The Social Cost of Illegal Immigration

Bloggers and economics teachers face a paradox.  We want to convince students and readers that economic ideas are valuable and the best way to grab attention is to use those ideas to analyze the economics of current events.  The best way to lose them is to use economic ideas to come to a conclusion that contradict their prior beliefs.  The intersection of economic analysis and prior beliefs is small; if it were large, there would be no reason to teach economics.

The current debate about illegal immigration illustrates the gulf that often separates the views of economists and everybody else.  The popular debate posits high domestic net costs to illegal immigration and the economic literature finds empirical evidence of net benefits or small net costs.

Arizona, Georgia, Indiana, Oklahoma, Texas and Utah have passed or are considering legislation aimed at reversing the tide of illegal immigration.  The severity of these laws hints at the large costs that backers believe illegal immigration imposes on society.  The new Alabama law, heralded or decried as the toughest yet to be enacted would require public schools to determine the citizenship status of students, force police to detain someone they have stopped for any reason if they believe that person may be an illegal alien and if the person cannot produce documentation.  It would make it a crime to transport or harbor someone who is in the country illegally, and allows government to suspend or revoke the business licenses of a business that knowingly hires an illegal alien.  It also requires businesses to use the E-Verify database to confirm the immigration status of new employees. 

In my last post, “Political Chicken and the Debt Ceiling,” I sided with the Republican position on the debt ceiling negotiations.  In this post, I will take a shot at them.  Republicans claim to support smaller government, a lighter regulatory burden, and constitutional rights.  The anti immigration law is more strongly supported by Republicans than Democrats.  It is increases the size and scope of government, increases regulatory burden of schools and businesses, and limits my first amendment right of freedom of assembly, the right to collectively gather to promote, pursue and defend common interests.  The impact of these laws is the opposite of the claimed position of the Republican party.

A petition to President Bush and the Congress that was signed by 523 economists presents what I believe is the majority opinion.  In part, it reads

Overall, immigration has been a net gain for American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy. 


Immigrants do not   take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.


In recent decades, immigration of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to have been small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.


While a small percentage of native-born Americans may be harmed by immigration, vastly more Americans benefit from the contributions that immigrants make to our economy, including lower consumer prices. As with trade in goods and services, the gains from immigration outweigh the losses. The effect of all immigration on low-skilled workers is very likely positive as many immigrants bring skills, capital and entrepreneurship to the American economy. 


Legitimate concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system, that enable Americans to be more productive with high-wage skills.

To my knowledge, there is not a competing anti-illegal immigration petition (see David Hedengren, Daniel B. Klein, and Carrie Milton.  “Economist Petitions: Ideology Revealed,” Econ Journal Watch, Volume 7, Number 3, September 2010, pp 288-319).