National Academy of Sciences

Published:  

A new authoritative study released by the National Academy of Sciences shows that mass immigration drives down annual wages by 5.2% for native-born workers who are in direct competition with immigrants for jobs while costing taxpayers around $299 billion in public services. The study found that the net economic benefit of mass immigration is around $55 billion but that money results from a $500 billion wage transfer from low-skilled workers to businesses.

The Center for Immigration Studies (CIS) has read and analyzed the report and came up with the following findings:

  • Immigration does make the U.S. economy larger by adding workers and population. But a larger economy is not necessarily a benefit to natives. 
  • Making reasonable assumptions, the NAS report estimates that the actual benefit to the native-born could be $54.2 billion a year. But relative to the income of natives the benefit is very small, representing a "0.31 percent overall increase in income" for native-born Americans (p. 128). 
  • To generate that benefit, immigration has to reduce the wages of natives in competition with immigrant workers by $493.9 billion annually. But business gain $548.1 billion from these lost wages, for a net gain of $54.2 billion. Unfortunately, the NAS does not report this large income redistribution, though it provides all the information necessary to calculate it. 
  • The above analysis is based on economic theory, but the report also summarizes empirical studies that have tried to directly measure the impact of immigration on the wages of natives. The size of the wage impact from such direct measurement is similar to that shown above (Table 5-3, pp. 207-208). But the size of this impact remains a subject for debate among economists. 
  • Turning to the fiscal impact, immigrants do not pay enough in taxes to cover their consumption of public services at the present time. The NAS report presents eight different scenarios based on different assumptions about the current fiscal impact (taxes paid minus services used) of immigrants and their dependent children. All of the scenarios show that immigrants are a fiscal drain. The drain is as large as $278.7 billion a year. In all the scenarios dealing with the current fiscal impact the deficit is as large or larger than the economic benefit reported above. 
  • Second-generation and third-generation Americans (native-born children and grandchildren of immigrants) are also in fiscal deficit, mainly because of the federal budget deficit shown in Table 8-2 p. 312. Of course, a fiscal drain for natives may be unavoidable. But adding more people through our immigration policies who run a deficit only adds to the problem. 
  • The deficit is mainly caused by the federal budget deficit — Washington is not collecting enough taxes to pay for government generally. At the state and local level, where budgets tend to be more in balance, immigrants are still a large net drain, while natives are a net fiscal benefit (Table 9-6, p. 404). 
  • The current fiscal deficit at the state level is very large. The average fiscal drain shown for each "immigrant independent person unit" (in effect, immigrant-headed households) is shown in Table 9-6, p. 404. Multiplying the average by the number of such units in each state (Table 9-13, p. 426) shows the following fiscal deficits: California -$18.96 billion; Texas -$7.8 billion, New York -$5.79 billion, Illinois -$4.16 billion, New Jersey -$3.24 billion, Washington State -$2.51 billion, Massachusetts -$1.86 billion, Colorado -$1.18 billion, Arizona -$1.17 billion, Florida -$1.14 billion, Georgia -$1.02 billion, Nevada -$620 million, Oregon -$600 million, Virginia -$469 million, New Mexico -$429 million, and North Carolina -$424 million. 
  • Projecting the fiscal impact over the next 75 years, the NAS study also provides eight different scenarios, based on different assumptions. Four of the scenarios project a negative impact on the budget, four do not (Table 8-12, p. 341). 
  • The projections are positive if the NAS assumes that federal spending in the future will be restrained in the way envisioned by the Congressional Budget Office (CBO). Further, the outlook is more positive if one assumes future immigrants are more skilled than is the current population of immigrants. Assuming that immigrants also create no additional costs for defense makes the projections significantly more positive. 
  • There are problems with all of these assumptions. Our current immigration system does not select immigrants based on their skills, so the future education level of immigrants is undetermined. Also, it is impossible to know how the country will deal with budgetary issues over the next 75 years — the CBO certainly does not have a great track record in this regard. Finally, immigration could be a source of domestic terrorism, which may result in military responses and additional defense spending. 
  • What is important about the fiscal impact reported in the NAS study is that the current fiscal impact is negative no matter what assumptions the NAS makes. The projections over the next 75 years are just assumption-driven speculation. 
  • A "key" conclusion of the report (p. 87) is that there is a "slowing rate of wage convergence for immigrants admitted after 1979" (i.e., immigrants are catching up with natives more slowly than before). The lower education level of newly arrived immigrants partly explains this difference, but even after controlling for education, the report still finds that immigrants assimilate more slowly today than in the past. 
  • The report also finds a slowdown in acquisition of English. It even cites as a possible explanation the huge number of immigrants already here who give immigrants much less incentive to learn English (pp. 89-91).
  • If new immigrants hurt the wages and slow down English acquisition of immigrants already here, then a reduction in immigration may help the millions of immigrants already here adapt to life in this country. The biggest beneficiary of lowering immigration may be immigrants themselves.

Read the full CIS report here.

Low-skilled Americans
wages
Taxpayer Burden

Updated: Mon, Jul 24th 2017 @ 3:24pm EDT