The Massive Economic Cost of Immigration
The Massive Economic Cost of Immigration
Illegal Immigration Isn't the Only Problem
Though Trump focused mainly on illegal immigration in his rhetoric, one of the best things he did for the American taxpayer was dramatically releasing the number of legal immigrants allowed into the country.1 That is because, contrary to what the “family values” and “immigrants do the work Americans won’t” crowd claims, most immigrants, legal and illegal, are a massive drag on the state. The welfare and entitlements burden is already severe to the point of being a looming disaster,2 and the strain placed on welfare programs, social services, and public resources by immigration makes the problem massively worse.
This article will examine the economic costs of immigration in the context of both legal and illegal immigration. This report focuses exclusively on the treasury issue, not on other, related problems like demographic change, crime, or politics leaving the realm of policy and becoming inter-ethnic squabbles, as Lee Kuan Yew warned of.3
Though this article is a standalone article, read our similar articles on the looming unfunded liabilities crisis, the real unemployment numbers, and how the elite’s preference for highly problematic policies like mass immigration is destroying Western civilization.
The Elite Either Can’t or Won’t Grasp the Immigration Problem
Between the 1920 and 1965, immigration into America, particularly from the Third World, was quite limited. Anti-immigration sentiment had built up dramatically as the Gilded Age progressed. During that period, economic opportunity in America led relatively poor immigrants from Southern and Eastern Europe to pour into the East Coast while similarly poor immigrants from East Asian nations like Japan and China migrated to the West Coast. Things came to a head in the 1920s, when the native population’s general dislike for immigration, which citizens saw as being bad for their wages and leading to vice and crime in cities, led to restrictions on the total amount of immigration into the country based on national origin.4 From then through the 1960s, immigration was low, and wages rose as a national culture emerged out of the many ethnic groups that had migrated to America. Then came the 1965 Hart-Cellar Act. Describing it, the Center for Immigration Studies reported:5
The 1924 law established a quota system based on national origins. It directed nearly 70 percent of the immigration slots to northern Europeans, cutting back drastically on immigration from southern and eastern Europe. It maintained formidable barriers against immigration from Asia and Africa, while leaving immigration from the Western Hemisphere unrestricted — a gesture of hemispheric solidarity that also served the cheap-labor interests of American employers.
The 1965 legislation was named the Hart-Celler Act for its principal sponsors in the Senate and House of Representatives. It abolished the quota system, which critics condemned as a racist contradiction of fundamental American values. By liberalizing the rules for immigration, especially by prioritizing family reunification, it also stimulated rapid growth of immigration numbers. Once immigrants had naturalized, they were able to sponsor relatives in their native lands in an ever-lengthening migratory process called chain migration. That unintended consequence is Hart-Celler's enduring legacy.
"The 1965 immigration law quickly transformed the ethnic portrait of the United States," scholars have noted. At first the new immigration came largely from southern Europe, especially Italy. But that stream played out in about a decade. Meanwhile, immigration from Eastern Europe was limited by repressive communist governments.
By 1980, most immigrants were coming from Latin America, Asia, and Africa — in numbers far greater than the annual average of 300,000 that had prevailed during the 1960s. Despite assurances by Hart-Celler advocates that the bill would add little to the immigrant stream, more than seven million newcomers entered the country legally during the 1980s. That trend has continued. Meanwhile, illegal immigration also began a decades-long surge.
While the 1965 Act re-opened America to mass immigration after keeping the gates closed for nearly half a century, it was not until the period of globalization that began in the 1980s and ramped up in the 1990s that the percentage of the population that was of an immigrant background reached the levels it had been at the end of the Gilded Age. Reagan’s 1986 amnesty for illegals bill and the 1990 Immigration Act did much to exacerbate the problem.6
All that is to say, the currently massive immigration situation is a new problem for America. In fact, it has only been for two to three decades that mass numbers of immigrants, most of whom are from the Third World, have poured into America. Far from being a long-held, sacred tenet of “our democracy,” it’s a relative aberration.
Unfortunately, most of the overlords of and public figures in “our democracy,” even the relatively clear thinkers, don’t understand that and remain in support of mass immigration so long as it’s “legal.” Elon Must, for example, recently posted, “Because I am raising concerns about the flood of unvetted illegal immigrants overwhelming American cities, the press will often characterize me as “anti-immigrant”. As an immigrant myself, nothing could be further from the truth. I am very much in favor of increased and expedited legal immigration for anyone who is talented, hard-working and honest. It is bizarrely difficult and agonizingly slow to immigrate to the USA legally, but trivial and fast to enter illegally! This obviously makes no sense.”7 Similarly, most Republicans who don’t identify as “Trump Republicans” think legal immigration should be held steady or increased, not slashed.8
In addition to wanting more immigrants, many who support the current system make some variation of the argument that immigrants, legal and illegal, are a benefit to America because they are “entrepreneurial,”9 have “family values,”10 and/or do the jobs that Americans won’t do or don’t want.11
The problem is, not only are those talking points, with the exception of the entrepreneurial one,12 generally untrue,13 they also cover up the biggest problem for most modern states and their fiscal health: with the exception of immigrants from Asia, immigration is a net drag on government coffers, not a net benefit.14
What Researchers from the University of Amsterdam Found
A study released by researchers from the University of Amsterdam and Amsterdam School of Economics titled “Borderless Welfare State: The Consequences of Immigration for Public Finances” was recently released.15 In it, the researchers examined the economic contributions of immigrant groups to the public coffers and found that, far from being the economic backbone of the nation, most immigrants were a major drag on the fiscal situation of their new home.
The Study’s Broad Applicability to America’s Immigration Situation
The Netherlands is, like America, also composed of about 13% immigrants, and most of its immigrants started arriving after the 1960s and asylum seekers in the 80s and 90s.16 Therefor, its situation is broadly similar to the United States, though America tends to have more immigrants from Central and South America rather than the Middle East and North Africa.
Despite that difference of origin, the conclusions drawn from studying immigration issues in the Netherlands can be treated as broadly applicable. That is because the report found that non-Western and non-East Asian immigrant groups tend to present similar financial issues for their host countries, particularly if they are asylum seekers. It found, “Immigration for work and study from most Western countries and a number of [mainly East Asian] countries show a positive outcome. All other forms of immigration are at best more or less budget neutral or have a negative effect on the budget. The latter applies especially to the motives family and asylum.”17
America, of course, is mainly beset right now by “asylum seekers”18 from countries other than Europe and East Asia that have increased in number since the ‘60s who tend to rely on the welfare state,19 so the budgetary implications are broadly applicable.
The Important Findings
Overall, the report found (emphasis ours), “Government spending on immigrants is now above average for items such as education, social security and benefits. Immigrants, on the other hand, pay less taxes and social security premiums on average. When added together, the net costs of immigration turn out to be considerable: for immigrants who entered in the period 1995-2019 alone, these are 400 billion euros, an amount in the order of magnitude of the total Dutch natural gas revenues from the 1960s onwards. These costs are mainly the result of redistribution through the welfare state. Continuing immigration with its current size and cost structure will put increasing pressure on public finances. Curtailment of the welfare state and/or immigration will then be inevitable.”20 The financial figures given are in 2016 euro values. Today, that 400 billion euro figure would be about $557 billion USD. As the Dutch GDP is about 1/27 of the US GDP (~$1 trillion in 202321 compared to America’s ~$27 trillion22), the corresponding American figure would be ~$1.5 trillion.
What’s more, the study found that the problem is exacerbated by low education levels amongst migrants, not just in the first generation but in future generations as well: “The educational level of immigrants is very decisive for their net contribution to the Dutch treasury, and the same applies to their children's Cito scores (scores on a 50-point scale for assessing pupils in primary education). If the parents make a positive net contribution, the second generation is usually comparable to the native Dutch population. If the parents make a strongly negative net contribution, the second generation usually lags behind considerably as well. Therefore, the adage ‘it will all work out with the second generation’ does not hold true.”23 The conclusion that immigrants were generally a net drag on the “treasury,” though economic, included other factors as well: “‘net contribution to the treasury’ – the core concept from the current report – is about more than just money: net contribution summarises in one number a variety of integration indicators, ranging from education and the labour market to benefits and crime.”24
Not only did it find that those who immigrated tended to attract those most likely to mooch off of the welfare state: according to the report, the welfare state acts “as a kind of 'reverse welfare magnet': immigrants who integrate poorly tend to settle in the Netherlands for a long time or permanently, while immigrants who score well on integration indicators often leave again quickly.”25 In other words, the most productive migrants tend to leave rather than stay and contribute to the state, while the welfare moochers stick around for as long as they are allowed to do so.
The treasury extraction problem those immigrants present is a severe one. According to the study, “On average, western immigrants make positive contributions of €25,000 and non-western immigrants cost €275,000.”26 It gets worse. Though “immigrants from Japan, North America, Oceania, the British Isles, Scandinavia and Switzerland make a substantial positive contribution of around €200,000 per immigrant,” “Immigration from non-Western regions tends to be negative for the treasury . . . [especially in the case of the] Caribbean, Middle East (including Pakistan and Turkey) and North, Central and West Africa (net costs of €200,000 to €400,000), Morocco (€550,000) and the Horn of Africa and Sudan (€600,000).”27 In short, Trump was right to ask why America doesn’t prioritize migration from Norway instead of Haiti.28 Immigration from Norway (Scandinavia) is a huge net positive, and immigration from Haiti (Caribbean) is terrible for a country’s treasury.
While the net earnings for the treasury were somewhat positive in the case of labor-only immigration, that was decidedly not the case for chain migration and other immigration situations where entire families could flow into the Netherlands. According to the study, “Family migration costs the treasury €275,000 per immigrant on average. The net cost of asylum migration averages €475,000 per immigrant.”29
As stated previously, America has immigration of all sorts, but much of it after the 1965 Hart-Cellar Act is family migration from the Third World and asylum migration from all over, but especially Central and South America. Those are the prime demographics for net calls on rather than contributions to the treasury, as shown by the University of Amsterdam study, and so the lessons learned must be the same.
Crisis Looms
The problem is a pressing one. Though Western populations are plummeting because people are not having kids, the same is not true of the Middle East and North Africa, from where the immigrants who are net burdens on the treasury come: “Immigrants who on average make a large negative net contribution to public finances are mainly found among those who exercise the right to asylum, especially if they come from Africa and the Middle East. The total population in these areas will increase from 1.6 billion today to 4.7 billion by the end of this century. Maintaining the existing legal framework, in particular regarding the right of asylum, does not seem a realistic option under these circumstances.”30
What’s more, even radical policy changes are probably not enough to return to budget-neutral immigration. The study found, “A less negative or a positive fiscal impact of immigration can be attained, but this requires a fundamental policy change. The present study calculates a restrictive scenario, in which labour immigration mainly originates from Western countries (except Central and Eastern Europe), Latin America and Asia (except the Middle East), in which there is also a 50% reduction in family immigration and a 90% reduction in asylum immigration. This scenario is highly selective compared to the current situation and requires changes in international treaties, such as the UN Refugee Convention. Nevertheless, even in that case, immigration is not even budget-neutral.”31
Even worse, compounding growth becomes a problem as the years wear on, making the problem increasingly intractable and its ill effects ever larger and wider in scope: “A simple rule of thumb is that every 10,000 increase in the average annual migration balance will increase the population by about 0.6 million people in 2060 and 1.2 million people in 2100.”32 And, “In an already densely populated country like the Netherlands, population size determines many issues, including public housing, spatial planning, traffic congestion, ecological footprint, climate goals and nature conservation. This makes population growth and immigration – the main cause of population growth – extremely policy-relevant issues.”33
Here’s how that already looks in America when just a thousand migrants flowed into the town of Whitewater, Wisconsin:34
Greater Whitewater Committee president Jeffrey Knight is quick to point out that migrants have caused New York's population to grow by 2 percent, while Whitewater's population has grown by almost 10 percent in two years, almost entirely due to the southern border crisis. That would translate into more than 1.5 million new arrivals in New York.
"I don't have a problem with immigration," Knight told the Washington Free Beacon. "The concern is about resources."
Like Knight, all Whitewater residents who spoke to the Free Beacon prided themselves on their hospitality and did not express prejudice toward the town's growing foreign population. But those who live here say they feel the strain migration has placed on their town: schools rushing to hire English as a second language (ESL) teachers, emergency services overwhelmed with unintelligible calls reporting domestic violence, and health providers faced with a flurry of uninsured patients.
Responding to the influx of migrants has put the town in a $400,000 budget hole, a town official speaking on condition of anonymity told the Free Beacon.
…
Once the migrants arrive, it is on the town to adapt. The hiring of new ESL teachers for Whitewater Public Schools has cost hundreds of thousands of dollars alone, one city official told the Free Beacon. Some students, the official said, have enrolled in Whitewater schools without knowing more than a few English words and phrases.
An official familiar with the issue says that at least 300 English ESL students are now enrolled in Whitewater Public Schools. That official also expressed concern about internal school reports of migrant students suffering from sexual abuse at home, as some live with distant relatives.
"You're setting up a disastrous situation," the individual said. "There's been an uptick in STDs and other sexual health issues."
But no other issue is as contentious as the town's growth in police responses. Two internal Whitewater Police Department slide shows obtained by the Free Beacon describe considerable strain on local law enforcement, with officers responding to calls that sound like something out of a police procedural.
In March, one slide states, law enforcement responded to a "deceased infant … located in a cardboard box." Another individual familiar with the immigration situation described finding a woman living in a shed with her infant during the Wisconsin winter.
That’s just a thousand people, and already the city is deeply in debt trying to deal with them while corpses are found in boxes, STDs proliferate, and students can’t learn because schools struggle to handle the influx of non-English-speaking illegals.
Under Biden’s Administration, illegal immigrants are flowing across the border at the rate of about 5,000 a day, judged conservatively.35 That means, according to the formula given by the Dutch study, half a million more people circa 2100, with all the welfare burden costs imposed by such a population. With about 10 million illegal immigrants having crossed under Biden, that means an almost unbelievable billion people at the turn of the century, thanks to compounding growth, all from the illegal immigration of Biden’s presidency.
Can America handle the inevitable costs of such growth, particularly among a population that, as the study shows, is a massive net drag on the treasury rather than a net contributor to it? No. of course not.
So, like the looming unfunded liabilities issue,36 it’s a looming crisis that will only be worse the longer the underlying factors go unresolved. But, as Washington has neither the political will nor capital necessary to solve it, unresolved it will go until it’s too late.
For details on his reduction of legal immigration, read, for example: https://www.cato.org/blog/president-trump-reduced-legal-immigration-he-did-not-reduce-illegal-immigration
“Multiculturalism will destroy America,” Lee warned. “There is a danger that large numbers of Mexicans and others from South and Central America will continue to come to the US and spread their culture across the whole of the country. If they breed faster than the WASPs [white Anglo-Saxon Protestants] and are living with them, whose culture will prevail? . . . It would be sad for American culture to be changed even partially.”
There aren’t jobs Americans won’t do: https://cis.org/sites/default/files/occupations-5-1.pdf; unemployment is low because labor force participation rate is terrible, probably as a result of immigration-depressed wages, not because we need more immigration: https://edworkforce.house.gov/uploadedfiles/9.13.23_camarota_testimony_help_subcommittee_hearing_on_open_borders_and_workforce.pdf; welfare rates are higher in immigrant households: https://cis.org/Report/Welfare-Use-Immigrants-and-USBorn. So, rather than taking jobs Americans don’t want, it appears that immigrants will just do them for wages too depressed for most Americans to consider.
