August 04, 2007

Illegal immigration

I've been reading up on illegal and legal immigration, on account of some stories I read on Carpentersville, IL. Now I'm just thinking out loud, trying to put some things together.

First of all, clearly illegal immigrants break the law. So does everyone that drives over the speed limit or jaywalks. Some laws are more important to enforce than others, and we don't jail or deport people for jaywalking. So illegality is not the end of the story.

What is the alternative to illegal immigration? Legal immigration, of course. But this process takes years and is expensive. It is also not likely to be successful for poor, uneducated people. Immigration reforms underway are going to make this even worse, by biasing the immigration process towards the rich and educated.

While on the subject of legal immigration, I should say I think that legal immigration, especially when biased towards educated professionals, does a huge disservice to the rest of the world. Importing foreign talent and education reduces those elsewhere. Good for US, not good for them...

Legal immigration of educated professionals also irons over the huge deficiencies in the American education system. The excessive reliance of the US economy on foreign-educated doctors, engineers and professors is a warning sign. Importing education is a stop-gap measure, but unfortunately it masks the urgency of the problem.

Now, back to illegal immigration. How many illegal immigrants are there anyway? The Pew study on the size and characteristics of the "undocumented" population estimated that in march 2004 there were 10.3 million undocumented migrants in the US. At the same time, there are 25.4 million documented migrants (which includes refugees and people on temporary papers). One thing bedevilling a rational debate on the issue is that 57% of the undocumented are Mexican, and 81% are Latin-American. This adds race, religion and language to the mix. It seems unlikely to me that the debate would be quite as visceral if the illegal immigrants were Caucasian, English-speaking and (to a lesser degree) protestant.

Compounding that part of the problem is that illegal immigration is largely a problem in states that have long been culturally ambivalent. California, Texas and Florida receive almost 50% of all illegal immigrants. California was settled by the Spanish, and was a part of Mexico until it was annexed by the US in the Mexican-American war of 1848. Texas was part of Mexico before it gained independence in 1836. Its eventual annexation by the US in 1845 was the root cause of the Mexican-American war. Florida was settled by Spanish and French, and has maintained a strong latin flavour. Both legal and illegal Latin-American immigration has targeted these historically Spanish or Mexican states, reinforcing their dual identities. This provides ample reason for fear amongst the dominant Anglo-Saxon culture, because it is unclear where this process will end. It could end with equality between Spanish and English, or that could just be a milestone along the way. There are many countries where citizens need to be fluent in at least two languages or accept that their employment (and social, and cultural) possibilities will be limited. The US has not had to deal with this for several generations (except, perhaps, in some areas of Florida).

I've read several arguments to the extent that Spanish-speaking immigrants will learn English and assimilate, just as all previous immigration waves have. And indeed, while previous immigration waves have also started out very localised, later generations have tended to spread out and integrate, leaving only small communities that still maintain their ancestral language and culture. But that argument is flawed, for four reasons. First off, technological progress. While it used to be hard to keep in touch with your ancestral culture, this is no longer the case. Personal mobility and communication technology mean that you can maintain links across continents with relative ease. Second, proximity. Latin-American culture is not a continent away. While Swedes, Germans, Italians and Irish had to look across the ocean to find their roots, Latin-American immigrants in the US only have to look across a river. Third, size of the culture. Previous waves of immigrants came from fairly small cultures of less than, say 80 million native speakers. Spanish is different in that there are over 400 million native speakers of it, more than there are native speakers of English. Four, persistence. Because of the proximity of most of the world's 400 million Spanish speakers to the US, the influx of Spanish-speaking immigrants is unlikely to slow unless the underlying causes for the migration are addressed. Whereas previous immigration waves were limited in size and time, there are no such limits foreseeable on Latin-American immigration.

Of course, in stead of addressing the driving forces of migration (poverty, violence, crime, civil wars, drug wars, ...) one could try to stop immigrants and send them back. The Pew center estimates that the population of undocumented immigrants rises by about 700,000 each year (since 2000). Since the ICE (Immigration and Customs Enforcement agency) returns about 220,000 people a year (mainly undocumented immigrants, with the occasional US citizen by mistake), that comes close to the ballpark figure of 1 million immigrants arriving each year, which is bandied about quite a bit. So the ICE spends about 8 billion a year, catching less than one quarter of the illegal immigrants, presumably the ones that are easiest to catch. So a ballpark estimate of the cost to catch enough illegal immigrants to offset new arrivals would be anywhere from 40 to 100 billion a year. Clearly, a lot of money, actually much more than illegal immigrants are estimated to cost the tax payer (about 16 billion). As discussed below, this "cost to the tax payer" is due to the fact that the illegals are low-income, not that they are illegal.

One can argue that undocumented immigrants committed a crime, and they should be caught and punished, just on principle. But do they need any more punishment than what they have chosen for themselves? In the end, undocumented workers have to leave the US before they reach retirement age, since they don't qualify for Social Security and cannot survive without working. The statistics bear this out: there are virtually no undocumented immigrants aged 60 and over. While they are in the US, they work very hard without protection from the law (actually, to some degree continuously persecuted by the law), and about 75% of them pay social security taxes and medicare taxes, of which they are not likely to benefit. Other taxes can be evaded as they are not directly deducted by the employer, but those would be very small indeed.

It is important to stress that last point. The Social Security administration tracks the money paid to workers with fake documentation, and puts the total at about 50 to 60 billion a year. There are estimated to be about 3.8 million undocumented households that contribute to payroll taxes, which means that household income is, on average about 15,000 USD per year. No doubt these households also have unreported income, but that is not a problem specific to the undocumented. At the income levels of the undocumented population, social security and medicaid taxes - being regressive taxes - run a healthy 7.65%. Federal tax rates in this bracket are 10%, but with normal deductions, the effective tax rate in this bracket is more like 5%. Of course undocumented immigrants pay sales taxes as well. All in all, even if the undocumented can evade the federal tax, gaining 5%, they still pay the 7.65% flat rate for social programs they cannot use. So they still overpay. As the Center for Immigration Studies puts it:
"If illegal aliens were given amnesty and began to pay taxes and use services like households headed by legal immigrants with the same education levels, the estimated annual net fiscal deficit would increase from $2,700 per household to nearly $7,700, for a total net cost of $29 billion."

The strange conclusion is that if every undocumented worker were suddenly to become documented, the increase in the federal taxes would be more than offset by the increase in federal liabilities in the social security programs. Keeping the undocumented workers undocumented is cheaper for the federal government.

So what about state taxes? Well, depends on the state. States that don't levy an income tax, such as Texas and Florida, would not be affected at all. In California, the state tax rate varies between 1, 2 and 4% for the incomes that undocumented households have. With standard deductions, it is unlikely that these households would pay more than 1% in income, on average about 150$ per year. That would have to pay for all the services they would get if they were fully documented.

So in terms of governmental budgets, the effect of undocumented immigrants is actually positive - they pay more in taxes than they can claim as services - compared to documented workers with the same incomes.

So why all the complaints about undocumented immigrants taking up resources?

Well, they have no health insurance, so medical costs are difficult to recuperate. Some of these costs end up being paid by Medicaid, but that is a program that the undocumented pay into, so they should be entitled to it. More importantly, the vast majority of the uninsured are citizens and residents. Turning the undocumented into documented workers might mean that some would be able to get healthcare insurance, but - at their income levels - this is not a likely outcome (less than 50% of households with incomes under 20,000$ are insured).

Uninsured drivers are a problem, and many of the undocumented would not normally be insured. That is a problem that can be tackled by reengineering driver's insurance and healthcare insurance. But crucially, uninsured drivers are not usually undocumented immigrants. The highest percentages of uninsured drivers are in Mississippi, Alabama, California, New Mexico and Arizona. Not only are 4 out of 5 of those states not noted for their undocumented immigrant population, but most importantly, the rate of uninsured drivers is between 22% and 26%. Clearly, the vast majority of the uninsured drivers are citizens and legal residents.

The highest impact of the illegal population on the resources is through their American-born children:
"Many of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth. Thus, greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them."
This points out why it is hard to reduce the public resources that illegal immigrants do use. A typical undocumented household uses less than half the resources than a similar documented one does.

The complaints about illegal immigrants have many causes, from simple racism and xenophobia to linguistic and cultural concerns. Those can be argued back and forth forever. But when it comes to the economic arguments, the situation is fairly simple. Most undocumented hold jobs and use few government resources. Most pay taxes, and the net fiscal effect of the undocumented is positive, considering their socio-economic situation. The perceived fiscal deficit is caused by the relatively low educational attainment of the undocumented immigrants which confines them to the lowest levels of US society. This is, however, a first-generation only problem - and not all that different from other mass migration waves that the US have seen before. With a decent educational system, the next generation ought to do better economically. So I don't see this as a problem that will continue to get worse.

Fiscally, the problem is the existence of so many low-paying jobs without benefits, which means that hardworking households that use much less public resources than most (about half), still cost the US government tax dollars. Simply removing a subset of the people that hold those jobs leads to a reduction in the quality of the services and/or a raise in salary costs to attract new workers. To keep the quality of services AND the prices stable, one can replace the currently undocumented workforce with a fully documented one. But that will cost the government even more, as the additional taxes will not cover the additional services.

Culturally, the US needs to become less insular, and the addition of a second cultural language should be welcomed, certainly in those states that have strong historical ties to it. In particular the states that used to be part of Mexico, such as California and Texas, it seems only fair that this history is recognized and even honoured.

Legally, I believe that punishing illegal immigrants is useless. The life they have chosen is full of back-breaking work done in fear. It is punishment enough. We would not punish people to become slaves voluntarily, even though slavery is illegal. One could punish those that promise them work, give them work and keep them in their current condition.

So I guess I would be for a kind of amnesty for anyone that has been in the country for a certain amount of time. After all, they have gone through hell. But while it is the right thing to do, it would not solve anything. As long as the jobs are there, and are not paid enough to attract legal residents to them, they will be filled with illegal immigrants. And legalizing the existing workforce would actually cost the government more. To reduce the illegal immigration, here are some simple steps that I think could help:
1. Increase minimum wages and encourage unionization of the jobs that attract the most illegal immigrants. This will make it more attractive for legal residents to fill the jobs.
2. Increase fines on employers that hire undocumented workers. For recidivist corporations, jailtime for white collar top executives should be an option.
3. Introduce national ID cards and link them to social security accounts. No card, no job. This is essential is one wants to crack down on employers. As long as identity is kept vague in the US, employers can argue that they were victims.
4. Deduct all taxes from the salary by default. This won't achieve much more than kill the argument that they're not paying taxes, but that is something.
5. Change citizenship rules. Born in the USA should only confer citizenship if one of the parents is a citizen. It should only confer legal residency if the parents are legal residents. Children born in the US to illegal immigrants should be sent back to their home country with their parents.

I actually think that the last one is too harsh. It would never fly, as it would lead to families being torn apart and women chosing to have their children without any medical assistance. But the other four could be a start.

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