain that there is an
effect, and I think there is a pretty good body of research to show that
there is a significant effect. The National Academy of Sciences
concluded that there was a significant negative effect; a new paper by
George Borjas at Harvard suggests that the effect is even larger. So I
think that that's pretty clear.
One final point to emphasize one more time: this study only deals with
the federal effects. It's almost 100 percent certain that the fiscal
costs at the state and local level are dramatically larger than they are
at the federal level. Certainly, the National Academy of Science, when
it looked at all immigrants who are unskilled immigrants, in general
found that the costs at the state and local level were much larger. So
our estimate that illegal aliens impose a net cost of over $10 billion
at the federal level, you would have to almost certainly assume that's
it much larger than that and add to it at the state and local level.
MR. KRIKORIAN: Thanks, Steve.
If you could please identify yourself and speak up when you ask your
Q: I'm Al Millikin (sp), affiliated
with Washington Writers. Do we know what other countries supply or
provide the most illegal immigrants to the U.S.? And when a nation like
Mexico has taken the positions they have on our immigration policy, does
this report show them acting in their best interest or would anything
from this report cause another country to question what they are doing
in relation to U.S. immigration, whether legal or illegal?
MR. CAMAROTA: Well, since the costs
are primarily being borne by American taxpayers, we can pretty much
count on the Mexican government not to put a very high priority on
fiscal costs borne by American taxpayers, and that would generally be
true of Central American governments and Caribbean governments as well
where the most illegal aliens obviously come: Mexico, Central America
and the Caribbean.
So in that sense, if they are very concerned about American taxpayers,
sure, they might decide that, gee, you know, maybe we want to cooperate
more with the United States, but my assumption is that that would not be
the case because they have little incentive. These individuals who come
to the United States are persons that those governments find it very
difficult to provide employment and housing and a decent life for. So
the fact that they are able to send a large share of their population to
the United States to kind of get them off their hands is generally
beneficial to the elites in those countries. That's why the elites in
those countries very much like large-scale migration to the United
States if for one thing it tends to get rid of people who are
dissatisfied with the status quo in the country, and if you are a member
of the ruling elite in Mexico or the Dominican Republic, that's a good
thing. You want to shed your problems and put them on the U.S.
Now, in fairness, if the United States adopts policies that impose costs
on their taxpayers, I'm sure we can be counted on to ignore that as
well. Countries don't generally represent the interests of other -- you
know, leaders of one country don't care very much about, and that's what
we would expect from Mexico and all of their behavior suggests that they
are not very concerned, and why would they be?
MR. KRIKORIAN: Yeah, go ahead.
MR. LOWELL: Just a quick addition.
These are overwhelmingly poor people and certainly we shouldn't hold
that against them, and the Mexican government, quite logically, and
other governments from their point of view, aren't primarily concerned
about how our social welfare plays out. They do express a lot of concern
about the welfare of the population here nonetheless, and that's very
reasonable, so the efforts with the matricula, the emphasis on trying to
secure the rights of these workers is something where their attention
tends to focus, and I don't think we should be surprised by that.
MR. CAMAROTA: But you wouldn't say
that we necessarily share the same interests as those governments. Our
interests might be quite different.
MR. LOWELL: I would say we should
have at least the same interests in terms of the quality of life for
these workers. Unfortunately, it's reasonable to say that both
governments are a little bit lax in expressing that concern by letting
the situation continue the way it is.
MR. KRIKORIAN: Julia?
Q: Two questions. If you could
address what some people have said. First of all, in Social Security the
report seems to indicate the benefits -- well, the one about the long
haul, and another issue that some supporters of broader immigration have
is that it's so essential to the economy, so if it essential to the
economy then perhaps it's worth the amount we're paying in federal
MR. CAMAROTA: Yeah. Let me address
the Social Security. We estimate that illegal aliens pay $7 billion a
year or more in Social Security and Medicare tax than they use in those
services. The problem is they are a net benefit for those two programs
of $7 billion but they are a net drain on everything else of $17
billion, creating the overall net drain of $10 billion. You can't just
consider those two programs in isolation.
One minor point to consider is if we legalized illegal aliens, the vast
majority, given their education levels and the kinds of jobs they do,
would of course receive the earned income tax credit, but it must be
pointed out that the earned income tax credit is specifically designed
to cancel out the Social Security payments that people make. It's a way
-- it's kind of like giving them their money back. In other words,
whatever net benefit we get on Social Security, with legalization that
would completely vanish just from the earned income tax credit. But as I
said, their benefit right now as illegal aliens, not as amnesty
recipients, is clear and unambiguous for Social Security and Medicare --
and those estimates are in the study -- but the net deficit everywhere
else completely offsets that.
On the question of the economic impact of illegal aliens, the National
Academy of Sciences of course devoted a lot of attention to the overall
impact of immigration on the U.S. economy, and their conclusion was that
it's very small, one way or the other. It mainly drives down wages for
the poorest workers -- it depends on how you feel about that; we've
expressed some concern on this panel about that, but putting that aside
-- and it generally should help owners of capital and consumers. But the
overall effect on the U.S. economy, according to the National Academy of
Sciences, was between one and two-tenths of 1 percent of the total of
U.S. economy in terms of what they thought the net benefit was. Now, if
that's right -- I should tell you that their net benefit figure was $1 to
$10 billion from immigration in an $8 trillion economy; so in other
words, a very tiny percentage: one-tenth of 1 percent. Now, that was for
all immigrants. Illegal aliens only make up about 25 percent of the
foreign-born, so whatever that benefit is you'd have to assume it would
be a small share of it.
In addition to that, of course, some more recent work done by Weinstein
and Davis at Columbia suggests that there is no economic benefit, even
the teeny tiny one estimated by the NRC, and their work suggested it's
an entirely net loss for natives, somewhere in the tune of like $65
billion a year. So there isn't even any agreement that there is a net
benefit. To the extent that people have found one, it seems to be
trivial. George Borjas at Harvard, who is considered the top economist
in the field, you know, summarizes a lot of this information in a book a
few years back, and he basically says, as he has before, that any
immigration's affect is trivial, and illegals are even a smaller portion
of that, so it's less than trivial, whatever that is.
So I guess that's my answer. And I should point out, when the National
Academy of Sciences did their estimates, they didn't even take into
account the economic effects because they thought that the effects were
so trivial they don't play out in terms of taxes or services.
And I guess one final point. If immigration drives down the wages of the
poor, that has additional implications for their use of public services.
That is, native-born workers are poorer because of the presence of
illegal aliens; surely they must increase in some way their use of
public services. We don't take that into account here, we just assume
each group as they are given and don't measure the impact on wages on
MR. KRIKORIAN: Go ahead, please.
MR. RECTOR: As I understand this
argument -- I mean, first of all you have to separate out different
streams of immigration here -- very high-skilled individuals, very
low-skilled individuals -- those will have different economic effects,
they'll have different social and governmental effects. But in terms of
low-skilled illegals, to say that they perform a vital function to our
society, essentially what people seem to be arguing is, well, who is
going to clean up the motel room if these women aren't there, or, who is
going to be standing around taking up those day labor jobs? And in
effect what you're saying is -- okay, let's take who is going to clean up
the motel room? If the illegals weren't here, those jobs would go vacant
and one would assume then that if this is such a big deal that you would
have to see a very substantial increase in the wages of individuals in
those occupations if the illegal immigrants weren't there taking up that
If their economic contribution is so essential, then that would also
imply that the wage effect of their presence would also be quite
substantial. Most of my job, or half of my job, involves people
continually, generally liberals, complaining about the wage levels of
native-born Americans precisely in those jobs, you know. I can't go a
single day without hearing an endless litany of complaints about welfare
mothers getting off and making only $7 an hour and how this is terrible,
and we have to do this, that and the other thing. And in that context to
say, you know, one of the great benefits here of having illegal
immigrants is that they keep the wages of these jobs down is just a bit
paradoxical, and I think is a bit cynical.
It seems to me quite likely that the presence of large numbers of
low-skilled illegals does keep wages in those industries down, and that
has some negative effects on native-born. In particular, if you are a
liberal theorist in these matters, you would say that these low wage
levels are in fact the primary contributing factor to all the other
behaviors that go with the dependent class, that the low wage levels
reduce the probability of marriage and low wage levels inducing poverty
cause educational failures of the kids and so forth. Now, I actually
don't really subscribe to that, but it's a very -- almost prevalent view
on the left wing of these debates. So if you were subscribed to those
viewpoints then the negative effects -- potential negative effects on
wages would be even more significant. I just generally think that saying
that one of the good things that we get from this is that we pay
low-skilled people less is not a particularly compelling argument.
MR. KRIKORIAN: Quick comment on
MR. LOWELL: Yeah, I think the basic
question there is very interesting. Other than these direct costs that
we know at least are measured to be adverse on the wages of other
low-skilled workers, are there other positive things that these workers
bring to the game? And I think the answer is clearly yes. On the one
hand, also, while I like to look at the economic side of things, it's
also the case that a confident and economically successful country
should see welfare payments and benefits as part of its obligation to
its population, so I don't have any problems with that except for the
fact that the unauthorized population is a population that's here
outside of the law and outside of what at least our upfront intentions
So from that point of view, the costs imposed are an issue that needs to
be paid attention to. The economic plus of this population -- are they
essential workers? In many sectors where these workers are found,
technology could replace them in many sectors in which they are found.
Consumers and businessmen could find other kinds of things to do, and
raising wages is only one of the possibilities. But as a society we
would have to make a choice as to what we want to do. Do we want people
come and mow our lawns? Do we want people to keep our price of lettuce
down? Would we be happy to live in a more European situation where our
food costs were twice the share of our household income than they are
now, and those kinds of things? But those choices are something we can
make. Those are choices we can make.
MR. CAMAROTA: Well, let me just say
-- I have great respect for Lindsay. On the question of food costs being
twice, there's actually a fair amount of research on this question.
MR. LOWELL: I'm not going to debate
MR. CAMAROTA: Yeah. The impact of
illegal aliens in the sector where they make up the largest share of
workers is actually even there pretty small because the price of a head
of a lettuce is determined by transportation -- packaging, food,
herbicides, pesticides -- not the price of the person who picks it. In
addition, of course, you could easily, in many cases, substitute
technology. Businesses don't want to do that; they'd rather hire lots of
unskilled workers and pass the costs onto taxpayers, but there's a lot
of reasons why we might not want them to do that. In general, however,
the impact of illegal immigration on prices has to be small, even though
it could have a significant impact on low-wage workers because low-wage
workers overall account for such a tiny fraction of total economic
output, even in agriculture.
MR. KRIKORIAN: Jerry? If you could
Q: Yeah, Jerry Kammer with the
Copley News Service.
Steve, CIS has long criticized the federal government for lack of
interior enforcement of immigration laws, but is it possible that
someone could read your report not only as an indictment of federal
immigration policy but also as an indictment of federal labor policy,
which has created a system of minimum wages and lack of enforcement at
the worksite, that according to your report would keep people still
among the working poor even after they are legalized? Are you also
indicting the wage system and the labor system?
MR. CAMAROTA: Well, I'm pretty
sympathetic to arguments about a higher minimum wage and greater
regulation, but it isn't going to change the basic fact that in the
modern American economy a person with an eighth-grade education whose
language skills are limited in English is going to earn very low wages
though they might be at a much higher minimum wage.
So I am sympathetic to that argument. It would be -- my sense is if you
want to improve the lives of America's working poor or low-income
workers in general, what you would want to do is -- two sides of that
equation. You probably would want to do things like raise the minimum
wage and at the same time reduce the number of unskilled immigrant
workers in the United States. The beauty of doing that is that one
disadvantage of raising the minimum wage is that it would tend to
increase unemployment -- how much is a matter of debate -- because you've
raised the costs, but if you reduce the number of workers at the same
time by reducing immigration, then it's much easier to raise the minimum
wage without fear that you're going to cause some significant number of
workers to be laid off.
So I would say that this could really -- if you really wanted to make a
difference for unskilled workers in the U.S., you would want to do
things both with our immigration policy and with regulation of the labor
MR. RECTOR: If I could -- basically
workers are paid at their level of marginal productivity. Less than 2
percent of American workers are paid at the minimum wage. And what we
have as a national policy is a very clear policy that says if you are a
low-skilled worker and you're trying to support a family, we will
massively support you in that effort. We will provide you with close to
$4,000 a year in the earned income tax credit. That's a refund; it's a
check in the mail. We will give you food stamps. We will provide you
with Medicaid. In some cases we'll provide you with public housing. That
is a policy that we've developed as a nation, recognizing that there
isn't any magic pill that suddenly takes low-skilled workers and makes
them into highly productive workers.
Now, the issue here is whether the presence of low-skilled immigrants is
pushing somewhat more people -- or suppressing the wages of people, say,
making between $5 and $8 an hour. We don't really know the answer to
that, but the social -- I mean, it certainly isn't having a helpful
affect on those wages, and, you know, I don't really think that we have
a deficit as a nation because we have recognized that we have
low-skilled workers, we do have very extensive policies to try to
support them by supplementing their wages, so that's really the core of
the welfare state now.
MR. CAMAROTA: Good point.
MR. RECTOR: And the question is, you
know, do we have a sort of unlimited obligation to provide those
supports to anyone who manages to get in this country legally or
illegally? That's really the question here.
MR. KRIKORIAN: Quick follow up?
Q: We're talking about the fiscal
burden, but obviously there are winners here, so thousands of employers
are clamoring for more immigrants to come up at the low-wage levels. Do
we have a system here that privatizes the gain in the hands of the
employer class and middle classes and socializes the loss across the
American taxpayer base?
MR. CAMAROTA: Oh, absolutely. I
mean, just put simply, it's a great deal for employers if the government
will provide health care to their workers. It's a great deal to
employers if the government will send them a check in the form of the
additional child tax credit, which illegals explicitly can get and the
EITC, which relatively few get now but would if they got legal status.
It's a great deal for employers if the government will provide workers
with housing and food stamps, and that's exactly what we're doing. And
one of the problems with illegal immigration is that the benefit to the
employer is narrowly focused and obvious, but the cost is diffuse, borne
by all taxpayers, and as a consequence, in politics, whenever you have a
narrowly focused benefit, it typically trumps the diffuse costs, even
though the diffused costs may be much larger than the narrowly focused
benefit, and that's what we're seeing. That's why we get so much illegal
immigration; that coupled with the fact that the people who are harmed
by illegal immigration in the labor market are poor and relatively
powerless as well.
MR. KRIKORIAN: Let's take one more
question if anyone has one, otherwise -- yes, sir. Yes.
Q: I'm (off mike) Rodriguez,
Department of Economics, University of -- (off mike).
Well, for me it's a little bit shocking, all of these results. I see
that both these are point estimates that you are doing. I think we have
to be very careful about the real cost, the real benefits, especially
when talking about immigration because the demographic (off mike) of
immigration is very different to the locals. They start working younger.
They die younger. Maybe there is some benefit from Social Security that
we're not taking into account. (Off mike.)
About local labor markets, we have to be very careful because the labor
market is segmented. We're talking about illegal and legal, and we're
talking about how the illegal immigrants are going to affect the poor
people and those guys who are earning low wages. And it's not very clear
for me; it's not straightforward to see that the effect, low-wage
people, because we're talking about segmented markets.
MR. KRIKORIAN: Okay, let me get some
reaction, because we're running over.
Go ahead, Steve.
MR. CAMAROTA: Yeah, real quick. I
mean, in terms of long term, the National Academy of Science did do a
whole series of estimates on long term and found that unskilled workers,
in the course of their lifetime, impose so many fiscal costs that even
over multiple generations they never pay that back. Now, again, the
National Research Council is an important organization, but you can make
of that what you will.
On the question of job competition, my own research -- I have tried to
look at unskilled natives and compare them to illegal aliens, and
obviously most Americans are not in competition with illegal aliens, but
the roughly 10 million native-born Americans who lack a high school
education and the roughly 2 or 3 million legal immigrants who lack a
high school education, they do seem to do exactly the same kinds of
jobs, which are, you know, they clean hotel rooms, they clean pools,
they are nannies, they are construction laborers. And of course, what
else would they be?
So my sense is they are in competition, not with most Americans but
unfortunately they are in competition with the poorest Americans, but
that's also a reason why it's so appealing to the middle class because
they can say, look, we're helping this guy out, we're letting him here,
he's working, and he's taking a job nobody wants. What the
college-educated American really means is, he's taking a job I don't
want, and that's always nice when you can give somebody else's job away.
MR. KRIKORIAN: Let's wrap it up
here. The panelists may well be willing to be accosted afterwards by
anybody who has further questions. Let me reiterate, the report is
online in its entirety at our website. And thanks for coming.