Poverty and Income

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So far we have focused on the effect of Mexican immigration on the American economy. However, Mexican immigration has other implications for the United States as well. This section of the report examines Mexican Immigrants’ economic standing relative to natives. There are, of course, many possible ways of measuring economic status. One of the most common is to examine poverty rates. The official definition of poverty developed by the federal government in 1964 considers a person to be in poverty (or poor) if the family in which he resides has pre-tax cash income below an officially determined threshold (based on the size of the family). The poverty threshold is adjusted upward each year based on the annual rate of inflation.23

Looking at rates of poverty is very important because it provides a good deal of insight into Mexican immigration’s impact on the United States. Poverty rates have wide-ranging implications not only for the immigrants themselves but for society in general. If Mexican immigrants are finding it difficult to obtain a middle-class income, it implies that a significant proportion of immigrants are unable to succeed in the modern American economy, and it implies significant fiscal costs to the country as well. Persons who live in or near poverty are, by design, eligible for a wide range of means-tested programs. Moreover, because of the progressive nature of payroll and other taxes, those with low incomes pay relatively little in taxes. Finally, by consuming scarce public resources, an increase in the size of the low-income population as a result of immigration may hinder the ability of the nation to help those with low incomes already here.

Mexican Immigrants Have Very High Poverty Rates. Poverty among immigrants in general and Mexican immigrants in particular is significantly higher than that of natives. In 1999, 11.2 percent of natives (compared to 16.8 percent of all immigrants) lived in poverty. The poverty rate for Mexican immigrants is dramatically higher than that of natives or immigrants in general. In 1999, 25.8 percent of Mexican-born immigrants lived in poverty — more than double the rate for natives. In other words, despite the current economic expansion, about one in four Mexican immigrants lives in poverty, compared to about one in ten natives.

While poverty among Mexican immigrants is certainly high, the figures cited above actually understate the difference between Mexicans and U.S. natives because the U.S.-born children of immigrants (under 18), who are by definition natives, are not counted with their immigrant parents, but instead are included in the figures for natives. Because a child’s standard of living reflects his parents’ income, however, it may be more reasonable to view poverty among the native-born children of immigrants as attributable to their immigrant parents. Figure 7 includes the U.S.-born children of immigrant mothers with their parents. The figure shows that poverty among natives drops from 11.2 percent to 10.8 percent when the American-born children of immigrants are excluded from the counts for natives. In contrast, poverty among Mexican immigrants rises from 25.8 percent to 28.7 percent when their U.S.-born are counted with them. Thus the poverty rates for Mexican immigrants and their children is two and one-half times the rate for natives and their children.

Because their poverty rates are so high, Mexican immigrants have substantially increased the overall size of the poor population in the United States. While Mexican immigrants and their U.S.-born children under age 18 account for 4.2 percent of the nation’s total population, they account for 3.3 million or 10.2 percent of the nation’s total poor population.

Near-Poverty Also Common Among Mexican Immigrants. In addition to examining poverty, it is also possible to examine persons who have an income that, while above the poverty threshold, still makes them quite poor by American standards. If "near" poverty is defined as an income of less than 200 percent of the poverty threshold, then 41.4 percent of immigrants and 28.8 percent of natives lived in or near poverty in 1999. Among Mexican immigrants, the rate of poverty/near poverty is 62.1 percent, more than double the rate for natives. Figure 7 shows the percentage of immigrants and their U.S.-born children living in or near poverty. In 1999, 27.9 percent of natives and their children lived in or near poverty, compared to 65.6 percent of Mexican immigrants and their children. Thus, almost two-thirds of Mexican immigrants and their children are poor or near poor — more than twice the rate for natives.

Poverty and Near-Poverty Over Time. Figure 8 reports the percentage of Mexican immigrants and their U.S.-born children (under age 18) who live in or near poverty based on how long they have lived in the United States.24 The figure shows strong evidence that the income of Mexican immigrants increases significantly over time. Of Mexicans who have lived in the country 10 years or less and their U.S.-born children, 35.4 percent are in poverty and 71.7 percent live in or near poverty. For those who have lived in the country for 11 to 20 years, 28.9 percent are in poverty and 69.5 percent live in or near poverty. Poverty and near poverty drops still further for those who have lived in the United States between 21 and 30 years, with 20.1 percent living in poverty and 55.9 percent living in or near poverty. While Figure 8 indicates that Mexican immigrants clearly make progress over time, poverty remains a significant problem even after they have lived in the country for many years. Mexican immigrants who have been in the country for 21 to 30 years still have rates of poverty and near poverty that are significantly higher than those of natives, as do those who have lived in the country for more than 30 years.

The high rates of poverty and near poverty for these long-time Mexican immigrants and their young children are striking because these immigrant families have had time to become familiar with life in their new country. Moreover, Mexican immigrants who arrived 21 to 30 years ago are 43 years old on average, 8 years older than the average native. Mexican immigrants who arrived more than 30 years ago are 58 years old on average— 23 years older than the average native. This is important because income generally rises with age and workforce experience. Because these immigrants are much older than natives, their rates of poverty and near poverty cannot be attributed to the youthfulness of this population. Overall, Figure 8 shows that while Mexican immigrants make significant progress over time, that progress still leaves them well behind natives.

Poverty Among Legal and Illegal Mexican Immigrants. Using the method described previously to distinguish legal and illegal Mexican immigrants, Figure 9 reports poverty for legal and illegal Mexican immigrants and their U.S.-born children. Our estimates indicate that of the three million illegal aliens from Mexico, 972,000 (33 percent) live in poverty and 2.1 million (71.4 percent) live in or near poverty. This means that poverty for legal Mexican immigrants is 21.5 percent and the percentage in or near poverty is 56.5. Of course, a large share of the children living in Mexican immigrant families are American-born. This is true for both legal and illegal immigrants. As already discussed, it makes far more sense to include these children (under 18) with their immigrant parents even though they themselves are native-born. I estimate that in addition to the nearly three million illegal aliens from Mexico in the CPS, there are 1.2 million U.S.-born children of illegal aliens from Mexico living in the United States for a total of 4.2 million Mexican illegal immigrants and their U.S.-born children. Of these, 1.5 million (35.4 percent) are in poverty and 3.1 million (74.2 percent) live in or near poverty. The poverty rate for legal immigrants from Mexico and their American-born children is estimated at 24.8, percent and their poverty/near poverty rate is 60.7 percent.

Two observations are clear from these estimates. First, illegal aliens from Mexico have significantly higher rates of poverty and near poverty than do legal Mexican immigrants. Second, poverty among legal Mexican immigrants is still dramatically higher than that of natives or other immigrants. In fact, the estimated rates of both poverty and near poverty for legal Mexican immigrants and their children is double that of natives. Thus, it is clear that legal status by itself does not explain the high rates of poverty and near poverty associated with Mexican immigrants.

This means, for example, that if a large share of the Mexican population were legalized, as some have proposed, a huge gap still would remain with natives. Further support for this can be found by looking at the year of entry data in Figure 8, which shows that Mexican immigrants who have been in the country for between 21 and 30 years and their American-born children are still much more likely to be poor than natives. This, despite the fact that these immigrants are well established and virtually all of them are legal residents.

Mexican Immigrants Have Much Lower Average Incomes Than Natives. Figure 10 shows average income from all sources for immigrants and natives in 2000. The average income for adult Mexican immigrants of $18,952 a year is less than half that of natives. Not surprisingly, the figure also shows that average income for Mexican immigrants rises significantly the longer they reside in the United States. Although there is significant progress, Figure 10 indicates that they never come close to matching the income level of natives. Even Mexican immigrants who have lived in the country for more than three decades still have an average income that is only 70 percent that of the average native. As is the case for poverty and near poverty, the much lower income of long-time Mexican immigrants is striking because these immigrants have had ample time to become familiar with life in their new home country and are much older than is the average native. Since income usually rises with workforce experience, these long-time residents should have higher incomes than natives, but in fact their incomes are much lower.

Income Among Legal and Illegal Mexican Immigrants. Figure 11 reports average annual income for natives and Mexican immigrants by legal status. Like poverty, the situation for legal Mexicans is much better than for those in the country illegally. However, the average income of legal Mexican immigrants is still only 57 percent that of natives. As is the case with poverty, legal status alone clearly does not explain the much lower income of Mexican immigrants.

It is worth noting that the above estimates for poverty and income by legal status are meant to provide insight into the economic and social standing of legal and illegal immigrants. They should not be seen as quantified absolute values. What these numbers do indicate is that Mexican immigrants lag far behind natives in income and poverty, and this difference is not only the result of illegal immigration.




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End Notes

23 Families are defined as a group of people related by marriage or blood living in the same housing unit. Persons living by themselves or with persons to whom they are unrelated are in effect their own family, and their poverty status is calculated based on their individual income. Poverty status is not determined for persons who are institutionalized. Unrelated individuals under age 15, who are mostly foster children, are not included in most official poverty
statistics, and they are not included in this study. The March CPS asks families about their annual income in the year prior to the survey. The poverty threshold for the typical family of four in 1999 was $17,029.

24 As already discussed, the CPS asks individuals what year they came to live in the United States. The native-born children of immigrants are linked with their parents.