Mr. Obama, tear down this wall

Americans would benefit from greater immigration

It is popular wisdom that immigrants are a drain upon our country. They’re stereotyped as either violent criminals, diseased, or wards of the state. We’re told that they steal American jobs, put a strain on our natural resources, and fail to integrate into our society. As immigration reform begins working its way through Congress, (and as Arizona goes insane), it is important to set the record straight and review the reasons why expanding legal immigration is in the interests of the United States.

Open immigration benefits countries much in the same manner as free trade. The analogy is not perfect, but when an immigrant relocates, it is comparable to them exporting labor resources to their host country. When those labor resources have higher marginal productivity in the host country than in the home country, there is a net benefit that is shared between the immigrant in the form of higher wages, the owners of complementary factors of production in the form of higher returns, and the consumers in the form of higher quality, lower cost products. As a matter of theory, we should expect immigration to provide gains to the United States.

It is possible, of course, that immigration could have negative effects on the well-being of natives. As a demonstration of one possible pathway, imagine two countries: Suckerland and Freerideria. In Suckerland, education, unemployment benefits, health care, and retirement pensions are provided to all individuals within the nation’s borders (paid for through income taxes). In Freerideria, such public programs are either far less generous or non-existent, and citizens often migrate temporarily to Suckerland whenever they are in need of these services. In this way, the transfer payments from Suckerland to Freerideria make immigration a net loss to Suckerland, and, should these transfer payments exert too distortionary an influence, may even lead to a net loss in welfare for Suckerland and Freerideria combined (i.e. Freeriders might migrate even if their labor resources were more valuable at home).

Anti-immigration advocates would have us believe that the United States is the equivalent of Suckerland, paying for the welfare, health care, and education of many immigrants who do not provide enough tax revenue to cover their public expense. This is very much untrue.

For some categories of spending, particularly defense spending, it would be odd to say that immigrants “consume” some level of the services provided. The military power that the United States projects depends upon its absolute level of spending, not its per-capita spending. The presence of an extra citizen does not detract from the security of others — accordingly, even if immigrants consumed as much in services as the average American, they would only need to provide a fraction of the average tax bill to have a net positive effect on the national ledger.

For those types of spending that can be described as consumable services or transfers, the U.S. experience has been, and continues to be, that immigrants pay for themselves. Immigrants tend to arrive when they are in their 20s and 30s, the prime of their laboring years. Their labor force participation rate is well above that of natives. Census Bureau data show that in nearly every category, they consume far less in public services and transfer payments than their native counterparts, with the only exception being that of public education. When the net difference between taxes paid by immigrants and the services they consume is estimated, we find that on average, immigrants provide a yearly net public benefit between $5,000 and $6,300 per immigrant in present dollars. As always, this estimate may change as the characteristics of immigrant inflows change (or as our public offerings change), but at the present we have little reason to believe that the average immigrant is a drain on our public resources.

The case is even more stark for illegal immigrants. Because of their undocumented status, illegal immigrants consume an even smaller fraction of public resources than their legally immigrated compatriots. Although hard numbers cannot be obtained, it is estimated that only five percent of illegal immigrants avail themselves of free medical treatment, four percent take advantage of unemployment insurance or K-12 education, and practically none use food stamps, welfare, or Social Security. Conversely, 77 percent of illegal immigrants pay into Social Security, and 73 percent have federal income tax withheld. While legal immigrants pay in taxes roughly twice what they consume in public services, illegal immigrants pay somewhere between five and ten times as much in taxes as they take from the system.

The youth of immigrants also helps to offset the demographic imbalance within the United States. Because they arrive young, immigrants spend decades paying into the Social Security system without receiving benefits, and by the time they retire, they typically have children whose Social Security payments are sufficient to fund their parents benefits. Each new immigrant, in effect, provides a one-time windfall to American entitlement programs, counter-balanced only by the addition of a vague entitlement promise down the road (of which illegal immigrants do not take advantage of).

Similarly, greater immigration would relieve downward pressures in the U.S. housing sector and bring that market into balance faster than could be done without a migrant influx. In fact, for any non-tradable capital investment (of which homes are merely a salient recent example), migration between countries can help relieve the effects of over- and under- investment, leading to a more robust and efficient economy.

There are categories of immigrants (criminals, smugglers, terrorists, etc) that we would wish to prevent from entering the country. Yet the current system makes it nearly impossible to screen these elements out. By denying entry to economic immigrants, we’ve created a vast industry in cross-border trafficking and made it much more costly to prevent undesirables from entering. When criminals are 1 percent of the illegal population, law enforcement needs to catch one-hundred illegal immigrants to stop a single criminal. If the illegal population is entirely criminals, correspondingly fewer resources are needed to maintain the same level of protection.

Empirically, the experience of immigration in America and elsewhere has had a negligible impact on long-term unemployment, levels of income inequality, or depletion of natural resources and the environment in the host country. American immigrants do not show a higher propensity to commit crime, and are above the mean for many activities considered positive, such as founding new businesses. Historically, immigrants are a much smaller fraction of our population than they were in the early 1900’s, and recent immigrants appear to be assimilating into American society at an acceptable rate. A majority of first generation immigrants speak English, nearly all second-generation immigrants speak English, and most third generation immigrants speak only English.

Our foreign policy, often at great cost, seeks to promote democracy abroad and secure for others the human rights that we as Americans enjoy. Why should we make such great expenditure to spread liberal government abroad and at the same time deny millions the opportunity to live under our system? We once considered it a travesty that East Germany built a wall to keep its citizens from migrating. Why is it not as equally great a crime that we wish to build a wall to accomplish the same goal? Open borders are not simply good economic sense, they are a moral obligation.

In this economic climate, immigration reform will be a tough sell to the American people, but so was health care reform. The president has said that he is willing to do what is right, even if it is unpopular. Stay true to your word Mr. Obama ­— tear down this wall.