"The New Americans,” published by the National Research Council in 1997, is probably the most unbiased study ever conducted on the economics of immigration. The study found the tax burden of immigration to be $1,178 per native household in California.
California was a high immigration state, with immigrant-headed households constituting 25% of total households. And most of California’s immigrants were unskilled or low-skilled. The tax burden was found to be $232 per native household in New Jersey. New Jersey had a comparatively smaller 13% of total households headed by immigrants, and New Jersey’s immigrants tended to be higher-skilled. The study also found that immigrant households contributed a net of $4 to the federal budget if they resided in California, and $3 to the federal budget if they resided in New Jersey. Therefore, the study concluded that the net burden to the United States taxpayer of immigrant households in those states was $1,174 and $229, respectively. (pp. 6-25 to 6-26).
A small benefit to the U.S. economy. A great cost to the U.S. low-skilled worker.
But if immigrants work hard and contribute to the economy, isn’t their tax burden more than offset by the value of their output? The 1997 NRC study analyzed the value to the U.S. economy of unskilled and low-skilled immigration, and ended up with a “ballpark” figure that such immigration could increase U.S. GDP by $14 billion per year. (p. 4-14)
Unfortunately, it is very clear in the study that the $14 billion gain has a necessary by-product of lowering the wages of native low-skilled workers by $84 billion and transferring those wages to the “high skilled” workers and to employers. (See figure 4.1, pages 4-2 to 4-6 and 4-14.) The study says: “This wage reduction is, in fact, the reason that the nation as a whole gains from immigration.” (p. 4-5). Specifically, an $84 billion gain to the high-skilled and employers is extracted by lowering the wages of domestic low-skilled labor due to competition with immigrants, and a $14 billion gain to the high-skilled and employers is extracted from the low-skilled immigrants due to their low wages. The study says,
Although immigration yields a positive net gain to domestic workers, that gain is not spread equally: it harms workers who are substitutes for immigrants while benefiting workers who are complements to immigrants. Most economists believe that unskilled domestic workers are the substitutes, so their wages will fall, and skilled domestic workers are the complements, so their wages will rise. (p. 4-4)
High rates of low-skilled immigration (and illegal immigration is a huge culprit here) have simply caused the supply of low-skilled workers to rise, and that has simply caused wages to fall. As a concrete example, this phenomenon has had a devastating effect on the working class in New York City, where failing public schools turn out vast numbers of low-skilled graduates each year. Even at the height of the real estate/Wall Street boom, with a 4.5% unemployment rate in NYC, low-skilled workers were desperate for $21,000 per year jobs in a city where you need $100,000 per year to be considered middle class. If people are desperate for a $21,000 a year job in New York City, it is probable that they are reliant upon public assistance to make ends meet. That is a further welfare cost to taxpayers on top of the direct cost of supporting low-skilled immigrants.