Is Illegal Immigration Beneficial to the U.S. Economy?

Abstract

This paper explores published resources on the topic of illegal immigration and how illegal immigration affects the U.S. economy. In recent years the immigration rate of undocumented immigrants has slightly subsided. It is estimated that at the end of 2010, approximately 11.2 million had established themselves in the U.S. This report will explain the philosophies of how illegal immigrants contribute to the U.S. economy. Most illegal immigrants contribute taxes and Social Security, but the high cost of medical care and educating children of illegal immigrants detracts from their contributions. Next, I plan to share other aspects of how undocumented immigrants influence our daily lives. Their establishment impacts the supply of labor and the average real wage rate as well as other features of our economy. I will then wrap up by concluding in my opinion if illegal immigration is beneficial to the U.S. economy.

Illegal is defined as not authorized by law, and immigration as entering with intentions of becoming established (Merriam-Webster, 2011). Illegal immigration into the United Sates (U.S.) became a topic of interest during the late nineteenth century. Starting in 1857, federal laws were established to prohibit entry of criminals, prostitutes and mentally ill immigrants. Up till then, immigration was not regulated, and the process was rather simple; welcoming millions from around the world annually. From 1881 to 1920, a large wave of immigrants poured in to the U.S., roughly 23.5 million (Americans for Legal Immigration, 2008-2010). Congress passed additional regulations in the years following to cap the number of immigrants authorized from each country. At that time, the restrictions were not enforced when regulating Mexicans and northern Europeans entering the U.S. It is believed that this is what drove illegal immigration to the furry it has become today.

A study determined that as of 31 Dec 2010, the number of illegal immigrants living in the U.S. was approximately 11.2 million; 4 percent of the U.S. population (Yen, H., 2011, Feb 1). The illegal population count has remained basically unchanged since 2009 and has even decreased slightly since 2007. Harboring illegal immigrants is costing the U.S. roughly 113 billion dollars a year, costing the average household $1,117 per year in taxes (Barnes, E., 2010, Jul 6). Illegal immigrants do contribute to economic growth, but is illegal immigration beneficial to our economy?

Educating the children of illegal immigrants is the most costly expense for American taxpayers. Statistics show that roughly 47 percent, of illegal immigrant households consist of parents with children. There are 5.5 million children and, 3.7 million school aged children of illegal immigrant parents currently living in the U.S. (Izumi, L., 2010, Aug 17). Of these children, almost three-quarters were born in the U.S. and are therefore citizens, but because their parents entered illegally, they now require taxpayer funding. The U.S. Census Bureau released 2008 figures showing that the national average total per-pupil funding from all revenue sources was $12,028 annually (Izumi, L., 2010, Aug 17). If you do the calculations and multiply $12,028 by the 3.7 million school aged children, you get a national total funding cost of 44.5 billion dollars annually. Taxpayers are left to pay the cost for these children to attend public schools in the U.S.

When illegal immigrants go to an emergency room for treatment, most hospitals will treat them. The hospitals then need to collect for providing treatment. The undocumented immigrant may pay a small portion, but the balance is left for the federal and state governments, private insurers, policyholders and taxpayers to pay. Roughly 75 percent of the cost is paid for by taxpayers (Noah, T., 2009, Nov 20). In 2008, the Kaiser Family Foundation determined it was costing taxpayers $4.3 billion each year for hospitals to provide uncompensated care to illegal immigrants (Noah, T., 2009, Nov 20). From 2004 to 2008, the federal government spent $250 million each year to compensate hospitals for the treatment they provided to undocumented immigrants (Noah, T., 2009, Nov 20). This uncompensated care also impacts insurance policyholders by driving up the cost of insurance premiums, often referred to as the "hidden tax".

Legally, Americans who contribute toward Social Security and Medicare will receive some form of a public pension in retirement and will be eligible for Medicare as soon as they turn 65 years of age. The exact number of undocumented immigrant workers paying taxes is impossible to calculate, but it is estimated that approximately three-quarters provide the U.S. system with financial support. It is important to keep in mind that the money paid by illegal workers and their employers is factored into all the Social Security Administration's projections and the illegal workers will not be entitled to these benefits. In 1986, the Immigration Reform and Control Act (IRCA) set penalties for employers who knowingly hire undocumented immigrants (Porter, E., 2005, Apr 5). It is no secret, to obtain employment in the U.S.; illegal workers have been forced to buy fake identification cards (ID). In most states the ID's are easily accessible and come with a social security card. Payroll tax deductions are initiated and employers are led to believe they are legal. Even with the IRCA, some employers were not discouraged from hiring illegal immigrants, but it has definitely benefited Social Security finances. During the 1990's, the Social Security Administration reported collecting $189 million in wages of incorrect or fictitious Social Security numbers (Porter, E., 2005, Apr 5). In the last decade, they averaged collecting $50 billion a year. Undocumented immigrants help U.S. Social Security's finances because they contribute, but will never collect the benefits.

Neither the Internal Revenue Service, nor the federal government know how many illegal immigrants pay income taxes or the amount of taxes they pay because they do not track it, but undocumented immigrants are paying taxes with little chance of claiming a refund. The Internal Revenue Service does not track a worker's immigration status, yet many illegal immigrants fearful of deportation will not risk the government attention that will come from filing a return even if they might qualify for a refund (Loller, T., 2008, Apr 11). It is also assumed that many illegal immigrants pay more taxes than they actually owe. In 2005, close to $9 billion in taxes were collected from incorrect or fictitious social security numbers (Loller, T., 2008, Apr 11).

It is obvious that immigrants provide an increase in the supply of labor