On Immigration: Legal and Illegal

Immigration seems to be the brightest blip on the map right now, and it seems it is the most popular topic among people. Immigration by itself doesn't seem to be the real issue, at the heart of it is the economics of Immigration. That is what needs to be addressed. Together and separately, the economics aspect, at least for some, can resolve these issues in a mutually beneficial way. This is not to say that other aspects of the issue are not important, the supposed health risks for example cannot be simply eradicated by economics, but addressing the issue at the root helps us to get past the emotional reactions and allows us to clearly define and resolve the issue completely.

Immigration is nothing new. The moving of people from one place to another for various reasons has been a mainstay of human life since the beginning. A chance to increase the quality of life or to advance knowledge or social rank have been the previous reasons for migration of people from homelands. For centuries this was the way cities and towns, and eventually states and countries grew. From the dust of the immigrant workers, nations grew to their current levels. But now it seems, this belief has been replaced with fear, misunderstanding, ignorance, nationalism and hate. Could the solutions to what some call a crisis be found in economics?

While the media portray a rising tide in illegal immigration, statistics shows another story.

According to statistics from Pew Hispanic Research and the Department of Homeland Security the estimates of Unauthorized or "Illegal" immigrants has remained roughly unchanged from the past year but has seen a relative decline since the recession began in 2008. Looking over the graphs provided on that page we can also see that the rise in Immigration happened between 2002 and 2007, adding almost 4 million more immigrants between those years. Fig 1.

While the current fuss is being made during the Obama Presidential administration the real blame should go to the prior administration. Under President George W. Bush an average of 4 million immigrants found their way to the US. But where was the outrage then?

There wasn't one. Why? The economy seemed stronger under Bush due in part due to the Housing Market Bubble that eventually, in late 2007, burst. This false prosperity brought in a higher demand and a need for more workers. Immigrants filled the void of low-skilled workers as native born citizens took over higher skilled positions. In 2007 unauthorized immigrants made up a total of 5.5% of the labor force in the US. And very few minded having these immigrants come here at the time, because a financial strain was not being put onto American workers, and jobs were plentiful and expanding. These points will not be made in the current discussion on Immigration.

The additional production gave way for American and Legal immigrants to take up higher skilled jobs while "illegals" took in the lower skilled jobs. Immigrants play a large part in the unskilled and low skilled workforce, in part to the barrier in language and education or experience. These "illegals" will take lower paying jobs due to these shortcomings, where citizens and legal immigrants will tend to be drawn to higher skilled jobs with higher pay ranges.

After the "They Took Our Jobs" line the next line will be "They took our Government Handouts"

Another issue in the immigration debate is that "illegal" immigrants use government programs more than they put into them through taxation, since most believe illegals are not taxed this would make sense. Next we can look at the claim that illegal immigrants do not pay taxes. This claim has been around for years, I even at one time believed it. First the point should be noted that ALL Federal, State, and Local "Welfare Programs" are funded by taxation, it is a redistribution of wealth.

Are they really costing more than they put in?

According to Shikha Dalmia in her 2006 article at Reason Foundation more than 8 million of the then 11 million immigrants actually paid into social security, medicaid and other taxes. But how is that you say...


In 1996 a welfare reform bill was passed. In this bill were "restrictions on benefits for noncitizens accounted for 44% of this total, and food stamp revisions for 43%. The 105th Congress rescinded and modified some 1996 budget cuts, restoring SSI, Medicaid and food stamp benefits to many aliens at an estimated 5-year cost of $12.3 billion. Further, Congress in 1997 created Welfare-to-Work (WtW) grants ($2.7 billion in estimated outlays for 2 years) to help states move severely disadvantaged TANF recipients into jobs, and it boosted funding for food stamp employment and training."

Another thing that happened is a bill that allowed the IRS to issue identification numbers for those illegal aliens that did not have social security numbers. This reform does two things, it allows those aliens to pay into the system to be in accordance to what citizens do in a hope it is seen as favorable if and when they file for legal statuses. Number two, it adds those tax monies into a system that because they do not have an official Social Security number, they cannot benefit from. This adds millions of dollars into the federal coffers. Damlia writing, "Last year, the revenues from these fake numbers — that the Social Security administration stashes in the "earnings suspense file" — added up to 10 percent of the Social Security surplus. The file is growing, on average, by more than $50 billion a year.

Her statement is pointing to the 2005 numbers. 

This data points to the fact that overall immigrants are not a drain on any programs but actually contribute. Add to this that even illegal immigrants pay sales taxes, adding millions more to their local community coffers. Roads, Schools and other services in and around their homes are partially contributed to through this tax. More info on taxes paid by illegal immigrants click here.

So how can we solve the Issue through Economics?

Can we simply abolish the Welfare State?

In order to tackle this we have to look at the statistics of those receiving this assistance and address it properly. Many have been saying for decades that the welfare state needs to be completely dissolved and regulations restricting voluntary aid programs given their chance to return. Prior to the 1930's the welfare state did not exist, it was before this that private organizations were the main source for any form of welfare or aid. Donations given by Individuals and Businesses alike kept Americans fed and housed on a larger scale than today. So where did this go? After government aid programs began the amount of funds used in voluntary donations were extracted by taxation and those who gave some were able to give less. This caused the great plethora of charities, to be replaced by bureaus and departments, each getting larger and larger, taking more and more to run their offices, less and less aid actually made it to those that needed it.

Where does that lead us to today?

Spending on largest Welfare Programs Federal Spending 2003-2013*[33]
Federal Programs	Spending 2003*	Spending 2013*
Medicaid Grants to States	$201,389	$266,565
Food Stamps (SNAP)	61,717	82,603
Earned Income Tax Credit (EITC)	40,027	55,123
Supplemental Security Income (SSI)	38,315	50,544
Housing assistance	37,205	49,739
Child Nutrition Program (CHIP)	13,558	20,842
Support Payments to States, TANF	28,980	20,842
Feeding Programs (WIC & CSFP)	5,695	6,671
Low Income Home Energy Assistance	2,542	3,704
Notes: * Spending in millions of dollars

Would abolishing the Welfare State actually have any effect on the economic issue of Immigration? It could, in a way, rid the system of an incentive to the minority that use the system without contributing. Taking away that incentive could cause many to rethink the opportunity costs of coming in illegally.

Benjamin W. Powell writes "Before, immigrants assimilated into a culture of hard work and self-reliance. Those who failed here often had to go home. Few go home today because of failure today. Instead, they are taught to assimilate into a system of government reliance where failure and laziness are not punished. The post-1965 immigration wave is the first that has come once we had a welfare state in place. Unfortunately, that welfare state not only makes them less productive, it also teaches them to undermine our old culture that made America successful."

Since there would be no guaranteed way for them to live off of the state, many may just decide to go the legal route or choose another place to move to.

Getting the Government out of businesses and allowing the markets to work properly could be the greatest and most needed change in policies. Deregulation, Getting rid of barriers to work, Abolishing minimum wage laws, stop with the corporate welfare programs, price controls, sending false signals and creating bubbles and busts in markets would easily give everyone, Immigrant or Natural Citizen, a better chance at building wealth and prosperity. Add along with this the ability for all people to keep 100% of their earned wages and abolish taxation, all taxation. Leading us into a voluntary state, a way for the preferences, wants and needs of everyone to be met by competitive businesses and entrepreneurs.

Speaking of legal immigration, one way to reduce the amount of illegal migrations is to make the legalization process easier to navigate and less costly. Those persons not willing to wait months on end and pay in thousands of dollars usually opt for the illegal route knowing the risk of deportation is lower than shelling out money and time. Reducing the time it takes to get through the legalization system and the amount of money put into legalization could drastically reduce the amount of people who enter illegally. 

The real issue of the Illegal Immigration debate isn't at all about the moving of people into a certain geographical area, but rather the implications and effects those people have in current models of operation. Looking at the issue form a reasonable economic standpoint can lead to real sustainable answer rather than the tug of war political party lines being offered now. Turning America into a thriving economy can give incentive to those wishing to better themselves, their families and their new homes as well.

Here is another post I wrote dealing with Borders and US Marine Tahmoorsi being held in a Mexican Jail.

More reading on this issue.
http://www.cato.org/policy-report/septemberoctober-2013/tear-down-wall-immigration-versus-welfare

http://www.fee.org/the_freeman/detail/immigration-friend-or-foe

http://www.fee.org/files/docLib/547_24.pdf


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