Unauthorized Immigration and the U.S. Economy

Print E-mail

Each year, thousands of persons enter the United States without authorization to take advantage of economic opportunities. Does this unauthorized immigration help or harm the U.S. economy?

Border Patrol


Entering the United States without authorization can be dangerous. For many years, many undocumented people in Central America and Mexico entering the U.S. have relied on the services of smugglers to lead them over the U.S.-Mexico border and across the hot desert lands of the American Southwest. These smugglers are known as "coyotes." In November 2003, a shootout between coyotes and an American gang left four immigrants dead. "Every few months," reports the Arizona Republic newspaper, "coyotes kill an immigrant [for not paying a smuggling fee]."

Why do people risk death in order to immigrate? In Mexico, poverty levels are high. The World Bank estimates that 40 percent of its population is poor.

Gordon H. Hanson, an economist at the University of California, San Diego, has studied unauthorized immigration. According to his findings, a 25-year-old Mexican male with nine years of education would only make $2.30 an hour in Mexico. In the United States, which has a much stronger economy, that same male stands to earn $8.50 an hour for the same work.

Hanson also found that the rates of the immigration change in response to changes in the economies of Mexico and the United States. Unauthorized immigration "moves large numbers of low-skilled workers," he states, "from a low-productivity to a high-productivity environment."

The overall effect of this unauthorized immigration on the U.S. economy is not clear. Studies reveal both positive and negative effects. Hanson cites studies that show that the increase of immigrant laborers can lower the prices of services such as housecleaning, dry cleaning, and childcare. That improves the income of all households. He cites other studies, however, showing that large migrations of low-skilled workers and their families financially burden public services, such as public schools, police and fire protection, and highway maintenance. These studies show that low-skilled workers pay less in taxes for the funding of these services.

Pro and Con: The Overall Effect

Supporters of immigrant rights tend to view unauthorized immigration as an overall benefit to all Americans. The White House's Council of Economic Advisors under former president George W. Bush issued a report in June 2007 that outlined the widespread positive impact of immigration in the United States. The report did not distinguish between authorized and unauthorized immigrants. Overall, the report concluded that immigrants "increase the economy's total output" and increase the income of native-born Americans by $30 billion per year.

Opponents of unauthorized immigration look to other studies that reach a different conclusion. The Federation for American Immigration Reform (FAIR) argues that any benefit to the economy from immigration is outweighed by the cost to the public treasury. FAIR cites a 1997 study by the National Academy of Sciences to reach the conclusion that though the benefit to the economy from authorized and unauthorized immigration might be as much as $15 billion per year, the cost to the public treasury is as much as $20 billion per year.

Pro and Con: Taxes

One economic issue related to immigration is taxation. Supporters of unauthorized immigration contend that unauthorized immigrants pay their fair share of taxes, even though they are not citizens. The Internal Revenue Service (IRS), for example, issues many tax identification numbers to foreign-born temporary workers to collect taxes from them. The taxes are typically withheld from their paychecks. Between 1995 and 2003, the IRS estimates that it issued 6.8 million of these tax numbers.

Supporters cite additional kinds of taxes that undocumented immigrants pay to illustrate their contribution. In 2005, the Urban Institute issued a report stating that it is a "myth" that undocumented immigrants do not pay taxes. "Undocumented immigrants," the report states, "pay the same real estate taxes-whether they own homes or taxes are passed through to rents-and the same sales and other consumption taxes as everyone else."

Opponents contend, however, that undocumented immigrants actually do not pay their fair share in income taxes. Steven Camarota, a researcher at the Center for Immigration Studies (CIS), has argued that "illegal households comprise 3.6 percent of the total population, but ... they account for an estimated 0.9 percent of taxes paid...." FAIR has also reported that most undocumented immigrants "work for low wages, often in an underground economy where they pay no taxes on their earnings."

Pro and Con: Services

Another economic issue is the burden on public services. Supporters argue that undocumented immigrants do not financially burden U.S. social services. The National Immigration Law Center (NILC), an immigrant advocacy organization, cites the same 1997 study used by FAIR to argue that the "value of immigrants' estimated future tax payments exceeded the cost of any [government] services they were expected to use by $80,000 for the average immigrant and his or her descendants."

In addition, supporters claim that undocumented immigrants use fewer services than documented immigrants and U.S. citizens. Local schools and other public services, reports the Urban Institute, are largely funded by the sales and other consumption taxes that everyone pays, including undocumented immigrants. The U.S. Social Security Administration estimates that these immigrants contribute $6 billion to $7 billion per year in Social Security payments (withheld from their paychecks) that they cannot later claim (because of their lack of citizenship). Much of that money comes from withholdings from paychecks to people with incorrect or fake Social Security numbers.

Opponents might agree that undocumented immigrants pay Social Security taxes, but they do not agree that they fund public services. Randy Alcorn of Californians for Population Stabilization has stated that "Social Security taxes are not the main source of revenue for state and federal government—income taxes are. . ." He further argues that undocumented immigrants have an incentive to avoid paying income tax and thus put a burden on citizens to fund services for them.

Opponents note that state governments provide most of the services to undocumented immigrants, especially education and health care. They argue that because the undocumented are unlikely to have health insurance, they are more likely to use the services of emergency rooms, which are expensive to maintain. They also point out that children of undocumented immigrants often do not speak English and thus require greater services from schools. Opponents cite a 2007 report from the Congressional Budget Office titled "The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments." This report reviewed 29 other studies. It concluded that although the spending on services for undocumented immigrants "represents a small percentage of the total amount spent" by states on these services, the "tax revenues that unauthorized immigrants generate for state and local governments do not offset the total cost of services provided to those immigrants."

In 2009 and 2010, studies began to show that the U.S. economic recession led to a decrease in unauthorized immigration over the U.S.-Mexico border. According to the Department of Homeland Security, fewer arrests of unauthorized immigrants were made in 2008 (even though the number of deportations increased in that year). Donald Kerwin of the Migration Policy Institute says that fewer Mexican immigrants are coming across the border because there are "no jobs for them to fill."


For Discussion

  1. What are some economic reasons why people immigrate to the United States?
  2. How could the immigration of many low-skilled workers to the U.S. either help or harm the economy?
  3. What reasons do immigrant advocates give to say that unauthorized immigrants pay enough in taxes?
  4. What reasons do opponents give to say that they do not pay enough in taxes?

Teachers, get a lesson plan for the above Current Issue.