Immigration from Mexico: Study Examines Costs and Benefits for the United States

WASHINGTON (July 12, 2001) — The Mexican government has expressed its strong support for an illegal-alien amnesty, and the Bush Administration is expected to propose a new Mexican guestworker program during President Fox’s state visit in September. What would be the likely effects of such policies? One way to answer this question is to examine the characteristics of current Mexican immigrants. To this end, the Center for Immigration Studies has published Immigration from Mexico: Assessing the Impact on the United States by the Center’s Director of Research, Steven A. Camarota. The new report contains detailed information on the economic and demographic characteristics of Mexican immigrants at both the national and state level. Topics examined include: education, welfare use, poverty and economic mobility, insurance coverage, school-age population, impact on prices and native wages, and performance of the 2nd and 3rd generations.

Among the report’s findings:

Large-scale immigration from Mexico is a very recent phenomenon. In 1970, the Mexican immigrant population was less than 800,000, compared to nearly 8 million in 2000.
Almost two-thirds of adult Mexican immigrants have not completed high school, compared to fewer than one in ten natives. Mexican immigrants now account for 22 percent of all high school dropouts in the labor force.
Though most natives are more skilled and thus do not face significant job competition from Mexican immigrants, this study (consistent with previous research) indicates that the more than 10 million natives who lack a high school degree do face significant job competition from Mexican immigrants.
By increasing the supply of unskilled labor, Mexican immigration in the 1990s has reduced the wages of workers without a high school education by an estimated 5 percent. The workers affected are already the lowest-paid, comprising a large share of the working poor and those trying to move from welfare to work.
This reduction in wages for the unskilled has likely reduced prices for consumers by only an estimated .08 to .2 percent in the 1990s. The impact is so small because unskilled labor accounts for only a tiny fraction of total economic output.

Author Steven Camarota said of the findings, "Mexican immigration is overwhelmingly unskilled, and it is hard to make an economic argument for unskilled immigration, because it tends to reduce wages for workers who are already the lowest paid and whose real wages actually declined in the 1990s. Moreover, this cheap labor comes with a high cost. Because the modern American economy offers very limited opportunities for workers with little education, continued unskilled immigration cannot help but to significantly increase the size of the poor and uninsured populations, as well as the number of people using welfare."

Other Findings:

Because of their much lower education levels, Mexican immigrants earn significantly less than natives on average. This results in lower average tax payments and heavier use of means-tested programs. Based on estimates developed by the National Academy of Sciences for immigrants by age and education at arrival, the lifetime fiscal impact (taxes paid minus services used) for the average adult Mexican immigrant is a negative $55,200.

Although they comprise 4.2 percent of the nation’s total population, Mexican immigrants and their U.S.-born children (under 18) account for 10.2 percent of all persons in poverty and 12.5 percent of those without health insurance. Even among Mexican immigrant families that have lived in United States for more than 20 years, almost all of whom are legal residents, more than half live in or near poverty and one-third are uninsured

Even after welfare reform, an estimated 34 percent of households headed by legal Mexican immigrants and 25 percent headed by illegal Mexican immigrants used at least one major welfare program, in contrast to 15 percent of native households. Mexican immigrants who have lived in the United States for more than 20 years, almost all of whom are legal residents, still have double the welfare use rate of natives.

Mexican immigration acts as a subsidy to businesses that employ unskilled workers, holding down labor costs while taxpayers pick up the costs of providing services to a much larger poor and low-income population.

The lower educational attainment of Mexican immigrants appears to persist across the generations. The high school dropout rates of native-born Mexican-Americans (both second and third generation) are two and a half times that of other natives.

Policy Recommendations:

The United States needs to consider programs designed to improve the labor market skills of legal Mexican immigrants. It is also absolutely essential that more effort be made to improve educational opportunities for their children so that they will have the skills necessary to compete in the modern American economy. In the future, the United States should also consider policies designed to reduce unskilled legal immigration in general, including from Mexico. Greater resources should also be devoted to stopping illegal immigration, including enforcement of the ban on hiring illegal aliens.

Guestworker programs are unlikely to solve the problems found in the study. By increasing the supply of unskilled labor, a guestworker program would still adversely effect the wages of the lowest-paid American workers. What’s more, unskilled guestworkers would be overwhelmingly poor or near-poor and thus would pay little in taxes and be likely to receive welfare on behalf of their U.S.-born children, just as many illegal immigrants do today. As a result, a guestworker program would almost certainly create significant fiscal costs. Thus, legalizing illegal aliens -- through a guestworker program, an amnesty, or some combination of the two -- would not change the fundamental problems associated with high levels of unskilled immigration.