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(Revised Post #1) The Impact of Illegal Immigrants on the U.S Economy.

The Impact of Illegal Immigrants on the U.S Economy.

In the U.S., there are many illegal immigrants mainly coming from Mexico, China, and other developing countries. According to the Pew Hispanic Center’s estimation, the size of unauthorized immigrants increased from 3.5 to 11.7 million between 1990 and 2012. As the number of illegal immigrants have been significantly growing over time, it is important to understand its effect on the economy.


Let’s begin with the negative economic effects that are occurred by illegal immigrants. We can start examining this question by assuming that most illegal immigrants are low-skilled workers. I know that this assumption is not always true but it is unlikely that high skilled immigrants are undocumented workers since it is much easier for them to get working visas. Thus, increase in the supply of migrants mostly undercut wages and take jobs from low-skilled natives. In this case, low-skilled native-born workers only have two options, which are accepting lower pay or looking for other jobs. According to labor economists, their finding suggests that illegal immigrants have lowered the wages of native born workers without high school diploma by anywhere between 0.4 to 7.4 percent. In addition, the fiscal effect of a migrant is initially negative because most illegal immigrants work in low-pay jobs, hence pay little income tax and send their children to school. Thus, undocumented workers pay a little tax but receive great benefits from the welfare including education and other government services.

Illegal immigration, however, also has a positive impact on the U.S. economy. Some economists claim that illegal immigrants lower the wage of low-skilled natives born workers but Ottaviano and Peri’s findings suggest that the effect of the immigration on wages are as following:

  1. Wages of native high school dropouts decrease only by 1.1%
  2. On average the US born wages increase by 1.8%
  3. Foreign-born wages drop by 19.8%

These findings show that the effect of illegal immigrants on the native workers’ wage is not significantly negative but only lowers the wages of foreign-born workers. This implies that manufacturing companies can make their products at cheaper prices since their hiring costs decrease as well, meaning that the price of normal goods that are consumed by average U.S. citizens also go down.

In addition, the fiscal effect of a migrant becomes positive as their earnings increase in the long run. Although the fiscal impact is initially negative, it becomes positive as their children become more educated, hence earning goes up. George Mason University economist Bryan Caplan writes, “Contrary to popular stereotypes, welfare states focus on the old, not the poor. Social Security and Medicare dwarf means-tested programs. Since immigrants tend to be young, they often end up supporting elderly natives rather than ‘milking the system.’ Illegal immigrants who pay taxes on fake Social Security numbers are pure profit for the Treasury. In 2005, Social Security’s chief actuary estimated that without all the taxes paid on invalid Social Security numbers, ‘the system’s long-term funding hole over 75 years would be 10 percent deeper”, claiming that illegal immigrants are not the economic burden to the U.S.

Whether illegal immigrants are good or bad for the U.S. economies, I personally think that it is really important jobs for the U.S. government to regulate the numbers of illegal immigrants. If the U.S. keeps letting illegal immigrants to come to their territories, I would expect more bad things to occur such as increasing an overall crime rate and more black markets will form within the U.S territories.
































Impact of Illegal Immigrants on U.S. Wages

Last time, we talked about the impact of illegal immigrants on the U.S economy. As I discussed before, it is important to know what the composition of skills of immigrants have in order to know its impact on the labor market. Our assumption last time was that most illegal immigrants are mostly less educated people than U.S native citizens. However, Ottaviano and Peri’s findings explicitly tell us that illegal immigrants only lower the wages of native high school dropouts only by 1.1 %. More importantly, however, increases in the number of illegal immigrants increase the US born wages by 1.8%. What do these findings indicate? Does it necessarily mean that illegal immigrants will never have a significant impact on the US born wages?

In Card’s Mariel Boatlift 1990 paper, it has some answers that we want to explore. Between April and October in 1980, a massive number of Cubans migrated into the United States, which is called the Mariel boatlift. More than 100,000 people left to the United States to seek for freedom and wealth. Most Cubans from Mariel Boatlift went to Miami, suggesting that the labor supply in Miami had increased dramatically in a short time period. This unexpected and rapid increase in number of immigrants increased the city’s labor force by 7 percent. Guess what happened to Miami’s wages? This is what I will talk about this time in order to find the general effect on the unskilled immigrants on United States.

Although most people would expect that the Mariel Boatlift harmed the U.S. labor market, Card found out that wages and employment opportunities of unskilled workers did not have an impact by the large inflow of Cuban people. I could not understand the reason why this is true because I learned in economic class that an increase in labor supply would not only decrease the wage but also lower the quantity of labor.

The results lead to the question how the Miami labor market was able to absorb a 7 % increase in the labor force without any negative effects. One possible answer for the rapid absorption of the Mariel immigrants is the growth of industries that utilize relatively unskilled labor. Card states, “the industry distribution in Miami in the late 1970s was well suited to handle an influx of unskilled immigrants”. Miami adopted a new technology much later than other states, which supports the idea that Miami employed unskilled labor.

We cannot definitely conclude that the influx of illegal immigrants does not have a significant impact on the U.S wages. However, Card’s Mariel Boatlift suggests that illegal immigrants or unskilled immigrants tend to have a small effect on the U.S wages.