The Economics of Illegal Immigration: Everything You Need To Know

h1-b visa workers wages have risen five times faster than those of american workers

FAIR Reports Illegal Immigrants Cost America $135 Billion Annually

This article was first published on American Greatness.

According to the Federation for American Immigration Reform’s (FAIR) new 2017 report, illegal immigrants, and their children, cost American taxpayers $135 billion annually—$8,075 per alien per year.

These costs are partially offset by taxes collected from illegals, which total $19 billion.  Taken together, the net cost of illegal immigrants to American taxpayers is $116 billion annually.

tax contributions by illegal immigrants to state and federal governments

cost of illegal immigration into america

While high, this number is certainly not an outlier: a recent study by the Heritage Foundation found that low-skilled immigrants (including those here illegally) cost Americans trillions over the course of their lifetimes, and my own research conducted for the National Economics Editorial found that illegal immigration costs America over $140 billion annually.  Suffice it to say that illegal immigration has real economic consequences—despite what the left tells you.

The FAIR report also provides details as to how said money is spent.  Unsurprisingly, state and local  governments bear the majority (two-thirds) of the costs, spending $88 billion annually.  The federal government gets off relatively easy, spending just $45 billion—ironic, given the problem is of their creation.

Still more ironically, the federal government receives the lion’s share of taxes paid by illegal aliens ($15.4 billion), although this does not cover even their costs.  State and local governments receive just $3.5 billion in annual taxes from illegal immigrants.

The single greatest cost is education at $46 billion annually; behind this are $29 billion in medical care, $23 billion for law enforcement, and $9 billion in welfare.  And, of course, the report does not include the value of remittances sent by illegal aliens, which would push the net fiscal loss higher by some $38 billion annually.

It is also worth mentioning that the State of California spends the most on illegal immigration—illegal immigration costs California $30.3 billion annually, which works out to some 17.7 percent of the state’s budget.  Texas is a distant second, although the costs are likewise significant: illegal immigration costs the State of Texas $12.4 billion annually, or roughly 10 percent of the state’s budget.  In third place is New York, which spends $7.4 billion on illegal immigration.

The data could not be clearer: illegal immigration costs American taxpayers big-time.  But taxes are only part of the story: illegal immigration hurts America’s economy in other ways: it distorts the labor market, causing wage stagnation and unemployment, and kills our economic vitality.

Illegal Immigration Decreases Wages & Increases Unemployment

Ever hear of the law of supply and demand?  It’s how the free market determines prices: when demand increases, prices increase (more people bid-up the price); conversely, when supply increases, prices decrease (less scarcity means less urgency), and vice versa.  Supply and demand underpins the price of everything from gasoline, to apples, to the value of a person’s labor—surgeons command high prices because there is a limited supply of surgeons, whereas store clerks make minimum wage because anyone can be a store clerk.

According to Pew Research, illegal immigration has flooded America’s labor market with at least 12 million new workers.  This has dramatically, and rapidly increased the labor supply and therefore decreased wages for American workers.  The evidence for this fact is overwhelming.

For example, before Hurricane Harvey President Trump’s crackdown on illegal aliens had already caused wages for construction workers to rise by 30 percent (half of Texas’ construction workers were illegal aliens). In light of recent events, their wages will likely rise even higher—but we can still attribute a significant portion of said rise to labor market constrictions.

Likewise, towns in Maine were forced to hire American workers after the availability of visas for temporary foreign workers declined. What happened? Unemployment decreased, wages increased, and working conditions improved in order to attract American workers—all good things. Illegal labor has completely undermined America’s labor markets, and hurt the bulk of our population; the only people benefiting are the very rich.

And if this were not bad enough, many illegal aliens also work under-the-table, making less than minimum wage and foregoing expensive employer-provided healthcare plans.  This undercuts the labor-market’s mandated floor, pulling the rug out from under American workers.  For these reasons, the impact of illegal aliens on American wages is far larger than that of legal immigrants—who also negatively distort wages for natives.

Illegal immigration also causes unemployment for American citizens.  Why?  Because employers often prefer to hire illegals because they have leverage over them: aliens have no recourse for termination without cause, and must tolerate poor working conditions.  This leverage, combined with lower wages, prices many Americans out of the labor market—how can a citizen earning minimum wage who has legal protections compete with a legal ghost making 2 bucks an hour?  They can’t.

This is part of the reason the youth unemployment rate is so high—the service industry used to be worked by teenagers, they have been replaced with illegals.  The same goes for Americans without college degrees, particularly blacks and Hispanics.

Debunking Liberal Economic Myths About Illegal Immigrants

Liberals often justify their fetish for illegal immigration along economic lines, arguing that: “we need illegals to do the jobs Americans won’t do”, and “the economic benefits of illegal immigration outweigh the costs”.  Of course, neither of these refrains rings true.

The first myth is easily debunked by the simple fact that America’s labor market is far from saturated.  In fact, fewer than 150 million Americans (out of a population of 320 million) are employed—either part or full time.  Furthermore, there are 23 million Americans currently looking for work, that is, twice the number of illegal aliens in the country.  Even if we assume that every illegal aliens was employed, replacing them with American workers would still leave 11 million Americans unemployed.

labor force participation chart

Beyond the raw numbers, it is also patently false that “illegals do jobs Americans won’t do”—they simply cannot do them because they are out-competed with cheap illegal labor.  If you read this document published by the Bureau of Labor Statistics, you will find that millions of Americans—of all races—currently work as janitors, laborers, and agricultural workers.  In fact, only four percent of American agricultural workers are illegal aliens, according to a report in the National Review, putting to bed the myth that we would starve without illegal laborers.  Americans will do the jobs, provided they are paid a fair wage.

Believe it or not, states without illegal immigrants, like Montana or Ohio, are not economic backwaters with exorbitantly high costs of living—people in Idaho can still afford McDonald’s and Starbucks, they just pay teenagers to work the drive-thrus.  In fact, the cost of living in said states is often cheaper, because their governments do not require high taxes to subsidize legions of illegal aliens

The second myth, that “the benefits of illegal immigration outweigh the costs” is also absurd.  Why?  First, illegals are a massive net cost to taxpayers.  Not only do they cost the government $116 billion annually, but these additional expenditures result in higher taxes and more borrowing—taxes and debt impede economic growth far more than the “cheap labor” may spur it.  Second, illegals transmit some $38 billion abroad every year as remittances, which has the same economic impact as a federal tax.

Finally, we must consider the opportunity costs—what else could our tax dollars buy?  Rather than spending billions on illegals, we could rebuild our ailing infrastructure.  According to the American Society of Civil Engineers, America’s infrastructure deficit will reach $3.6 trillion by 2020.

Furthermore, poor infrastructure also costs the economy money.  For example, traffic jams cost America $124 billion a year—almost as much as illegals aliens.  If the government stopped spending on illegal immigrants, it could cut our infrastructure deficit in half by 2020, and save the economy hundreds of billions on traffic jams and airport delays—not to mention the headaches.

It is also worth mentioning that America is the only Western nation, until very recently, that imports millions of illegal immigrants to work in its service sector—other rich nations like Japan and Canada, do not.  Yet despite this, the GDP per capita of Japan has actually grown faster than America’s during the same period.  The same is true of Canada and Australia.  If illegal immigration is such a boon to America, why are Americans being left behind by states without this “advantage”?

Japan vs USA GDP per capita

Perhaps because illegal immigration is not an advantage.

Perhaps the elites are lying.

University professors, Silicon Valley CEOs, senators, and news anchors are not losing their jobs to illegals—they are hiring them as gardeners, nurses, and cheap coders.  It is the common man who pays the price for their decadence: construction workers and sales associates are losing their jobs—ordinary folk.

I guarantee you that if all illegal immigrants were Pulitzer Prize-winning writers that the country would look like the gated communities in Washington DC or Beverly Hills—it would have a wall and a security detail.

It’s time we got illegal immigration under control.


About Spencer P Morrison 160 Articles
J.D. B.A. in Ancient & Medieval History. Writer and independent intellectual, with a focus on applied philosophy, empirical history, and practical economics. Author of "Bobbins, Not Gold," Editor-In-Chief of the National Economics Editorial, and contributor to American Greatness. His work has appeared in publications including the Daily Caller, the American Thinker, and the Foundation for Economic Education.