The economic impact of immigration

The United States of America is a nation built largely by immigrants and their descendants. Here is an overview of how immigrant workers and business owners continue to contribute and build the nation in the 21st century.


Photo: iStock/rightdx

The contributions and impact of immigrants in the United States in the past 400 years are well documented: we already know that our diverse culture and productive economy are due to many generations of immigration. So what follows is an overview of the economic impact of immigration and immigrants – documented and undocumented – in the USA today.

Business and industry

Here are some facts from America’s Advantage: A Handbook on Immigration and Economic Growth published by the George W. Bush Institute:

  • More than 40 percent of Fortune 500 businesses were started by an immigrant or second-generation American. Collectively, these 201 companies had total revenue of $4.8 trillion and employed 18.9 million workers globally in fiscal year 2015.
  • Immigrants start new businesses at twice the rate of native-born Americans.
  • The cities with the fastest-growing immigrant workforces are the cities with the largest per capita GDP increases.
  • Between 2000 and 2016, Americans received 78 Nobel Prizes in the fields of chemistry, medicine, and physics. Of those 78 awards, 31 went to U.S. immigrants.
Immigrants are more likely to start businesses and less likely to work in government jobs. These charts are based on data from the George W Bush Institute/US Census Bureau.

The immigrant workforce

Immigrants work in higher numbers per capita than native-born Americans. According to the National Academy of Science’s The Integration of Immigrants into American Society, they also work at jobs where workers are in high demand, notably low-skilled jobs, because native-born workers are not filling those jobs. According to America’s Advantage: A Handbook on Immigration and Economic Growth, almost half of the growth in the US workforce in the last 10 years was due to immigrants.

Our workforce is aging and the birth rate among native-born Americans is not keeping up. A low birth rate leads eventually to a slowing economy, Even if this were not the case, we still need a growing population of working-age adults to take care of the rapidly growing number of American retirees. According to the Center on Budget and Policy Priorities, “By 2035, the Census Bureau projects, there will be only about 2.4 working-age adults in the U.S. for each person age 65 or older, fewer than in any prior decade on record and down from 4.7 working-age adults in 2016.” But more than 70% of immigrant Americans are of working age, compared to less than 50% of US-born Americans.

Taxes

One of the most enduring myths about unauthorized immigrants in the United States is that they do not pay taxes. In fact, unauthorized immigrants pay billions of dollars a year in sales tax, income tax, property tax and social security. Here is a fact from the Institute on Taxation and Economic Policy (ITEP):

“Undocumented immigrants nationwide pay on average an estimated 8 percent of their incomes in state and local taxes. To put this in perspective, the top 1 percent of taxpayers pay an average nationwide effective tax rate of just 5.4 percent.”

Many unauthorized immigrants contribute payroll taxes using a false social security number. At least 50% of undocumented immigrant households file tax returns using an Individual Tax Identification Number (INIT). The Social Security Administration says that unauthorized immigrants paid about $13 billion into the program through payroll taxes in 2010. But in spite of paying into the system, unauthorized immigrants are not eligible for its benefits.

The anti-immigration arguments: examining the evidence

Nobody argues with the basic economic fact that more workers in the economy means more output and a stronger economy. But people who oppose immigration argue that immigrants cost money and increase crime. Respected researchers have examined the evidence, and here are some of the main findings:

  • Do low-income immigrants use up more benefits than US-born Americans?
    The Cato Institute released a Welfare and Entitlement Benefits report in January 2020. It stated, “The per capita cost of providing welfare to immigrants is substantially less than the per capita cost of providing welfare to native‐​born Americans. … The dollar differences are most pronounced for the entitlement programs of Medicare and Social Security benefits, which are the two largest programs in the American welfare state.”
  • Do immigrant workers lower wages for US-born workers?
    A study from the National Bureau of Economic Research, Immigration and National Wages: Clarifying the Theory and the Empirics by Gianmarco I.P. Ottaviano and Giovanni Peri, examined the effect of immigrant workers on the wages of US-born Americans. It found that “immigration (1990–2006) had small negative effects in the short run on native workers with no high school degree (-0.7%) and on average wages (-0.4%) while it had small positive effects on native workers with no high school degree (+0.3%) and on average native wages (+0.6%) in the long run.”
  • Do immigrants commit more crimes?
    A large and detailed study of evidence by the Brookings Institution shows that immigrants to the United States are considerably less likely than natives to commit crimes or to be incarcerated. In addition, according to the National Academy of Science, the more immigrants live in an area, the lower the crime rate tends to be.