Bryan Caplan  

Griswold on Immigration and the Welfare State

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Life Among the Thetes... Headsets...
Dan Griswold's "Immigration and the Welfare State" was my favorite in the Cato Journal immigration symposium.  Highlights:

False stereotypes notwithstanding, immigrants have an awesome work ethic:
The typical foreign-born adult resident of the United States today is more likely to participate in the work force than the typical native-born American. According to the U.S. Department of Labor (2011), the labor-force participation rate of the foreign-born in 2010 was 67.9 percent, compared to the native-born rate of 64.1 percent. The gap was especially high among men. The labor-force participation rate of foreign-born men in 2010 was 80.1 percent, a full 10 percentage points higher than the rate among native-born men.

Labor-force participation rates were highest of all among unauthorized male immigrants in the United States. According to estimates by Jeffrey Passell (2006) of the Pew Hispanic Center, 94 percent of illegal immigrant men were in the labor force in the mid-2000s.
Immigrants display reverse welfare magnetism:
The 10 states with the largest percentage increase in foreign-born population between 2000 and 2009 spent far less on public assistance per capita in 2009 compared to the 10 states with the slowest-growing foreign-born populations--$35 vs. $166 (see Table 1). In the 10 states with the lowest per capita spending on public assistance, the immigrant population grew 31 percent between 2000 and 2009; in the 10 states with the highest per capita spending on public assistance, the foreign-born population grew 13 percent (U.S.
Census 2011, NASBO 2010: 33).
What about illegals?
Undocumented immigrants are even more likely to self-select states with below-average social spending. Between 2000 and 2009, the number of unauthorized immigrants in the low-spending states grew by a net 855,000, or 35 percent. In the high-spending states, the population grew by 385,000, or 11 percent (U.S. Census 2011; NASBO 2010: 33; Passel and Cohn 2011). One possible reason why unauthorized immigrants are even less drawn to high-welfare-spending states is that, unlike immigrants who have been naturalized, they are not eligible for any of the standard welfare programs.
The paper goes on to cover the net multigenerational fiscal effects of immigration, with extra sections on educational spending, health spending, and Social Security.  Though the net fiscal effect seems positive, there's a clear federal-state conflict:
The 1997 National Research Council study determined that the typical immigrant and descendants represent an $80,000 fiscal gain to the government in terms of net present value. But that gain divides into a positive $105,000 fiscal impact for the federal government and a negative $25,000 impact on the state and local level (NRC 1997: 337).
While the net fiscal effects of illegal immigration in Texas were modestly negative, the net economic effect for Texas was strongly positive:
[U]nauthorized immigrants in fiscal year 2005 paid a total of $2.09 billion in taxes at the state and local level, while consuming $2.60 billion in services (Strayhorn 2006: 20). Education was the main expenditure on the state level, and health care on the local level. Thus the net fiscal cost for state and local taxpayers in Texas from illegal immigration that year was $504 million.

The fiscal cost, however, was more than offset by the boost to the size of the Texas economy, another finding consistent with other state studies. The Texas comptroller used a general equilibrium model known as the Regional Economic Model Inc... The model found that the resulting drop in the state's labor force would cause wages of remaining workers to rise slightly--by less than 1 percent. But the higher wages caused by a tightening labor market would make producers in the state less competitive, resulting in a modest decline in the value of the state's exports. The state's economy would shrink by 2.1 percent or $17.7 billion (Strayhorn 2006: 17)
Griswold's not apologizing for the welfare state.  But libertarians who see the welfare state as an argument for restricting immigration are straining out a gnat and swallowing a camel.



COMMENTS (9 to date)
Airman Spry Shark writes:

Simple solution: have the Federal government pay $25k to the State where a new (legal) immigrant first gets a job. States will compete to attract immigrants, and citizens will clamor for a means for illegal immigrants to be legitimized in order for their State to get paid (thereby reducing their own State tax burden).

mdb writes:

The one thing I always wonder is this, how much does the current very restrictive immigration policy select individuals with these traits? You have to work hard to get in here no matter what route you take, lazy people won't even try. I bet you would even see similar a pattern (maybe not as pronounced) with internal movement - because moving takes effort.

Alex Nowrasteh writes:

mdb, Mobility, whether inte-rnational or intra-national, is an excellent indicator of entrepreneurship. The effect of open borders would likely be to attract the more entrepreneurs and people with excellent work ethic but who don't want to live and work in a black market.

Schemes of Practical Utility By Zorina Khan and Kenneth Sokoloff, THE JOURNAL OF ECONOMIC HISTORY. June 1993.

Roger Sweeny writes:

Illegal immigrants tend to go to states with less generous welfare systems because, being illegal, they aren't eligible for the things it provides.

This suggests that the present restrictive immigration system is a gnat in terms of attracting people who will wind up being dependent. It is hardly an argument that a less restrictive system wouldn't be more camel-like.

John Thacker writes:

I'd like to see a comparison of the fiscal effect on Texas and the fiscal effect on California.

Texas has a tax system that is well-designed to keep the fiscal effects of illegal immigrants small. It doesn't have an income tax (which illegal immigrants not only find easy to evade, but often must evade to stay in the country) and relies on sales taxes (paid by legal residents and illegal alike) and property taxes (and most illegal residents rent and thus pay through their landlords.)

California relies heavily on the income tax, and thus probably has a worse fiscal penalty for illegal immigrants. That is to me primarily an argument for a better tax system, though.

(Yes, the feds have a worse tax system by this measure but positive fiscal effects; that is because they mostly miss out on the biggest extra expenditure, education.)

Anonymous writes:

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Brian Holtz writes:

Under open borders, would the next half-billion immigrants really be like the current ones?

http://blog.knowinghumans.net/2007/06/immigration-reform-hostage-to-welfare.html

Ghost of Christmas Past writes:

Uh, 'scuse me, but perhaps you are misinterpreting those labor-force participation numbers?

First, it's unfair to compare immigrant labor-force participation to native participation without first subtracting disabled and currently-or-previously institutionalized natives from the native workforce. Obviously people who migrate internationally to seek work are a more select bunch than natives.

Second, and much more importantly, low-wage immigrants drive natives (who are eligible for welfare) into unemployment. Or to put that in cruder terms, (chiefly-)Mexican immigrants just replace American blacks in low-wage jobs. Without jobs, the American blacks subsist on welfare, "disability," and crime (and hosing that native labor-force participation statistic).

This is the problem which immigration-booster "economists" never address: low-wage, non-native-speaking immigrants don't merely drive wages in their sector down along some smooth curve like the econ prof draws in the first micro class, leaving both natives and immigrants employed but all at slightly lower wages. Instead, those immigrants displace lower-productivity (black) natives entirely. The latter drop out of the workforce (they can't get hired anyway, because employers prefer the more docile and "hard working" immigrants and don't want the troubles (such as "racial tensions," but also including simple communication problems due to language barriers) which commonly plague a mixed workforce).

clay writes:

Adult immigrants have a great work ethic and low crime profile, but their children and grandchildren often dont.

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