Center for Immigration Studies Download a PDF of this Backgrounder.
Jason Richwine, PhD, is an independent public policy analyst in Washington, D.C., and a contributing writer at National Review.
In September 2015, the Center for Immigration Studies published a landmark study of immigration and welfare use, showing that 51 percent of immigrant-headed households used at least one federal welfare program — cash, food, housing, or medical care — compared to 30 percent of native households. Following similar methodology, this new study examines the dollar cost of that welfare use.
- The average household headed by an immigrant (legal or illegal) costs taxpayers $6,234 in federal welfare benefits, which is 41 percent higher than the $4,431 received by the average native household.
- The average immigrant household consumes 33 percent more cash welfare, 57 percent more food assistance, and 44 percent more Medicaid dollars than the average native household. Housing costs are about the same for both groups.
- At $8,251, households headed by immigrants from Central America and Mexico have the highest welfare costs of any sending region — 86 percent higher than the costs of native households.
- Illegal immigrant households cost an average of $5,692 (driven largely by the presence of U.S.-born children), while legal immigrant households cost $6,378.
- The greater consumption of welfare dollars by immigrants can be explained in large part by their lower level of education and larger number of children compared to natives. Over 24 percent of immigrant households are headed by a high school dropout, compared to just 8 percent of native households. In addition, 13 percent of immigrant households have three or more children, vs. just 6 percent of native households.
IntroductionIn September 2015, the Center for Immigration Studies published a landmark study of immigration and welfare use, showing that 51 percent of immigrant-headed households (legal and illegal) use at least one federal welfare program, compared to 30 percent of native households.1 “Welfare” refers to means-tested anti-poverty programs. These include direct cash assistance in the form of Supplemental Security Income (SSI) and Temporary Assistance for Needy Families (TANF); food aid such as free school lunch, the Women, Infants, and Children (WIC) nutrition program, and food stamps; Medicaid; and housing assistance in the form of rent subsidies and public housing. Not included are social insurance programs for which participants must generally pay into the system before drawing benefits, such as Social Security and Medicare. The earlier CIS study was notable for showing much higher welfare participation rates than previously reported. The reason is that earlier studies measured welfare participation with the Annual Social and Economic Supplement (ASEC) of the Current Population Survey. The ASEC is a simple cross-sectional dataset widely used in labor market research. However, the ASEC substantially undercounts welfare participation, in part because it asks respondents to recall their welfare use over a period between three and 15 months before the interview takes place. To address the undercount problem, CIS used a more complex dataset called the Survey of Income and Program Participation (SIPP). As the name implies, the Census Bureau specifically designed the SIPP to measure participation in government programs. In addition, the SIPP is a “longitudinal” dataset, meaning it follows the same respondents over time, asking them about their monthly program participation in three different interview “waves” throughout the year. The result is a much more complete picture of welfare participation compared to what the ASEC provides. Table 1, adapted from that CIS study, quantifies the differences. While the SIPP shows that 51 percent of immigrant-headed households and 30 percent of native-headed households used at least one welfare program in 2012, the comparable figures in the ASEC for immigrant and native households are just 39 percent and 24 percent, respectively.
FindingsThe main findings are presented in Table 2. The average welfare cost in immigrant-headed households is $6,234, compared to $4,431 in native-headed households. Immigrant households consume more cash, food, and Medicaid dollars than native households, while housing costs are roughly the same for both groups. Figure 1 shows that Medicaid is the largest welfare program, driving a large part of the overall difference between immigrants and natives.
The Broader Fiscal PictureThis study focuses on the cost of major welfare programs used by immigrant and native households. By contrast, a complete fiscal analysis would measure the cost of all government services and compare those costs with the taxes paid by each type of household. Some readers may wonder whether broadening the analysis would reveal that immigrant households make up for their greater welfare cost by paying higher taxes. This is not the case. As the previous CIS study of welfare participation demonstrated, immigrant households pay only about 89 cents in federal income and payroll taxes for every dollar paid by native households.9 The aforementioned report by the National Research Council, which did measure all government expenditures and taxes paid, found that immigrant households cost taxpayers as much as $2,200 per year in the 1990s, depending on their state of residence.10 More recently, the Heritage Foundation’s complete fiscal analysis (to which the author of this study contributed) estimated that the average legal immigrant household paid $4,344 less in taxes than it received in services in 2010, compared to a deficit of just $310 for the average native household.11 For the most up-to-date numbers, the National Research Council will release a new analysis later this year. The studies mentioned above measure the direct fiscal effects of immigration by comparing the services households receive with the taxes they pay. But what about indirect effects? Immigration touches all aspects of American life, so one could give almost endless examples of immigrants influencing society in ways that indirectly change how much the government taxes and spends. Attempting to quantify some of those indirect effects is not objectionable in itself, but it does open a “Pandora’s Box” of selectivity bias and exaggeration. For example, consider the reaction to the Heritage Foundation’s estimate that illegal immigration and amnesty would generate a direct lifetime cost of $6.3 trillion. Supporters of amnesty quickly settled on a rebuttal point: Although illegal immigrants who receive amnesty may pay as a group $6.3 trillion less in taxes than they receive in benefits over their lifetimes, their labor boosts economic productivity so much that natives probably still end up in the black.12 That claim is, first of all, a tremendous exaggeration. Most of the gains from immigration go to immigrants themselves, not to natives.13 In a paper for CIS back in 2013, economist George Borjas estimated that illegal immigrants increased GDP by $395 billion to $472 billion. Of that amount, however, only about $9 billion went to natives.14 After extending that $9 billion annually over an adult lifetime of 50 years, productivity gains would add back just 7 percent of the $6.3 trillion fiscal cost. Furthermore, an increase in productivity is just one of many indirect fiscal effects of immigration. What is the cost of additional welfare spending on natives when they are displaced from jobs or see their wages lowered by immigrant competition?15 What are the moving and commuting costs incurred by natives who flee overcrowding? What are the costs of less social trust and cooperation identified by Robert Putnam and others?16 How about the increase in English-language learners in public schools? One could go on and on with costs and benefits of immigration that indirectly impact the government’s fiscal situation. But once advocates enter the world of indirect effects, they become decidedly selective with the effects they wish to include.
ConclusionWhen researchers analyze welfare participation and costs, their dataset of choice has traditionally been the Annual Social and Economic Supplement (ASEC) of the Current Population Survey. While the ASEC is certainly useful — CIS uses it frequently — it substantially undercounts welfare participation. For that reason, CIS turned to the Survey of Income and Program Participation (SIPP), a more complex dataset developed by the Census Bureau specifically to analyze welfare use. CIS’s analysis of the SIPP has now generated two major studies. The first study, published in September 2015, measured welfare participation rates. It showed that 51 percent of immigrant-headed households used some form of welfare, compared to 30 percent of native households.17 This second study extends the SIPP analysis by moving from rates to costs. It finds that immigrant-headed households consume an average of $6,234 in welfare spending, compared to $4,431 for native households. The highest-cost immigrant households tend to be those headed by a person from Latin America, while the lowest-cost households are headed by people from Europe and Asia. This study implies that two competing narratives about immigration are both true. Immigrants do indeed have a strong attachment to the labor force, as immigration advocates often point out. At the same time, however, immigrants consume a large amount of welfare spending, just as critics claim. The reason that both narratives are true is that the American welfare system has become increasingly focused on buttressing low-wage workers rather than supporting non-workers. Put more simply, welfare and low-wage work go together. Just as natives with low levels of education and large numbers of children are apt to consume welfare, immigrants with those same characteristics are also likely to be on welfare. A strong work ethic does not change this reality. In order to reduce the cost of immigrant welfare use, either the welfare system or the immigration system must change. The former option is sometimes described as “building a wall around the welfare state” to prevent new immigrants from accessing it. It is easier said than done. Loopholes and exceptions have weakened previous attempts to limit immigrant access to welfare.18 More importantly, Congress has no power to prevent the U.S.-born children of immigrants from using the same welfare programs that the children of natives do. No matter how strong the “wall around the welfare state” is built, it cannot stop immigrant parents from signing up their U.S.-born children for Medicaid, SNAP, free school lunch, etc., as long as native parents can do the same. Only a full-scale rollback of the welfare state for both immigrants and natives would prevent immigrant families from consuming welfare dollars. Whatever one thinks of that proposal, it is not a policy change likely to occur in the near future.19 In fact, importing new clients of the welfare state likely makes it even harder to roll back.20 As long as the U.S. continues to admit large numbers of low-skill immigrants (legal or illegal), then immigrant welfare consumption will remain high.
AppendixTo determine which households use which welfare programs in the SIPP, this study follows almost the exact methodology of the previous CIS report, “Welfare Use by Immigrant and Native Households”. The one exception is that the aggregate Cash category now refers exclusively to SSI and TANF. In the previous study, Cash also included several miscellaneous programs such as state general assistance, veterans’ compensation, and, in the cryptic words of the SIPP documentation, “other welfare”.21 Because these smaller programs are too vaguely defined to locate in budget documents, the Cash category is now limited to the two largest cash assistance programs, SSI and TANF. The contribution of this study is to estimate the dollar costs associated with the welfare use rates previously reported. That process involves two major steps. First, some program costs in the SIPP must be imputed because they are not measured directly in the survey. Second, due to measurement error in the survey responses and imputations, the SIPP costs must be adjusted to reflect the full cost of each welfare program as reported in the government’s budget. Program Costs in the SIPP. The SIPP provides direct cost estimates for some but not all of the welfare programs for which it measures participation. Determining the annual household cost of SSI, TANF, WIC, and food stamps is simply a matter of summing the monthly values of the variables provided in the SIPP.22 However, the cost of free or reduced school lunch, Medicaid, and subsidized housing (the “cost-unknown programs”) must be imputed separately. Recall that the ASEC substantially undercounts program participation, making it suboptimal for a welfare analysis. However, the ASEC does provide direct cost estimates for the cost-unknown programs using imputation procedures developed by the Census Bureau. The approach of this study is to apply the same imputation to the SIPP’s cost-unknown programs as the Census Bureau uses with the ASEC. The aim is to produce a “best of both worlds” dataset that combines the more accurate participation rates of the SIPP with the more complete cost estimates of the ASEC. Table A1 outlines the process.
End Notes1 Steven A. Camarota, “Welfare Use by Immigrant and Native Households”, Center for Immigration Studies Backgrounder, September 2015. 2 National Research Council, The New Americans, Washington, D.C.: National Academy Press, 1997, p. 308. 3 The Heritage Foundation’s 2013 fiscal analysis makes the same assumption. Robert Rector and Jason Richwine, “The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer”, Heritage Foundation Special Report, May 6, 2013, p. 47. 4 Here is a list of the countries grouped under the region categories in Figure 2. Central America: Belize, Mexico, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama. Caribbean: Barbados, Cuba, Dominica, Dominican Republic, Grenada, Haiti, Jamaica, Trinidad and Tobago, West Indies. South America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Peru, Uruguay, Venezuela. Europe: Austria, Belgium, France, Germany, Ireland, Holland/Netherlands, Norway, Sweden, Switzerland, United Kingdom, Albania, Bulgaria, Greece, Hungary, Italy, Poland, Portugal, Romania, Spain, Czech Republic, Bosnia and Herzegovina, Croatia, Lithuania, Belarus, Russia, Ukraine, USSR. East Asia: China, Hong Kong, Japan, Korea, South Korea, Taiwan. South Asia: Afghanistan, Bangladesh, India, Iran, Nepal, Pakistan, Sri Lanka, Uzbekistan. Africa: Egypt, Equatorial Guinea, Ethiopia, Eritrea, Ghana, Kenya, Liberia, Morocco, Nigeria, Sierra Leone, Somalia, South Africa, Sudan. 5 Steven A. Camarota, “Welfare Use by Legal and Illegal Immigrant Households”, Center for Immigration Studies Backgrounder, September 2015, pp. 2-3. 6 Camarota, “Welfare Use by Immigrant and Native Households”, Appendix. 7 See, for example, Shikha Dalmia, “Heritage’s Updated Study on the Welfare Costs of Immigrants: Garbage In, Garbage Out”, Reason, May 7, 2013. 8 Camarota, “Welfare Use by Immigrant and Native Households”, Appendix. 9 Ibid., pp. 22-23. 10 National Research Council, The New Americans, pp. 284-289. The $2,200 figure refers to California, which the authors describe as likely to be an upper bound estimate. 11 Rector and Richwine, “The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer”, Table 6. Both types of households are in deficit because the government spends more than it takes in. 12 See, for example, Will Wilkinson, “Welfare and Amnesty”, The Economist, May 8, 2013. 13 The mistaken belief that immigration generates large indirect fiscal benefits seems to stem from confusing GDP growth with gains for natives. The latter is just a tiny proportion of the former. For a more in-depth discussion, see Jason Richwine, “Most of the Gains from Immigration Go to Immigrants Themselves – Not to Natives”, Center for Immigration Studies, February 10, 2016. 14 George Borjas, “Immigration and the American Worker”, Center for Immigration Studies Backgrounder, April 2013. 15 See, for example, George J. Borjas, Jeffrey Grogger, and Gordon H. Hanson, “Immigration and the Economic Status of African-American Men”, Economica, Vol. 73 (2010), pp. 255-282. 16 Robert D. Putnam, “E Pluribus Unum: Diversity and Community in the Twenty-first Century”, Scandinavian Political Studies, Vol. 30, No. 2 (June 2007), pp. 137-174. 17 Camarota, “Welfare Use by Immigrant and Native Households”. 18 Ibid., Appendix. 19 Means-tested anti-poverty spending has trended ineluctably upward. Even the famous “cuts” in 1981 and 1996 were just minor speed bumps on the road to higher spending. See Jason Richwine, “Crying Wolf Over Spending Cuts”, The Richwine Archive, January 18, 2014. 20 “How Mass (Legal) Immigration Dooms a Conservative Republican Party”, Eagle Forum, first published January 2014. 21 Personal communication with Shelley Irving at the Census Bureau. 22 One reported value for annual SSI receipt is an implausibly high $69,934. It appears to be a mis-code, as the next-highest value is just $37,281. The implausible value has been top-coded to $37,281 for this study. 23 A disabled person in the ASEC is under age 65 and has at least one of the following additional characteristics: SSI income, Social Security income, or not working due to illness. 24 Personal communication with Jessica Semega at the Census Bureau. 25 Unfortunately, the SIPP does not identify Medicare recipients who are under 15 years old, even though children with kidney disease could be on the program. Therefore, the cost of Medicaid never includes an additional $1,199 Medicare premium for respondents under 15 in this study. 26 Paul D. Johnson, Trudi Renwick, and Kathleen Short, “Estimating The Value of Federal Housing Assistance for the Supplemental Poverty Measure”, U.S. Census Bureau Working Paper, December 2010, pp. 6-7. 27 The SIPP panel used in this study started in 2008, so it is possible to calculate SIPP welfare costs over the fiscal-year period of October 2011 to September 2012 rather than over the calendar-year period. The trouble is that the Census Bureau provides longitudinal weights only for calendar years. Without those weights, the SIPP would be unrepresentative of the general population. 28 One reason SSI is overestimated in the SIPP may be that respondents confuse it with disability insurance (DI) payments. Both SSI and DI are administered by the Social Security Administration, but DI is a social insurance program open only to workers who pay into the system, while SSI is a means-tested transfer payment. Source: CENTER FOR IMMIGRATION STUDIES PUBLICATIONS]]>