Minnesota Lessons from CA Study of Immigrants

Bruce P. Corrie, Ph.D. corrie@csp.edu A report by an independent research organization, Center for the Continuing Study of the California Economy recently presented its report to the California government. http://www.labor.ca.gov/panel/impactimmcaecon.pdf. The report reviews a wide range of studies on the impact of immigration both legal and illegal on the California and national economy (Please see report for extensive links to studies on immigration and the economy). The report’s conclusions are helpful to us in Minnesota as we explore this issue and are excerpted below: General: Immigration policy in the United States is a federal responsibility. Congress sets immigration eligibility rules and limits, and the federal government has the responsibility for border security. Even though immigration policy is a federal responsibility, the effects of immigration are concentrated in states, such as California, where most immigrants live. This disparity between federal responsibility and local impact helps make immigration one of the most hotly debated public policy issues. Defining Terms: Various organizations use different terms to refer to people who reside in the United States without legal authorization. The Census Bureau and the Immigration and Naturalization Service (INS) generally use the term unauthorized immigrant. This is the term used throughout this report. Other organizations use different terms. The Pew Hispanic Center now uses the term unauthorized migrant. The Urban Institute and the National Council of La Raza use the term undocumented immigrant. The U.S. General Accounting Office uses the terms illegal immigrant and illegal alien. The Center for Immigration Studies and the Federation for American Immigration Reform use the term illegal immigrant. Unauthorized immigrants enter the country in one of two principal ways:

• By crossing the border without valid immigration documents; or
• By entering with a valid visa and then remaining in the country after their visas expire.

Fiscal Impacts: The National Research Council studies and other studies raise many methodological and measurement questions about getting accurate estimates of the fiscal effects of immigration and, particularly, unauthorized immigration. The methodological and measurement issues (many of which are mentioned earlier in this chapter) derive from the fact that existing studies:

• Generally omit long-term impacts;
• Differ on which costs should be attributed to immigrants;
• Differ on how to account for taxes paid by immigrants;
• Count all education spending as a cost (rather than an investment) and omit the benefits of investing in education;
• Differ on how to incorporate the children of immigrants;
• Do not generally take a comprehensive look at federal, state and local fiscal impacts; and
• Look at a single point in time and do not estimate trends in fiscal impacts.

Fiscal Balance Varies by Jurisdiction Federal payroll taxes for Social Security and Medicare are the largest tax payments made by low-income residents, regardless of whether they are immigrants or native-born citizens. However, the largest public service costs are for education—and most of these costs are paid for at the state and local level. When the distribution of all public service costs and tax payments is taken into account, all studies of the fiscal effects of immigration agree that the fiscal balance is negative at the state and local level. Moreover, the state and local fiscal effects are felt most keenly in jurisdictions with higher shares of low-income immigrants. Some jurisdictions experience more negative fiscal balances than others. Immigration policy in the United States is a federal responsibility. Congress sets immigration eligibility rules and limits, and the federal government has the responsibility for border security. Because immigration policy is a federal responsibility, and because the fiscal balance for immigrants can be positive at the federal level and negative at the state and local level, states with large immigrant populations—whether legal or unauthorized—regularly ask Congress for financial assistance to offset the current costs of serving unauthorized immigrants. Some federal financial assistance is granted for emergency Medicaid costs and for prison costs, but that federal assistance covers only approximately 10% of the costs of these programs. Economic Impacts The economic impact of immigration falls into two broad categories:

• Effects on the overall economy—including economic growth, unemployment, wages and price levels.

• Effects on individuals—including, in particular, whether individuals’ wages or job opportunities are affected as a result of immigration.

The conclusion of most research on the subject is that immigration provides net economic benefits to domestic residents, although some individuals may suffer losses of income. In other words, immigration provides net benefits—but there are both winners and losers. The ability of immigrants to acquire experience, and the ability of their children to acquire a good education, including college education, will play a large role in determining the long-term economic and fiscal impact of immigration in the state and the nation. Some California Trends:

• Job growth — California’s job growth has outpaced the national average since 1994. Although California has experienced two downturns since 1990 (the aerospace-led downturn in the early 1990s and the Internet/tech-led downturn after 2000), immigration was not a factor in either downturn.
• Poverty rate — California’s poverty rate is now close to the national average, after having been 3% higher than the nation’s rate in the early 1990s. The poverty rate declines as the immigrants’ length of residence in the U.S. increases.
• Average wage levels — California average wages have risen faster than the national average since 1990. They were 13% above the national average in 2004.
• English language proficiency — English language proficiency and high school graduation rates rise in the second generation. The Pew Hispanic Center reports that only 7% of second-generation Latinos use Spanish as their primary language. In the third generation of Latinos, 78% use English as their primary language, and the other 22% are bilingual.

In The Costs of Immigration to Taxpayers, analysts George Vernez and Kevin McCarthy conclude: Existing studies of the costs of immigration do not provide a reliable or accurate estimate of the net costs and benefits of immigration—even when those costs and benefits are defined narrowly. Moreover, without reaching consensus on a host of conceptual and accounting issues, we doubt that additional studies will shed light on these important policy questions. Thanks to Barbara Ronnigen of the State Demographer’s Office for bringing this study to my attention.