Is Immigration Good for America?

Spring 2022, tens of thousands of asylum seekers poured into New York City, driven by the hope of a better future. At first, the city was optimistic, providing shelter, food, health care and more. But the optimism quickly faded.

And by July 2024, New York had spent $5 billion to manage the crisis. What's worse, all of this happened while native New Yorkers struggled to make ends meet. With the rising cost of living in recent years, both legal and illegal immigration has skyrocketed.

And now, foreign born residents make up a larger share of the US population than ever before. But something surprising has happened. Just as immigration has increased, so has income inequality.

This raises a critical question. Is immigration good for Americans? Welcome to the Economic Truth of US immigration.

Immigration has been a hallmark of the US story for centuries, and the prevailing narrative is that immigration is critical to building a better America. According to the most comprehensive study on immigration, immigrants increase wages by 0. 6% in the long term.

But this seems to be counterintuitive. How can increasing the supply of workers lead to higher wages? Well, it can't.

For one, the 0. 6% number cited isn't actually based on real world data. Rather, it's based on a theoretical model that assumes long term capital efficiency.

But otherwise it is deeply flawed and biased. Thankfully, there is real world data available for us to review. And unlike the theoretical model of the ten correlational studies we reviewed, only one found a positive impact on wages.

And none found a positive impact for low skilled, low income Americans. The claim that immigration increases wages is absolutely absurd. Not only does it contradict Solow's model, but it goes against the fundamental understanding of supply and demand.

An argument economists make to justify these conditions is that immigrants take the jobs that locals don't want. But is this actually true? In 2006, Crider, a chicken processing plant in Georgia, was raided by immigration agents and in the snap of a finger, 75% of their workforce vanished.

Why? Because they had been hiring undocumented immigrants. Within days, Crider had posted an ad in the local newspaper exclaiming increased wages with no alternative.

Crider decided to increase wages by 14% overnight. The result? 200 mostly black and local candidates were hired.

But sadly, the story doesn't end there. Many of these new employees complained about the working conditions and lack of worker rights. All things that illegal immigrants, sadly are unable to complain about.

In essence, immigrants don't take jobs that locals won't do. They take jobs with conditions and wages that locals won't do. By increasing immigration, especially low skilled and illegal.

We are flooding the market with people who will compete with the native population. The result? Higher rates of unemployment and lower wages.

But as a society, we turn a blind eye. Because working class Americans don't donate to political parties, they don't have the influence nor the means, and overall they just don't matter. These policies have gutted Middle America.

In 1971, 72% of all income was held by lower to middle income Americans. In 2020, that share dropped to 50%. The increasing income inequality has plagued communities, leading to growing rates of mental health issues and deaths of despair.

Now, immigration isn't the only reason this is happening, but it most likely is one of them. The most gut wrenching impact of this is on minority communities. A study found that an increase in low skilled immigration of 10% led to a 2.

1% reduction in white employment, but a 5. 6% drop in black employment, 2. 7 times greater.

But why would the government have these programs if they clearly harm some of America's most vulnerable people? Very simple profits. Many companies, like Crider, benefit materially from cheaper labor by bringing in large numbers of unskilled immigrants.

The government helps businesses drive down wages and increase profits. On the plus side, lower wages do reduce the cost of goods for consumer, but at the expense of unskilled Americans. Economists estimate that immigration generated $54 billion of additional wealth.

But to do this, $500 billion of wages were lost. This means that there was a meaningful transfer of wealth from employee wages to company coffers and consumer savings. All this said, wages aren't everything, and many argue that the overall fiscal benefit of immigrants outweighs the costs.

But again, is this true? The fact is, and I'll say it now, you have to get them the hell out. You have to get them out.

I'm sorry. Anti-immigration proponents claim that immigrants burden the welfare state. But a quick Google search will show dozens of headlines claiming that immigrants use welfare benefits and entitlements at similar rates as native born Americans.

But again, this seems counterintuitive. How can people coming from a foreign country with lower levels of education on average, and lower levels of English proficiency, require less government assistance? According to the data, in 2018, native born Americans received government assistance 23.

1% of the time. Immigrants, on the other hand, received at 24. 5% of the time.

This is in line with the headlines pretty much the same. But just as before, the data is purposefully misleading. Let me explain.

To get this result, economists categorize the children of immigrants who live at home and use welfare as Americans. And although they are American, it misrepresents the analysis. Instead, we should look at the entire household immigrant led households versus nonimmigrant led households.

When the data is analyzed from this lens, the figure changes dramatically. American households use welfare 22. 6% of the time.

And immigrant led households 35. 1% of the time. A 50% increase above the native born American population.

This result makes a lot more sense. Immigrant households earn less on average and have more children. As such, they rely more significantly on the government to support them.

This means that Americans are generally subsidizing immigrants at a higher rate than native born Americans. And some economists argue that with fewer immigrants, the number of American households using welfare would go down as employment and wages would go up. A counter to this argument is that although immigrants may use welfare more, it is more than offset by the taxes they pay on a local, state, and federal level.

And again, a quick Google search shows that most research concludes that this is true, meaning immigrants pay more in taxes than they take. In particular, the most comprehensive study on the matter suggests immigrants contribute $58,000 to the US government over a 75 year period. Put differently.

They contribute $58,000 more than they take and across 55 million immigrants. That's a gain of $3. 2 trillion.

Okay, great. That means we should bring in more immigrants, right? Well, not so fast.

Like before, the data is misleading. Firstly, this assumes that immigrants have no impact on the overall cost of public goods like subsidies, defense spending, and more. If we change this assumption, we see a loss of $5,000 per immigrant or $275 billion.

But there is another assumption being used. This assumes the congressional Budget Office's long term outlook on taxes and benefits are accurate. But the CBO can barely predict next year, let alone 75 years into the future.

If you remove this assumption, then the loss jumps to $119,000 per immigrant, or $6. 6 trillion. So by changing two assumptions, we go from a gain of 3.

2 trillion to a loss of 6. 6 trillion. And even if you take into account the supposed $54 billion of wealth generated per year by immigrants, it pales in comparison to a deficit of $6.

6 trillion. The fact that pundits and economists use this data with confidence is alarming. Even more concerning is that these flawed assumptions could shape policies that lead to dire consequences for the economy and the American workforce.

But as we've explored these impacts, lower wages, reduced employment opportunities and a fiscal deficit. An important question naturally arises is all immigration bad? When we slice the data by skill level, a remarkable pattern emerges.

No matter the assumption, low skilled immigrants are always a loss for society, and high skilled immigrants are always a boon. This distinction is crucial because it highlights that the real economic benefit from immigration comes from less than 35% of immigrants. Those with a bachelor's degree or higher.

High skilled immigrants are the lifeblood of the hyper productive segments of the US economy. In 2019, 1 in 4 STEM workers in the US were foreign born, marking a nearly 50% increase since 2000. These individuals aren't just filling positions.

They're driving innovation and keeping the US at the cutting edge of technology and research. Nearly half of these foreign born STEM workers hold advanced degrees, compared to just 22% of their native born counterparts. The impact doesn't stop there.

High skilled immigrants contribute to approximately 25% of all patent related market value, while making up less than 6% of the US population. A staggering 300% overrepresentation. And this isn't a fluke.

It's a testament to how vital these immigrants are to maintaining America's competitive edge. Just look at the giants they built. Sergey Brin, a Russian immigrant, co-founded Google.

Jensen Huang, a Taiwanese immigrant, founded Nvidia. Elon Musk, a South African immigrant, launched SpaceX and Tesla. These aren't just success stories.

They're cornerstones of the modern economy. Collectively, immigrant founded fortune 500 companies generated over $8 trillion in revenue and employ nearly 15 million people. Despite these undeniable contributions, U.

S. immigration policies failed to prioritize high skilled immigrants. In 2022, a whopping 58% of all US immigration was family based, while only 27% was employment based.

Green cards mirrored this disparity. 50% go to family based immigrants, while only 14% are reserved for employment based immigrants. Half the number actually admitted securing a green card as a high skilled worker is also a nightmare.

You need a perm labor certification, an employer to file a form I-140, and then you're stuck waiting on your priority date and visa bulletin, which can take months or even years. Add in biometrics and more red tape. And it's clear why so many high value immigrants are left out.

Why is the US putting up these barriers for those who could significantly boost their economy? We have a couple of ideas. First.

Low skilled immigration helps keep costs down in service and manufacturing sectors, which lowers prices for consumers. High skilled workers don't have the same deflationary effect. Instead, they drive wealth growth rather than price deflation.

Second, companies that rely on large numbers of low skilled workers lobby heavily for increased immigration. They claim they can't find locals to fill these jobs, pushing for policies that favor a steady influx of low skilled labor. Lastly, increased high skilled immigration threatens domestic high skilled workers with wage deflation and higher unemployment rates.

Politicians, always eager to appease influential voters, often ignore the most vulnerable in favor of maintaining the status quo. The conclusion of all of this is that immigration in its current form is generally harmful, and that all the gains to society are from high skilled immigration. This would suggest that high levels of immigration often lead to higher rates of income inequality.

To show this, we come back to this chart. This shows the overall level of inequality in the US over the last 100 years. In the early 1900s.

Inequality was relatively high, but it fell dramatically after World War two. Many consider this postwar era to be the golden age of the United States. Everyone got along and they felt like they had a shot at the American dream.

But something happened in the 70s and 80s. Inequality began to rise again, and now it's as high as ever. When you plot the percentage of Americans that are foreign born on this same chart, the correlation is frightening.

More foreigners equals more inequality. The historian Jeff Cowie argues that the Great Migration of Black Americans from the rural South to the factories in the North could not have happened without the immigration restrictions of the mid-century, because factory owners would have preferred migrants to black locals. And the same can be said today, where the owners of businesses and factories prefer migrants to local Americans.

This isn't to say that immigrants themselves are bad. In fact, the rhetoric and anger against immigrants is misplaced and misguided. People naturally want to improve their lives, and if they make a good effort at it and try their best, we can’t knock them.

They want the American dream just as bad as you. However, to turn a blind eye to what immigration can and has done to America is to turn a blind eye to your neighbors. Immigration shouldn't be about lowering wages and increasing profits.

It should be about prosperity, not for the corporate shareholder, but for Americans, something that our politicians have forgotten. Thank you. And subscribe to 2&20 for more economics, analysis.

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