Conclusion

It is often suggested that "matching a willing worker with a willing employer" is all that matters when it comes to immigration policy. The fiscal costs of illegal immigration indicate that focusing only on workers and employers is grossly inadequate. If the presence of large numbers of unskilled workers lowers prices for some goods and services, but at the same time increases the burden on taxpayers, then this may not be a good deal for the country. Put simply, the mere fact that employers want more workers, and foreigners wish to work in this country, does not mean that Americans necessarily benefit from their coming. This fact must be considered when formulating policy.

Low Levels of Education Create Deficit. The findings of this study show that the primary reason illegal households create a fiscal deficit at the federal level is that their much lower levels of education result in low incomes and tax payments that are only 28 percent that of other households. Thus, even though the costs they impose are estimated to be only 46 percent those of other households on average, there remains a significant net deficit. Whether one considers their use of services low is a matter of perspective. Because illegals are not even supposed to be in the country, many Americans are angered by the fact that they receive any services at all. This is especially true of transfers to households like food stamps or cash payments from the Child Tax Credit. Although many Americans are upset about their use of public services, there is little evidence that illegals come to America to take advantage of public benefits. Most illegal aliens come for jobs, and the vast majority are in fact employed. But low levels of education mean they unavoidably create large costs for taxpayers.

As Long as Illegals Remain, So Will Costs. The relatively low receipt of services by illegals is important from a policy perspective because it means that the amount of money that can be saved by further efforts to curtail their use of public services is probably very limited. As already discussed, the average illegal household is estimated to receives less than half as much in services from the federal government as do other households, even though their households are 17 percent larger on average. This, coupled with the fact that benefits are often received on behalf of their U.S.-born children who are awarded citizenship at birth under current law, means that it is very difficult to avoid many of the costs as long as the illegal aliens remain in the country. In addition, if they are allowed to stay, most of the costs they impose will be for programs whose use is difficult to prevent politically or as a practical matter. For example, denying illegals benefits such as the Women, Infants, and Children nutrition program might encounter significant political opposition. And incarcerating illegals who have been convicted of crimes is an unavoidable cost of having a large illegal population. Thus, if we want to avoid the costs, we must look to alternatives other than trying to cut them off from public services.

Amnesty Would Dramatically Increase Costs. One of the key findings of this report is that legalization would dramatically increase the costs of illegal immigration. If illegals were given green cards and began to pay taxes and use services like legal immigrants with the same education levels, the net annual fiscal deficit at the federal level would likely increase from $2,736 to $7,668 per household under the most likely scenario. Total costs could grow from $10.4 billion a year to $28.8 billion. The costs increase dramatically because unskilled immigrants with legal status, which is what most illegal aliens would become, can access government programs but still tend to make very modest tax payments. This is because the modern American economy offers very limited opportunities to those with little education, regardless of legal status. Though we estimate that household income might rise by 15 percent with legalization and average tax payments would increase by 77 percent as more illegals would be paid off the books, their average household incomes would still remain one-third below that of other households. At the same time, service use would rise dramatically because legal immigrants are eligible for most programs, and they typically have much less fear about using them than illegal aliens. This does not mean that low-income legal immigrants use more in services than low-income native-born Americans. The fiscal deficit is created by the fact that so many illegal aliens are unskilled and thus have low income.

What's Different About Today's Immigration. Many native-born Americans observe that their ancestors came to America and did not place great 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 means-tested programs, but expenditures on public schools and roads were only a fraction what they are today. Thus the arrival of unskilled immigrants in the past did not have the negative fiscal implications that it has today. Moreover, the American economy has changed profoundly since the last great wave of immigration, with education now the key determinant of economic success. The costs that unskilled immigrants, or unskilled natives for that matter, impose should not be seen so much as a failings on their part, but instead as a reflection of the nature of the modern American economy. Put simply, large-scale unskilled immigration is incompatible with current economic conditions and an extensive welfare state. If the fiscal costs are to be avoided, then our immigration policies need to reflect current fiscal and economic realities and the number of unskilled immigrants, legal or illegal, should be reduced.

The Bottom Line. This report has focused on only the fiscal impact of illegal aliens at the federal level. It is almost certain that they also create a large fiscal deficit at the state and local levels.³⁶ Thus, the results in this report only deal with part of the costs of illegal immigration. On the other hand, it must be remembered that this report says nothing about the overall fiscal impact of households headed by legal immigrants. The fact that unskilled immigrants who are legal residents impose large fiscal costs on federal coffers does not mean that legal immigrants overall are a drain on federal coffers. Many legal immigrants are highly skilled. That having been said, we find strong and convincing evidence that the costs of illegal immigration are significant at the federal level and those costs would grow dramatically if illegals were legalized. Of course, there are many other issues to consider when deciding what do to about illegal immigration. But given the costs of illegal aliens and of any amnesty, it would probably make more sense to enforce immigration laws and reduce illegal immigration. Reducing the supply of unskilled labor would force employers to increase wages and invest in labor-saving devices in order to meet their labor needs.

If we instead chose to increase the number of unskilled workers in the country through immigration, then we at least have to understand that such a policy has negative fiscal consequences. Perhaps legalizing illegal aliens may be justified on humanitarian grounds, or as a way to improve relations with other countries. Conversely, enforcement might make more sense because it reduces job competition for unskilled Americans, or for national security reasons. But this analysis shows that, at least with regard to the federal budget, there is a high cost to unskilled illegal alien labor and this must be part of any policy discussion.

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³⁶ Although they did not look at illegals separately, the NRC study found that in California and New Jersey (the two states they examined) immigrants from Latin America and the Caribbean, where the vast majority of illegals come from, were a significant fiscal drain. By using Census Bureau data that include both illegals and legals, their fiscal analysis is really a combined estimate of the entire foreign-born population both legal and illegal.