Legal Immigration Into the United States (Part 5); The Net Contribution of Immigrants: An Attempt at Critical Quantification

In his October 2006 article in Liberty, (“Immigration: Yes, No, and Maybe” by Richard Fields, Stephen Cox, and Bruce Ramsey), Cox tries to summarize the net cost that (then) current immigrants impose on American society by working out a quantitative example. He stages an imaginary but realistic (Mexican) immigrant family of five living in Los Angeles – two parents and three minor children. He assigns reasonable earnings to the parents and sets those against the probable costs that the whole family imposes in the form of normal local and other services. He arrives at the conclusion that the family annually costs American society 38,900 2006 dollars. (I agree with Cox that this may be a conservative estimate. That would be about 48,000 June 2018 dollars, using the CPI Inflation Calculator of the Bureau of Labor Statistics).

To gauge the real magnitude of the overall normal costs legal immigrants  thus impose on American society, let’s suppose further that all of the 2016 legal immigration is composed of Cox’s families of five. That’s 240,000 such families. The aggregate excess of their social costs over their earnings is 48,000 x 240,000 = 11.52 billion dollars. As a percentage of 2016 GDP, this figure is less than 7/10,000 (seven over ten thousand – 2016 GDP from CountryEconomy.Com).

Now, let’s suppose that Cox was too conservative by one half in his estimate of the cost his family imposes on American society. This would imply that the legal immigrant families that compose all of 2016 immigration cost American society an amount that is like 14/10,000. The numerator in this last estimate includes only legal immigrants. Let’s suppose further that the number of illegal immigrants for the year of reference equals the number of legal ones and that they cost the same and contribute the same as legal immigrants. The cost that all immigrants impose on American society is then approximately 28/10,000 or about 1/3 of one per cent of GDP. If you assume that illegal immigrants earn only half as much as legal immigrants, the net cost of immigration overall goes up correspondingly. It’s still not much. My point is this: In the worst case scenario I can conjure, the net cost that immigrants impose on American society is very low. It’s of the order of 12 million Americans buying a $10 lottery ticket at Nine/Eleven every payday.

This is still certainly an overestimation, for two reasons. One, this scenario is the extreme, limiting case. There is, of course, zero chance that the total legal immigration in any one year is composed entirely of the kind of families of five Cox describes. Among the immigrants, as with nearly all immigration everywhere, there must be a preponderance of healthy young men and young women without children. This happens through self-selection: emigration is very difficult. It requires courage and even a solid dose of unrealism; children are a big impediment in this respect. But, in most cases, younger people without children must easily contribute more than they cost American society because they land all raised up and ready to work (as I said). The exceptions concern those who fall seriously sick– uncommon among the young – and those who end up in jail or prison. The latter is not a rare occurrence among the young in general, among young males in particular. As I said, I deal below with the particular cost of incarcerating immigrants.

The other imaginary limiting case is this: Among the 1,200,000 immigrants in 2016, there is a single family of five as described by Cox and the balance is made up of vigorous young women and young men who never become sick and never transgress the law. In that other limiting case, immigrants are almost certainly a net economic boon to American society. I don’t know where the reality lies and it may change from year to year. It’s doable research which, I think, has not been done.

The second reason why the figure of 28/10,000 is probably an overestimation, or why it leads to fallacious inferences, has to do with life cycles. First, there will probably be a period during the family’s life when the children will be grown and capable of working while the parents themselves are working, undisturbed by family obligations. During that period, three or four, or all five immigrants will in all likelihood contribute more than they take from American society, in spite of their low qualifications. This sweet spot may vanish when the parents reach Medicare and Social Security age. In the meantime, several family members will have contributed to the relevant social funds; one or more of the children will too, probably for 30 years or more. Hence, whether the family of five receives a net benefit or impose a net cost over a longer, trans-generational period depends on actuarial calculations that neither Cox nor I have performed.

I hasten to add that it’s quite possible that such actuarial calculations, performed with real numbers, would still show the five in my chosen family as perpetrating a net cost on American society. To be thorough, one would have to take into account two more things. One is the possibility that one of the three children will turn out to be a great, outsize contributor, like the 40% American Nobel Prize winners born abroad. Or all three. The relevant reasoning has to be trans-generational to some extent, it seems to me. Just look at the extreme imaginary scenario below.

For ten years in a row, the US admits as many immigrants as it did in 2016. That’s 12 million immigrants. Let’s assume none dies during that period and they have no children (We will see that this unrealistic assumption does not matter here.) Not one of the twelve million is able to pay his full fare. On the average, they each cost American society $20,000 there is no chance they will ever pay back, one way or another. However, one of these hapless immigrants is Steve Job’s biological father. You know the rest of this true story. Ask yourself: If it were your decision, knowing this and, and based solely on economic matters which are the stake here, would keep out all twelve million?

This quandary poses an interesting conceptual problem we keep encountering: Had Job’s biological father not accidentally made his girlfriend pregnant; had they not decided to give Steve up for adoption, would someone else have developed the personal computer with Wozniak? Without him? Would you bet on it? The truth is that American society is unusually inventive but it’s probably not the most inventive on a per capita basis. (Last time I looked, the Japanese were registering more patents than Americans – that’s per capita.) It’s also seems true that immigrants account for a disproportionate number of American innovations, including 40% of all Nobel prizes in other than literature. (And also excluding the often farcical Nobel Peace Prize.) It’s not absurd to think of American inventiveness as the happy encounter of American institutions unusually favorable to innovation with immigrant vigor. This is just a speculation, of course but how willing are you to discard it summarily?

Finally, the calculation of immigrants’ net burden imposed on American society necessarily fails to take into account real positive contributions that are difficult to quantify, more or less intangible contributions, some of which I have mentioned elsewhere. They go from Italian cuisine to my own ability to interpret some world events better than almost any native-born professor. Here is another mental experiment: Suppose a national society decided, through some process or other, to bring up the average quality of its every day food from, say English levels, to 1/3 of Italian level. The cost would be astronomical and the result would clearly constitute a significant improvement in the quality of Americans’ every day life – which is what the science of Economics is all about, of course. My point is that the fact that this felicitous result was achieved through the happenstance of immigration does not imply that its societal value is zero.

One of the highest per capita expenditures that immigrants–like every other population group over and below a certain age–impose on American society is the cost of incarceration. That cost is also mostly borne by state and local authorities, although there exists a process by which the federal government reimburses local governments for illegal immigrants incarcerated for crimes other than illegal border crossing (explained in Cox 2006). I examine below the tangled issue of the cost of immigrant incarceration.

[Editor’s note: In case you missed it, here is Part 4]

3 thoughts on “Legal Immigration Into the United States (Part 5); The Net Contribution of Immigrants: An Attempt at Critical Quantification

    • Societies bear aggregate costs. In this case, I was referring to national societies. the costs of husbanding the national debt is a societal costs. If no, what is it? I sense you don’t like simplifications. Go ahead, write something on this for NOL. Go to town!

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