Introduction & Session Notes. Opening Address. Plenary 1, 2, 3, 4. Panel Discussion 1A, 1B, 1C. Review & Preview. Plenary 5. Panel Discussion 2A. Session Notes, Population Change & Social Services. Panel Discussion 2B, 2C, 2D. Plenary 6. Panel Discussion 3A, 3B, 3C. Closing Address.

PLENARY 2 - INTERNATIONAL PERSPECTIVE ON ECONOMIC IMPACTS OF IMMIGRATION

DR JAMES SMITH, Rand Corporation, United States SESSION NOTES, International Perspective on Demographic and Economic Impacts of Immigration.

Percent of Female Workers in High-Skilled Occupations Who Are Immigrants
(California)

Foreign Language Teachers	60
Social Science Teachers	54
Chemists	43
Dentists	43
Podiatrists	38
Pharmacists	34
Biological Technicians	29
Doctors	28
Architects	27
Medical Scientists	26
LIcensed Practical Nurses	26
Nurses	24
Physicists	23
Biological and Life Scientists	23

Get your teeth worked on in California? Foreign-born. Doctors-28% of the women doctors in California foreign-born. Nurses, physicists, these are the contributions immigrants make. So one way of summarising it, they take care of your child when they're very young: they become the nannies of your children. They cook, either preparing the food on the farmlands or if you go to a restaurant they're cooking the food. They drive your kids to school in the morning, and then when they grow up they teach them physics. That's the contribution immigrants make.

Now let me go to the final question. What impact do immigrants have on us as taxpayers? I can't tell you for New Zealand. It seems to me a less sensitive issue here than in America, from my short stay. Of all the things I've just talked about, this is the one that gets Americans excited. Why are we so concerned about this? When immigrants have been coming to our country for 200 years, why are we so concerned about the taxpayer effect now? And there is actually good reason. There's good reason because government is much more important than it was for those immigrants who came in the 19th century. This is the fraction of GNP that consists of government at the federal level and at the state and local level.

Government Expenditures as a Proportion of GNP,
1890 to 1990

You can see when the immigrants at the turn of the century were coming, government wasn't all that important. With the development of the welfare state, government is now 30-40% of GNP. It's a far more important issue. It's a much more legitimate issue and we should be talking about it a lot more, certainly in the United States. These taxpayer effects are very important. So in this research, we did two types of studies. First we did the types of studies everyone else was doing. Take two states, California and New Jersey, two of the main immigrant states. We're going to go through their budgets and we're going to see what the difference is between immigrant-headed households and native-born headed households. But then we're going to do a different kind of study which I call longitudinal study which is the correct way of asking the question of what the impact of an immigrant is.

Profile of Two States

	New Jersey	California
% foreign born	14	25
% of immigrants who are
European-Candian	47	12
Latin American	56	28
Asian	20	25

Those of you who have been to the United States will know that California and New Jersey are not identical. They look different in many ways but they're also different in this way. In spite of the fact they are two of the six immigrant states, California has a lot more immigrants-a quarter, and it's only 14% in New Jersey. But look at the difference in ethnic composition. In New Jersey a lot of European-Canadians. In California, Asians and Latinos. Look at the income differences. The immigrants in New Jersey are doing OK, but in California there are very low-wage immigrants who come in with a lot of kids. Those are the basic differences that are going to drive these numbers I now want to look at. What do immigrants receive and what do native-born households receive in terms of government services from all levels of government?

Size of California Government Benefits
(dollars per household)

I'm adding up federal programmes, state programmes, local programmes-all the level of government, the people in California, that's what they receive from all levels of government. So if you're a native-born headed household you're receiving $23,000 a year from the government, a little bit more if you're an immigrant-headed household. If I did this for the United States, those numbers are almost identical.

Average Government Benefits Minus Taxes Paid by Immigrant-Headed Households

Average Government Benefits Minus Taxes Paid
by Native-Born-Headed Households

What immigrant-headed households and native born-headed households receive is almost identical. The difference is they pay different levels of taxes because immigrants have less money. But the totals are about the same. But examine the specific programme expenditures.

If I was an immigrant advocate and I wanted to use numbers to show you how good immigrants were, what would I do, which programmes would I select, what would I talk about? I'd be talking about social security. Immigrants are young. They come in, they can save our social security programme. They are receiving a lot fewer benefits from social security, which is our programme for income for the aged. Also Medicare, health care. If I'm an anti-immigrant person and I want to show how bad immigrants are, what do I talk about? I talk about the schools "K-12" on the overhead. I talk about all those kids who are going to those schools and what they're doing to those school's budgets. What should I not be talking about, and you see we don't talk about either one of those, in our country, we talk about AFDC, that's our welfare programme. That's $464, really nothing. But that's mostly all we talk about.

Another aspect of these programmes is those programmes where immigrants benefit taxpayers, social security, Medicare, they're federal government programmes. The programmes where immigrants absorb more from the state, like schooling, they are the state and local governments, so there's a very different impact on state budgets than on federal budgets. In fact, let me show you what that is and again, to put aside a lot of complications, let me go to the total number, $3,463 and tell you what that is.

That is the difference between what an immigrant-headed household receives in benefits and what they pay in taxes. So each immigrant-headed household in California is receiving $3,463 more from the state than they pay in taxes. The budget has to balance at a state level, who pays for that? There's only one group left to pay for it, that is native born-headed households. How much do they end up paying? Each household in California pays $1,174 more in taxes than they receive in benefits to make that budget balance. Look how small it is in New Jersey, another immigrant state. So you can see the diversity among the states that attract immigrants-in New Jersey it's only $229.

But it is a very large number in California. In a given year, native-born households are paying over a $1000 more in taxes than they're receiving in benefits. It is no surprise that they are upset. It is no surprise by what's happening in the political climate in California. But it is also a totally irrelevant number to the question of the impact of bringing an immigrant into the United States. It's an irrelevant number because if an immigrant comes in, has some kids, the kids go to school, and we know they're costing a lot of money. Some of these kids are native-born Americans. But they're in the immigrant-headed household. So they're in the immigrant column while they're going to school and they are a big drain on the treasury. Now they grow up, they form their own household. What kind of household? Native-born American. Now they're paying a lot more in taxes than they're receiving in benefits. They're a great boon, but what have I done? I've shifted them over and now, once they become benefits, I call them native-born Americans. That is not the consequence of immigration. The right way of doing this is to take an immigrant, and for the first year he comes in, see how many taxes he pays, and see how many benefits he receives. Do it the next year, do it five years later, do it ten years later, do it when their kids grow up, do it for their grandchildren, do it to the great grandchildren. Once you start doing this, you can do almost anything right, but this is the right way of answering the question and let's see what happens. This is what happens, and I'm going to use the term present value which I'll explain to you. I'm going to take all those things I just talked about, the taxes and benefits, the difference in taxes and benefits and all those future years, bring them back to the present with an interest rate and I'm going to express it in one number. And here is the number.

Net Present Value of a Typical New Immigrant

Immigrants over their lifetime and their kid's lifetime actually end up paying in the United States $80,000 more in taxes than they receive in benefits. They are not a tax drain, they are a tax benefit. All that benefit occurs at the federal level however; but there is a cost to state and local government. In fact there is only one state where there is an enormous cost, California. There is a real public policy issue in my country, the federal government sets immigration policy, the state of California suffers from it. That is the policy question for immigrants. But on net, immigrants help us as taxpayers.

Not all immigrants are alike. They are different in many ways and they are different in net benefit as well and I've shown two different ways in which they differ here.

Net Present Value by Education and Age

Their age and their education. If the only thing I was interested in is the effect on you as taxpayers and, I'll say this as an economist-it should not be the only thing you are interested in-don't bring in anyone over 50. They don't contribute much in taxes, take a lot out in benefits, and 70 year olds who are coming (basically the parents who are coming to live with their kids) are a big drain on U.S. taxpayers. A way around this would be if the family wants to bring in a parent, they should support them.

There is a pro-skill bias. The further you go up in the skill level, the more benefit you are getting from people in a pure taxpayer sense. So in the United States, relative to New Zealand, we tend to bring in a lot of low-skilled immigrants who benefit us economically but do create an issue in terms of their taxpayer effect. If the only thing you wanted to do was maximise the taxpayer benefits, you'd bring in only high-skilled younger immigrants.

 

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SESSION NOTES, INTERNATIONAL PERSPECTIVE ON DEMOGRAPHIC AND ECONOMIC IMPACTS OF IMMIGRATION

Dr James Smith, Rand Corporation, United States

What is the effect of immigration on:

1.
1. The future size and composition of the American population?

   2.

2. The United States economy and its workers?

   3.

3. The fiscal balances of federal, state and local governments?

Question 1

• Fertility and mortality - for example in the first generation of new immigrants, the fertility rates of Asian and Hispanic groups was much higher, but by the second and third generations, there has been complete assimilation into the national norm.

• Exogamy (rates of intermarriage between groups) and ethnic attribution (rate at which you identify with one ethnic group). Intermarriage can increase population numbers for one ethnic group as more children from those marriages can choose to identify with just one group. New immigrants marry within their own ethnic group, but by the third generation, a large number marry outside (increased attribution).

• Conclusion: There is predicted growth in USA of 120 million by 2050, 80 million of these will be immigrants. Immigrants are the main force of population growth in USA, not fertility. One third of all USA citizens in 2050 will claim Asian or Hispanic identity.

Question 2

• How do immigrants compare with native born workers? New immigrants always earn less and this wage gap is growing over time. Immigrant workers are generally low skilled and half of all immigrants are in the bottom 10% for wages. However, by the third generation, there are no economic differences.

• Are native born workers better off? Native born benefit from immigration. Immigrants are different which is a benefit, although they are less skilled. The losers are people who compete for low skilled jobs, for example, other immigrants and 'high school drop outs'. Most immigrants dominate in low skilled occupations but they are also engaged in high skilled occupations.

Question 3

• The USA brings in a lot of low skilled immigrants who benefit the country in terms of low skilled workers. If a country is only worried about the benefit to the tax payer, they should only bring in young, highly skilled workers.

• Immigrants receive more in benefits from the Government, but this analysis is irrelevant by the second generation when they are identified as native born.

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