Why Does Immigration Divide America?
Public Finance and Political Opposition to Open Borders

Gordon H. Hanson
University of California, San Diego
and National Bureau of Economic Research

March 2005

I thank Fred Bergsten, Richard Cooper, Ken Scheve, Matt Slaughter, and seminar
participants at the Council on Foreign Relations, Columbia University, the Institute forInternational Economics, UC San Diego, and the University of Oregon for helpfulcomments. Jeff Lin and Sergio Khwanang provided excellent research assistance.

Executive Summary
In this manuscript, I consider the interplay between public finance and U.S. immigration
policy. Immigration is making the U.S. population larger and more ethnically diverse
and the U.S. labor force more abundant in low-skilled labor. One consequence of thesechanges has been lower wages for low-skilled U.S. workers. More generally, the benefits
and costs of immigration appear to be distributed quite unevenly. Capital owners, landowners, and employers capture most of the benefits associated with immigration, which
they enjoy in the form of higher factor returns. Taxpayers in high-immigration U.S.
states shoulder most of immigration’s fiscal costs, which they bear in the form of higher
taxes that go to pay for public services used by immigrant households. On net theeconomic impact of immigration on the United States is small. However, small net
changes in national income mask potentially large changes in the distribution of income.
These distributional changes appear to be an important ingredient in how individuals
form opinions about immigration policy.
Survey data suggest that individuals are more opposed to immigration if they (a) are more
exposed to immigration’s labor-market consequences, as are low-income workers living
in states with large immigrant populations, or (b) are more exposed to the immigration’s
public-finance consequences, as are high-income workers living in states with highimmigrant uptake of public assistance. Policies that have reduced the fiscal costs ofimmigration, such as welfare reform in the 1990’s, appear to have softened political
opposition to immigration. Generating greater political support for open immigration
policies would require reducing immigration’s adverse effects on the labor-market
earnings and on the fiscal burdens of U.S. residents.
Currently, there is political gridlock in the United States regarding immigration policy.
This gridlock makes it difficult to address pressing issues related to illegal immigration,such as what to do about the 10 million illegal immigrants living in the United States, andnational security, such as how to get immigration authorities and intelligence agencies tocoordinate meaningfully with each other.
One strategy for reforming U.S. immigration policy would be to change the skill
composition of those admitted. By shifting to a system that favors high-skilled
immigrants, the United States would attract individuals with high income potential. A
skills-based immigration policy would help raise the wages of low-skilled workers andreduce the fiscal burden on taxpayers. However, it would have the disadvantage of
having its effects on U.S. labor markets blunted by other aspects of globalization. An
alternative (but not mutually exclusive) strategy would be to expand temporary
immigration programs and to phase in immigrant access to public benefits more slowly
over time. A rights-based immigration policy would help alleviate the negative fiscal
consequences of immigration and free immigration policy to be used for meeting U.S.
labor needs or achieving other objectives. To be effective, any change in immigration
policy must address enforcement against illegal immigration.

1

Table of Contents

1.

Introduction

2.

U.S. Immigration Policy and Recent Immigration Trends

3.

Immigrant Demands on Public Benefits

4.

Public Preferences over Immigration Policy

5.

Reforming U.S. Immigration Policy2

1. Introduction
Immigration is an issue capable of dividing otherwise like-minded people.
Identify a group whose members tend to agree on political issues – liberals,
conservatives, isolationists, internationalists, environmentalists, free marketers – and one
will tend to find that within the group there is no strong majority opinion about U.S.
immigration policy. Neither major political party is unified in its position on how open
U.S. borders should be to foreign citizens. Among Republicans, the business lobby
persistently advocates for access to foreign labor. Emphasizing the economic benefits ofimmigration, the view of the National Association of Manufacturers is that,“Foreign nationals have made enormous contributions to U.S. companies, our economy
and society as a whole. To continue our economic and technological preeminence weneed to ensure that we have access to the talent we need to lead and compete.”1
But many conservative groups oppose immigration due to the perception that it expands
the welfare state, dilutes American culture, and threatens national security.2 This split
within the party manifested itself most recently following President Bush’s 2004 proposal
to grant illegal immigrants temporary legal status as guest workers, an idea supported bybusiness interests. The sharpest criticism of the plan came from lawmakers in Bush’s
own party. A letter from two-dozen congressional Republicans complains,1

See http://www.nam.org/.

2

According to Rep. Tom Tancredo (R-CO), a leading congressional opponent of immigration, “There are 9
to 11 million illegal aliens living amongst us right now, who have never had a criminal background checkand have never been screened through any terrorism databases. Yet the political leadership of this country
seems to think that attacking terrorism overseas will allow us to ignore the invitation our open borders
presents to those who wish to strike us at home” (http://www.house.gov/tancredo/Immigration/). Former
Republican and presidential candidate Pat Buchanan adds, “If America is to survive as ‘one nation,’ wemust take an immigration ‘time out’ to mend the melting pot… The enemy is already inside the gates.
How many others among our 11 million ‘undocumented’ immigrants are ready to carry out truck
bombings, assassinations, sabotage, skyjackings?” (http://www.issues2000.org/).

3

“Our offices have been inundated with calls from dismayed constituents expressing
vehement opposition to the Administration's proposal… Respect for the rule of law is acore conservative value… We cannot continue to allow our immigration laws to beviolated and ignored… Illegal aliens are by definition criminals."3
Democrats are no more united. Union leaders have joined forces with Latinogroups in support of permanent legal immigration and of an amnesty for illegal
immigrants.4 But this runs counter to the opinions of many rank-and-file union members
who tend to prefer closed borders (Scheve and Slaughter, 2001a).5 Environmentalists arealso split on immigration, due to its effects on U.S. population growth. In 2004, an antiimmigration bloc attempted to gain control of the Sierra Club board. While the movefailed, the issue remains a source of conflict within the environmental movement.
Such internecine disputes over immigration mirror differences of opinion in theelectorate as a whole. When asked about the contributions of immigrants to U.S. society,over two-thirds of survey respondents recognize these as being positive (Scheve andSlaughter, 2001b). But when asked about the level of immigration, nearly half of survey
respondents would prefer to see the numbers admitted reduced. This leaves the publicroughly divided between those that prefer scaling down immigration and those that prefermaintaining it at current levels. Americans appear to believe that immigration offers a
3

Susan Jones, “Republican Lawmakers Won't Back Bush on Immigration,” CNSNews.com, January 26,
2004. See also Christopher Wills, “Immigration, Bush Proposal Divides Republican Candidates,” AP Wire,
February 1, 2004, and Valerie Richardson, “Republicans Warn Bush on Immigration Policy,” Washington
Times, January 28, 2004.
4

The AFL-CIO endorses granting legal status to illegal immigrants but opposes guest worker programs thatprovide immigrants with anything short of full labor rights (http://www.aflcio.org/). This position issimilar to that of the National Council of La Raza (http://www.nclr.org/), whose president praised the AFLCIO’s decision to support an amnesty: “This policy change makes the full labor movement a partner in theimmigrants' rights movement; we welcome their strong defense of immigrant workers. We applaudorganized labor for taking this wise and courageous action.”
5

See Juliet Eilperin, “Immigration Issue Sparks Battle at Sierra Club,” Washington Post, March 22, 2004,
p. A02 (http://www.washingtonpost.com/wp-dyn/articles/A13539-2004Mar21.html).

4

range of potential benefits to the country, but are also concerned about the costs
associated with admitting large numbers of foreigners.
One result of divisiveness is inaction. While there appears to be agreement acrossthe political spectrum that U.S. immigration policy is in need of repair, the likelihood ofserious reform appears dim. Common criticisms of current policy are that it fails to
enforce U.S. borders and leaves large numbers of individuals in legal limbo. The U.S.
Census Bureau (Costanzo et al, 2001) calculates that on net 300,000 to 500,000 new
illegal immigrants enter the United States each year. In 2003, the illegal population was
estimated to be 9.8 million individuals, up from 3.8 million in 1990 (Passel, Capps, andFix, 2004). In the aftermath of the terrorist attacks of 9/11, the security of U.S. borders
has assumed renewed urgency. Yet, U.S. border enforcement remains ineffective and thegovernment still lacks the ability track temporary legal immigrants in the country.6
If asked, few politician or voters would be likely to endorse high levels of illegal
immigration or inadequate border controls. Instead, these outcomes appear to be theresult of an accommodation of interests that is far from the first best. Business lobbies
for freer immigration but is countered by a diverse coalition that opposes open borders.
The result is a system in which the government restricts the level of permanent legal
immigration but allows less visible types of immigration to adjust by changing thenumber of temporary work visas and the intensity with which it enforces against illegal
entry. While business gets access to foreign labor, it must make due with a third or morethese workers being illegal and with many others being subject to the constraints of
temporary immigration status.

Illegality exposes U.S. companies to legal risks and6

See Camarota (2002). In June 2004, the U.S. government announced that it had awarded a contract to thefirm, Accenture, to develop the US-VISIT system, which would manage U.S. borders and monitor entry
and exit by foreigners (http://www.dhs.gov/dhspublic/index.jsp).

5

uncertainty about labor supply and denies immigrants legal protections, the ability tomove easily between jobs, and the incentive to make long-run investments in acquiring
skills or improving their communities.

Sources of Political Opposition to Immigration
That opinions on immigration vary is hardly surprising.

Immigration, likeinternational trade, foreign investment and other aspects of globalization, changes the
distribution of income within a country. In the United States, a disproportionate numberof immigrants have low skill levels, concentrating the negative labor-market effects ofimmigration on less-skilled U.S. residents. In 2003, 33% of all foreign-born adults in the
U.S. (including both legal and illegal immigrants) had less than 12 years of education.
This compares with only 13% of native-born adults. By increasing the relative supply of
low-skilled labor, immigration puts downward pressure on the wages of low-skilled
native-born workers.

George Borjas (2003) finds that between 1980 and 2000

immigration had the largest effect on the low-skilled, reducing the wages of native-bornhigh-school dropouts by 9%.7 The expanding supply and declining wages of low-skilledlabor benefits labor-intensive industries, which helps explain the support of certain
business groups, such as agriculture and apparel, for immigration.
Given these labor-market repercussions, we would expect low-skilled workers tobe among those most opposed to immigration.

In surveys of public opinion on

immigration policy, Kenneth Scheve and Matthew Slaughter (2001b) find that the
opposition to immigration is indeed higher among the less educated.

Less-skilled

7

While many early studies of the labor-market consequences of immigration found that its wage impacts
were small (Borjas, 1999b), recent studies find that immigration depresses wages for native workers who
are likely to substitute for immigrant labor (Borjas, Freeman, and Katz, 1997; Borjas, 2003).

6

laborers’ skepticism about immigration mirrors their skepticism about globalization in
general.8 Still, it does not appear that the labor-market effects of immigration alone can
explain the current political divide.

The workers adversely affected account for a

relatively small share of the U.S. electorate, both because today the number of highschool dropouts is small and because they are relatively unlikely to vote. Clearly, there
is more to immigration that its consequences for labor markets. Among its myriad othereffects, immigration also alters public finances and politics at the local and national levels
in ways that international flows of goods or capital do not. Immigrants pay taxes, use
public services, and, after naturalization, vote; imports do none of these things.
Contributing to the opposition to immigration is the concern that admitting lowskilled foreigners raises the net tax burden on U.S. natives. Low-skilled immigrants tend
to earn relatively low wages, to contribute relatively little in taxes, and to enroll ingovernment entitlement programs with relatively high frequency. There is abundantevidence that immigrants make greater use of welfare programs than natives (Borjas and
Hilton, 1996; Borjas, 1999a; Fix and Passel, 2002). This has remained true even after
welfare reform in 1996, which restricted immigrant access to many types of government
benefits (Zimmerman and Tumlin, 1999; Fix and Passel, 2002). In U.S. states with large
immigrant populations, such as California, immigration appears to increase net burdens
on native taxpayers substantially (Smith and Edmonston, 1997).
In this manuscript, I consider the interplay between public finance andimmigration policy in the United States.9 Immigration affects the incomes of existing
residents through its impacts on labor markets and on government taxes and transfers.
8

See Rodrik (1997, 1998), Scheve and Slaughter (2001a 2001b,2001c, 2004), O’Rourke and Sinnott (2001,
2003), Mayda and Rodrik (2002), Hainmueller and Hiscox (2004), and Mayda (2004).
9
I draw heavily on the analysis and results in Hanson, Scheve, and Slaughter (2005).

7

By increasing the relative supply of low-skilled labor, immigration tends to lower the
pre-tax income of low-skilled labor relative to the pre-tax income of high-skilled labor.
These labor-market outcomes help create opposition to immigration among the lessskilled. Immigration also affects after-tax income. If immigrants have access to public
assistance, public education, and other public services, and if their contributions to tax
revenues are insufficient to pay for their use of these services, then immigration will
force governments to raise taxes on existing residents, to reduce services to existing
residents, and/or to borrow from future generations. Any of these actions is likely to beunpopular, creating the potential for political action against immigration by individuals
that expect to bear immigration’s costs.
One factor that helps shape the politics of immigration is that U.S. states vary
substantially in their tax structures and spending policies. California and New York, forinstance, have high state income taxes and provide generous public benefits, while
Florida and Texas have no state income tax and provide markedly less generous benefits.
States also vary in the size of their immigrant populations.

A handful of states –California, Florida, Illinois, New Jersey, New York, and Texas – have in the last few
decades been the “gateway” states for immigrants entering the country (Borjas, 1999a).
Most new immigrants settle in one of these states, exposing their residents to the maineconomics consequences of immigration. Recently, immigrant settlement patterns havebegun to change, exposing new regions of the United States to the direct effects ofimmigration.

Since the 1990’s, Mountain, Southern, and Plains states – including

Arizona, Colorado, Georgia, Nevada, and North Carolina – have begun to attract large
numbers of immigrants (Passel and Zimmerman, 2001; Card and Lewis, 2005). The

8

interaction between local tax and spending policies and the size of the local immigrant
population determines who is subject to the costs and benefits of immigration, affecting
which voters will favor immigration and which will not.
In the absence of distortionary tax and spending policies, economic theory
suggests that low-skilled immigration would be supported by more-educated, high-skilled
U.S. workers and opposed by less-educated, low-skilled U.S. workers. As we’ve seen,
the available evidence is consistent with this prediction (see note 8). Theory would alsosuggest that the positive correlation between skill and support for immigration would bestrongest in states that do not provide generous welfare programs, since in these states thelabor-market effects of immigration are likely to dominate the public-finance effects. In
states that provide more generous public assistance to immigrants, the consequences ofimmigration for public finances are likely to be more important politically. If thesebenefits are financed by progressive income taxes, as, say, in California and New York,then high-skilled, high-income individuals – who are most exposed to the fiscal burden
associated with immigration – may join the low-skilled in opposing open borders.

A Tale of Two Governors
To motivate the story of how public finance affects the politics of immigration,
consider the recent history of California and Texas. In the mid 1990’s, the two stateseach had fiscally conservative Republican governors who were rising stars within theirparty. Governors Pete Wilson, elected in 1990, and George Bush, elected in 1994, were
touted as potential candidates for president and each later ran for higher office. As
governors of large states, they had a great deal on the line politically.

9

Both governors faced difficult fiscal environments. California, battered by the
post-Cold War decline in defense spending, had a severe recession in 1990 and 1991,
which left the state short on tax revenues. Wilson battled with the state legislature overcutting spending, leading to a shutdown in government payments that lasted for twomonths. Texas bore the brunt of the late 1980’s savings and loan crisis and the late1980’s and early 1990’s swings in oil prices. California and Texas were also absorbing
much of the national surge in immigration. During the 1990’s, as the foreign-born shareof the U.S. population grew from 8% to 11%, 37% of immigrants chose to reside in oneof the two states (as compared to only 17% of the native-born population).
Initially, Bush and Wilson appeared to have similar politics. Among other issues,
they were both unabashed free traders and strongly supported the North American Free
Trade Agreement. Yet, when it came to immigration they took very different approaches.
In California, Wilson made restricting public benefits to immigrants the centerpiece of
his strategy to control spending.

Memorably, he backed Proposition 187, a ballot

measure to deny public services to illegal immigrants.10 In Texas, Bush embraced thestate’s immigrant population and courted Latino voters, even campaigning in Spanish.11
He publicly distanced himself from Proposition 187 and said he would not support such ameasure in Texas.12 In his 1998 gubernatorial bid, Bush won 49% of the Latino vote(and 69% of the total vote), the strongest showing ever among Texas Hispanics by a
Republican in a state-wide electoral race.13

10

Julie Marquis, “Wilson Blames Ills on Illegal Immigrants,” Los Angeles Times, Oct. 17, 1994, B1.
R.G. Ratcliffe, “Bush Ads Aim for Big Share of Hispanic Vote; Governor Speaks Spanish in Radio
Spots,” Houston Chronicle, August 15, 1998, p. A33.
12
Juan Palomo, “The Cool Headed Governor,” Hispanic Business, Dec. 1995, 12-16.
13
Ken Herman, “Bush Proves Ethnic Bona Fides,” Atlanta Journal and Constitution, November 13, 1998,
p. 4C.
11

10

History has already rendered its verdict on these strategies. While Bush becamepresident, Wilson’s success was short lived. He did manage to get Proposition 187
passed, with the support of 59% of California voters. However, the subsequent politicalbacklash against the measure lead to successful court challenges against it and inspired
the Latino community and other pro-immigrant groups to organize politically against
Wilson and the state Republican Party.14 The legacy of Proposition 187 appeared tocontribute to the party’s poor showing in California’s statewide elections in 1998 and to
Wilson’s failed 2000 presidential campaign.
The experience of California and Texas with immigration shows how local tax
and spending policies influence the politics of immigration.

In California, with its

progressive income taxes and generous public benefits, high-income voters, who are an
important constituency within the Republican Party, saw immigration as increasing theirtax burden.

These individuals, in addition to conservatives who oppose illegal

immigration on law-and-order grounds, were an important source of pressure on Wilson
to reduce fiscal transfers to immigrants.15 Texas, in contrast, has a weaker safety net andrelies on regressive forms of taxation, such as a sales tax. The state’s high-income voters
may have perceived immigration as having a smaller impact on their tax obligations,giving Bush greater latitude in how to address the issue.16 In Texas, and other states
where the labor-market effects of immigration tend to dominate its public-finance effects,
political opposition to immigration appears to be less organized.

14“Nothing but Gravel in their Pan,” Economist, Mar. 7, 2002.
Louis Freedberg, “Wilson Defends Stance on Illegals,” San Francisco Chronicle, Jun. 23, 1994, A2.
16
In particular, Texas’ tax and spending policies may allowed Gov. Bush the political space to appear to beboth pro-immigrant, to appeal to the state Latino vote, and fiscally conservative, to appeal to the party’s
base. See “Yo te quiero mucho,” Economist, Sep. 28, 2000.
1511

Non-Economic Factors and Attitudes toward Immigration
Pressures on labor markets and public finances are by no means the only sourcesof opposition to immigration.

There have long been complaints that immigration

undermines .U.S. culture (Daniels, 2003; Tichenor, 2002).

In his 1996 and 2000

presidential bids, Patrick Buchanan attempted to tap into public discontent over bilingual
education and increasing ethnic diversity in the United States. Some of Buchanan’s
arguments are mirrored in Samuel Huntington’s (2004) influential critique of recent
immigration from Mexico and elsewhere in Latin America. Huntington claims that theculture and values of Latino immigrants are different from those of the predominantly
European immigrants who came to the United States in the late 19th and early 20th
centuries. These differences, Huntington contends, impede the assimilation of Latino
immigrants into U.S. society and slow the erosion of political loyalties to their homecountries.

As a result, the continuing surge in Latino immigration is weakening

American identity.
Huntington singles out Mexican immigration for its scale and for how Mexico’s
proximity to the United States has contributed to inflows of illegal migrants and to theconcentration of immigrants in the southwest. Without question, the focus on Mexico iswarranted. It has become is the most important source country for U.S. immigration,accounting for over one-third of new immigrants since 1990. However, evidence on
whether Mexican immigration weakens American identity is decidedly mixed.
Huntington cites language and intermarriage as areas in which Mexican immigrants havebeen slow to assimilate. The data do support this claim but hardly exhibit glaring
differences between immigrants from Mexico and those from other countries. After 10

12years in the United States 52% of Mexican immigrants report that they speak English
well or very well, compared to 63% of immigrants from other non-English-speaking
countries.17 Among marriages in which at least one of the spouses is Mexican American(second or later generation), 48% are exogamous partnerships (i.e., at least one of the
spouses is not of Mexican ancestry) (Duncan and Trejo, 2005). While members of otherimmigrant groups are more likely to be fluent in English and to marry outside of theirnational-origin group, differences between Mexican and other immigrants hardly appear
large enough to warrant significant concern. More broadly, the strong commitment of
Mexican immigrants to work, family, community, and church – which has been noted byobservers from across the political spectrum – appears to be in line with what areconsidered traditional American values.
One area in which Mexican immigrants do stand out is terms of educational
attainment. Two-thirds of recent Mexican immigrants have completed less than theequivalent of a high-school education (Borjas and Katz, 2005). This mirrors the lowlevel of average schooling in Mexico (and in many other developing countries). Whilesecond generation Mexican Americans complete 42% more schooling than theirimmigrant parents, progress in educational attainment appears to lag in third and later
generations (Grogger and Trejo, 2002).18
Given low schooling levels, Mexican immigrants are likely to compete for jobs
with low-skilled U.S. natives. Low schooling also contributes to low earnings potential
17

Excluding immigrants from all Latin American countries, the share of the foreign-born population
reporting to speak English well or very well rises to 66%. All figures on language ability are based on datafrom the 2000 U.S. Census of Population and Housing.
18
Over the period 1980-2002, average years of schooling is 8.8 years for first-generation Mexicans, 12.2
years from second-generation Mexicans, and 12.3 years for third-generation Mexicans (Duncan and Trejo,2005). See Smith (2003) for an alternative take on the data, in which he finds evidence of greater
educational progress between the second and third generations for Mexican Americans.

13and to low net contributions to government fiscal accounts, creating potentially adverse
consequences for native taxpayers in the southwestern states in which Mexican
immigrants tend to congregate. A distinguishing feature of Mexican immigration, then,is that its economic effects are concentrated on specific groups of native workers andtaxpayers. Putting aside the cultural ramifications of open borders, one wonders how
much the concentrated economic consequences of Mexican immigration (and of Latino
immigration more generally) account why there appears to be such a strong appetite for
Buchanan’s and Huntington’s arguments to scale back immigration from Mexico and therest of Latin America.
In this manuscript, I will focus almost exclusively on economic motivations forpolitical opposition to immigration. I will leave unexplored the claim that opposition to
immigration is rooted in conflicts over identity. In so doing, my analysis gives culturalarguments against open borders short shrift. In defense of this approach, the data I will
present appear to support the argument that economic motivations go a long way toward
accounting for individual attitudes towards immigration policy.

Plan for the Manuscript
In the following four chapters, I develop my argument about the interaction
between local public finance and public preferences toward immigration policy. In
chapter 2, I discuss current U.S. immigration policy and use recent data from the Current
Population Survey (CPS) to describe the evolution of U.S. immigration trends. I also
review evidence on the labor-market consequences of immigration.

14

In Chapter 3, I examine immigrant uptake of public benefits and the fiscal burden
this implies for native taxpayers. That the size and composition of immigrant populations
vary across U.S. states suggests that immigrant demands for public services also varyacross states.

Added to this are cross-state differences in the generosity of publicbenefits, made more extreme by federal welfare reform in 1996, which gave states
discretion about which benefits to offer and whether to give immigrants access to thesebenefits. Among states with similarly sized immigrant populations, those with moregenerous welfare programs in effect require each native household to pay for the benefits
used by a greater number of immigrant households. States with generous benefits also
tend to be states with progressive tax structures, suggesting that higher income
households in these states are likely to shoulder a disproportionate share of the fiscal
burden associated with providing public services to immigrants.
The results of chapters 2 and 3 suggest that the U.S. residents most adversely
affected by immigration will include low-wage workers, especially those living in highimmigration states, and high-wage workers living in high-immigration states with highimmigrant uptake of welfare. In chapter 4, I use data from National Election Studies
surveys to examine whether opposition to immigration is stronger among individuals forwhom immigration increases either expected labor-market competition or net tax
payments. Consistent with previous studies, I find that opposition to immigration isstronger among the less educated, the group most exposed to the labor-market
consequences of immigration. Building on the results in Hanson, Scheve, and Slaughter(2005), I also find that the opposition of the low-skilled is stronger in states with larger
immigrant populations, where we expect the wage effects of immigration to be strongest.

15

Among the highly educated, opposition to immigration is more intense in states in which
immigrants make greater use of means-tested entitlement programs. What appears tomatter for this group is not so much living in a high-immigration state, but rather living ina high-immigration state that also has high immigrant uptake of public assistance andother public benefits.
The results of Chapter 4 suggest several potential strategies to diffuse tensions
surrounding immigration and move toward meaningful reform of U.S. immigration
policies. One would be to shift the composition of the immigrants admitted toward thehigh skilled, which would reduce immigrant demand for public benefits and raise
immigrant contributions to tax revenues. Another would be to restructure the rights ofimmigrants regarding access to public benefits, which would reduce immigrant draws on
public expenditure. In Chapter 5, I discuss proposals for reforming U.S. immigration
policy.

Shifting towards skills-based immigration, as has been proposed by Borjas(1999) and Huntington (2004), would eliminate the benefits to U.S. consumers andemployers from low-skilled immigration. Additionally, it would fail to confront thecentral question in U.S. immigration policy, which is how to manage migrant inflows
from Mexico. In terms of its impact on U.S. wages, the effects of any shift from lowskilled to high-skilled immigration may be partly offset by increased imports from andU.S. investment in low-wage countries. Phasing in immigrant access to public benefits
more slowly over time is a potentially more attractive and more politically palatableapproach to achieve immigration reform. It would also create a framework in which
policy makers could address Mexican immigration.

16

To be effective, any change in immigration policy must address enforcement
against illegal immigration. Enforcement at U.S. borders, where immigrant authorities
currently devote most of their efforts, is ineffective.

Despite massive increases inspending on border enforcement since the early 1990’s, the inflow of illegal immigrants
has not slowed. An alternative policy would be to change the nature of U.S. enforcement
against the hiring of illegal immigrants.

Mandating information sharing between

immigration authorities, the Social Security Administration, and the Internal Revenue
Service (either through a national identity card or electronic tracking of immigrants’ visa
status) would permit employers to verify instantly whether or not a potential employee isa legal immigrant. This could expand the capacity of immigration authorities to enforce
against illegal immigration at the U.S. work place in a manner that is effective,
unobtrusive, and humane. The obtrusiveness of current efforts at enforcement of illegal
immigration in the U.S. interior in part accounts for its political unpopularity.

In the 2004 presidential campaign, both candidates identified immigration policy
as an important topic deserving attention. However, each was predictably vague about
the best way to go about policy reform. The building consensus that U.S. immigration
policy is broken creates a political opening for the new presidential administration toaddress the issue. Continued inaction would be costly. Among other consequences, itwould allow a large and growing segment of the U.S. labor force to operate in a legal
grey area, lacking the protections afforded by the rule of law. Creating a strategy toreform immigration policy requires, first, understanding the economic consequences ofimmigration and, second, how these consequences shape public attitudes about the
number of foreigners that should be admitted to the United States.

17

2. U.S. Immigration Policy and Recent Immigration Trends
Since the late 1960’s, immigration in the United States has been on the rise.
After several decades of decline, the share of immigrants in the U.S. population grewfrom 5% in 1970 to 12% in 2003 (Figure 1). The increasing presence of the foreign bornis the result of high levels of legal and illegal immigration, which reflect recent changes
in U.S. immigration policy. The continuing influx of immigrants includes large numbersof Asians and Latin Americans, who are altering the ethnic composition of the U.S.
population and the educational composition of the U.S. labor force.

U.S. Immigration Policy
U.S. immigration policy governs the admission of legal permanent and temporary
immigrants and enforcement policies that affect the inflow of illegal immigrants. In
addition to setting the level of immigration and the criterion for admitting immigrants,
U.S. policy also determines the rights conferred to different classes of immigrants.
Current U.S. policy on permanent legal immigration is based on a quota system,
established by the Hart-Celler Immigration Bill of 1965.19 Hart-Celler revised restrictive
quotas based on national origin, which the Immigration Act of 1924 had created, andmade family reunification a central feature of U.S. admission decisions.20 The result was
an increase in permanent legal immigration (Figure 2) and an expansion in the range ofcountries sending immigrants to the United States (Table 1). Later changes in U.S.

19

For histories of U.S. immigration policy see Tichenor (2002) and Daniels (2003).
The 1924 law represented the first comprehensive restrictions on immigration in the United States. Prior
to that time, the United States had been largely open to immigration from the rest of the world. The 1965
law amended the Immigration and Nationality Act of 1952, which had created skill-based categories for
immigration but had not changed the 1924 restrictions on national origin (Smith and Edmonston, 1997).

20

18

policy granted special status to refugees and asylees.21 Under the present system, U.S.
Citizen and Immigration Services (of the Department of Homeland Security) assigns
applicants for permanent legal residence to one of seven categories, with each subject toits own quota level.22 The law guarantees admission to immediate family members of
U.S. citizens, who are exempt from entry quotas. Specific quotas are assigned to otherfamily members of U.S. citizens, immediate family members of legal U.S. residents,
individuals in special skill categories, and refugees and asylees facing persecution in theirhome countries.23 Of the 705,827 permanent legal immigrants admitted in 2003, 70%
gained entry as family members of U.S. citizens or legal residents, 12% gained entry on
the basis of employment preferences, 7% were admitted under the diversity program, 6%
were refugees, and 5% were in other categories (DHS, 2004).
After five years as a permanent legal resident, an immigrant is eligible to apply
for U.S. citizenship. Citizenship confers the right to vote and the right to draw on all
government benefit programs for which an individual meets eligibility requirements. In
1996, as part of a comprehensive reform of federal welfare policies, Congress excluded
non-citizen immigrants from access to many entitlement programs (Zimmerman and
Tumlin, 1999). While a number of U.S. states have restored immigrant access to some21

The Refugee Act of 1980 created procedures for the admission of refugees “of humanitarian concern,”eliminating refugees and asylees as a category of the existing quota-preference system (DHS, 2004).
22
In 2003, the Immigration and Naturalization Service (INS) was moved from the Department of Justice tothe Department of Homeland Security (DHS). INS functions were divided among three DHS agencies.
Immigration-related services moved to U.S. Citizenship and Immigration Services (USCIS), enforcementof immigration laws in the interior United States moved to U.S. Immigration and Customs Enforcement(ICE), and enforcement of U.S. borders, including the U.S. Border Patrol, moved to the Bureau of Customs
and Border Protection (CBP).
23
The Immigration Act of 1990 set a flexible cap for legal admissions at 675,000 of which 480,000 would
be family-based, 140,000 would be employment-based, and 55,000 would be “diversity immigrants.” Thelaw also set temporary immigration at 65,000 for the H-1B program and 66,000 under the H-2 program,and created new categories for temporary admission of workers (O, P, Q, R). Subsequent legislation
created categories for temporary immigration of professional workers from Canada and Mexico as part of
the North American Free Trade Agreement (DHS, 2004).

19

programs, the effect of welfare reform was to create a five-year waiting period before
permanent immigrant may have full access to benefits (Table 2).
Additional admissions of legal immigrants occur through the granting of
temporary work visas.24 In 2003, the United States admitted 590,680 temporary workers
and 135,933 immediate family members accompanying these individuals (DHS, 2004).
The largest classes of temporary work visas are for high-skilled workers (H-1B), shortterm manual laborers in agriculture (H-2A), short-term manual laborers outside of
agriculture (H-2B). To obtain a temporary work visa, an immigrant must be sponsoredby a U.S. employer. The H-1B visa was created in 1990 to permit foreigners with acollege degree to work in the United States for a once renewable three-year term for
employers who petition on their behalf. Most individuals on H-1B visas work in theelectronics or software industries. Between 1998 and 2000, the U.S. Congress raised theannual number of H-1B visas from 65,000 to 195,000; in 2003, it allowed their number tofall back to 65,000. The H-2A visa, created by the Immigration Reform and Control Act
of 1986, applies to seasonal laborers in agriculture. The H-2B visa applies to hotel andrestaurant workers, landscape workers, and other low-skill workers in seasonal
occupations. The bureaucratic steps needed to obtain H-2A or H-2B visas are onerous,
which appears to limit their use. Between 2000 and 2003, the numbers of H-2 visas
awarded annually ranged from 14,000 to 33,000 under the H-2A program and from51,000 to 103,000 under the H-2B program.

24

There are large numbers of temporary entry visas given to tourists, business travelers, and students, noneof whom are eligible to work in the United States. The figures in the text exclude these categories andtemporary visas given to foreign government officials (equal to 138,496 in 2003); and intra-company
transferees, NAFTA workers, and their family members (equal to 168,580 in 2003) (DHS, 2004).

20

Though the United States does not set the level of illegal immigration explicitly,
existing policy in effect allows substantial numbers of illegal aliens to enter the country.
In 2003, the illegal immigrant population was estimated to be 9.8 million individuals(Passel, Capps, and Fix, 2004).25 During the 1990’s, an average 300,000 to 500,000 net
new illegal immigrants entered the United States each year (Costanzo et al., 2001; INS2003). Current U.S. policy on illegal immigration is based the Immigration Reform andControl Act (IRCA) of 1986, which made it illegal to employ illegal aliens,26 mandated
monitoring of employers, and dramatically expanded border enforcement. Between 1980
and 2002, real expenditure on immigration enforcement increased by 5.6 times to $1.8
billion. IRCA also offered amnesty to illegal aliens who had resided in the United Statessince before 1982. As a result of IRCA, the United States granted permanent legal
residence to 2.7 million individuals, 2 million of whom were Mexican nationals (Bureau
of International Labor Affairs, 1996) (Figure 2).27
Most illegal immigrants enter the United States by crossing the U.S.-Mexico
border or by overstaying temporary entry visas. The U.S. Border Patrol enforces against
illegal immigration by policing the U.S.-Mexico border and other points of entry fromabroad and by seeking to prevent the smuggling and employment of illegal workers. In
2003, the Border Patrol apprehended 931,557 illegal aliens in the United States (which
25This estimate of the illegal immigrant population is equal to the residual foreign born as tabulated fromofficial government survey data. To calculate the residual foreign born, one takes the enumerated
immigrant population in the U.S. Current Population Survey (or the U.S. Census of Population andHousing) and subtracts new legal immigrant admissions (less estimated departures and deaths for legal
immigrants). The residual foreign born population is thus immigrants left over after accounting for net
legal immigration. Since the CPS and the census appear to undercount the illegal immigrant population by
as much as 15%, the residual foreign born may underestimate the U.S. illegal immigration population. See
Bean et al. (2001), Costanzo et al. (2001), and INS (2001).
26
Prior to this time it had been illegal to “harbor” illegal aliens but not to employ them (Calavita, 1992).
27
As a result of IRCA, during the late 1980’s and early 1990’s net illegal immigration slowed (since large
number of illegal immigrants were becoming legal immigrants) but gross inflows of illegal immigrants
appeared to continue at high levels (INS, 2001).

21

were 89% of total apprehensions of illegal aliens by U.S. immigration authorities).28 Of
these, 95% were Mexican nationals (DHS, 2004). Most of the Border Patrol’s activities
are concentrated in U.S. cities that border Mexico, such as San Diego, El Paso, and El
Centro. This has encouraged those attempting illegal entry to cross in the less populated– and more treacherous – desert and mountain regions of Arizona and eastern
California.29 In 2003, immigration authorities apprehended another 114,865 individuals(11% of total apprehensions) through interior enforcement activities. Very little of either
border or interior enforcement occurs at U.S. work sites. Of Border Patrol apprehensions
in 2003, only 5,800 (0.6% of the total) occurred at U.S. farms or other places of
employment (the rest occurred at or near the U.S.-Mexico border). Few employers facepenalties for hiring illegal workers. In 2003, only 72 employers were convicted for
employing illegal immigrants. Since 1986, fewer than two dozen employers have paidfines in excess of $75,000 as a result of penalties associated with hiring illegal
immigrants. These facts lead the General Accounting Office to conclude in a recent
report that once in the United States illegal immigrants appear to face relatively little riskof apprehension or deportation (GAO, 2002).
While illegal immigrants lack the same rights granted to permanent or temporary
legal immigrants, they do enjoy some legal protections. The Supreme Court has ruledthat the government may not deny public education or emergency medical services toforeign-born U.S. residents, even those in the country illegally.

This gives illegal

immigrants the right to send their children to U.S. public schools and to call upon
28

Other apprehensions are by non-Border Patrol immigration authorities in the U.S. interior.
Apprehensions of illegal aliens overstate attempted illegal immigration as a single individual may be
captured by the Border Patrol multiple times in a given year.
29
The end result of this policy has been an increase in deaths among illegal border crossers from 50
individuals a year in the early 1990’s to 300-500 per year in the early 2000’s (Cornelius, 2001).

22

emergency medical care from U.S. hospitals. The U.S.-born children of immigrants,
whether their parents are legal or illegal residents, are eligible to receive welfare benefits
targeted to children, such as subsidized health care and school lunches. In practice, theBorder Patrol rarely polices near schools, public health facilities, churches, or otherlocales where apprehending illegal immigrants would be politically controversial.
Combined with the lack of enforcement at U.S. work sites, this creates many public
spaces where illegal immigrants may move about in relative freedom.
It is a common misperception that illegal immigrants do not make contributions to
tax revenues. Illegal immigrants pay sales taxes on their consumption purchases andproperty taxes on dwellings they own or rent. In addition, many illegal immigrants
contribute to Social Security and to federal income taxes. Since IRCA in 1986, U.S. law
requires that employers ask employees to provide proof of their employment eligibility.
In response, many illegal immigrants present employees with fake Social Security cards
that have invalid Social Security numbers.

Most employers appear to treat illegal-

immigrant employees as legal workers, withholding federal payroll taxes and income
taxes from their paychecks. When paying payroll taxes on these workers, employers end
up making contributions to invalid Social Security accounts.
The Social Security Administration holds contributions with invalid names orSocial Security numbers in what is know as the Earnings Suspense File. Since the late1980’s, when IRCA went into effect, annual inflows into the Earnings Suspense File havesoared, rising from $7 billion in 1986 to $49 billion in 2000. As of 2003, the Earnings
Suspense File contained $463 billion in contributions (Council of Economic Advisors,2005). While the earliest items in the file date back to 1937, the vast majority of23

contributions have accumulated since 1985 (Social Security Administration, 2003). It
seems highly unlikely that illegal immigrants who have contributed to invalid accounts
would be able to draw on Social Security benefits in the future.30 While the Social
Security Administration does not immediately release funds in these accounts, theholdings in the Earnings Suspense File initially amount to a zero-interest-rate loan fromthe contributors to the U.S. federal government and eventually are rolled into the Social
Security Administration’s general funds.
Many employers also withhold federal income taxes from the paychecks of illegal
immigrants, though the value of these contributions is hard to gauge. As a means ofestablishing a credit history, some self-employed illegal immigrants appear to pay income
taxes voluntarily. This may account in part for the rapid increase in the number of tax
identification numbers given out by the Internal Revenue Service to individuals who areunable to obtain Social Security numbers. Between 1996 and 2003, the IRS gave out 6.8
million tax ID numbers to such individuals. Certainly, not all of these tax IDs go toillegal immigrants. They also go to foreign students and researchers who are in the
United States on temporary visas and cannot obtain a Social Security number.31 By thesame token, it appears unlikely all of these tax IDs could have gone to students andresearchers, suggesting the IRS has awarded tax IDs to many illegal immigrants.

U.S. Immigration Trends
Immigration is making the U.S. population larger and more ethnically diverse andthe U.S. labor force more abundant in low-skilled labor. In this section, I use data from30

At several junctures, Congress has contemplated action that would explicitly prohibit illegal immigrants
from drawing on their contributions to Social Security. See Mark Stevenson, “Ban Sought on Benefits for
Illegal Immigrants,” Associated Press, August 31, 2004.
31
See “Illegal Aliens Paying Taxes,” CBSNews.com, April 14, 2003.

24

the Current Population Survey to review recent U.S. immigration trends. These data
include both legal and illegal immigrants (see note 25), and among legal immigrants
include both permanent residents and those on longer-term temporary visas.
Recent immigrants come primarily from Asia and Latin America. Of immigrants
entering the United States between 1990 and 2003, 58% came from Latin American and
26% came from Asia (Table 1). Mexico is the most important source country for
immigration, accounting for 34% of all immigrants arriving since 1990 and 30% of thetotal U.S. foreign-born population. The shift in U.S. immigration toward Asia and Latin
America has diminished Europe’s role. In 2003, while 41% of immigrants who hadentered the United States before 1970 came from Europe, only 12% of immigrants
entering the country since 1990 came from the region.
Based on estimates by the U.S. Census Bureau and by academic demographers,
Asia and Latin America appear to be even more important as source regions for illegal
immigration.32 In 2000, Asia and Latin America accounted for 75% of the U.S. illegal
immigrant population, up from 69% in 1990. Mexico is by far and away the largest
source country for illegal immigrants, accounting for 57% of the illegal population in2003 (Passel, Capps, and Fix, 2004). In 2000, the share of the foreign-born population in
the country illegally was 31% for all immigrants, 19% for immigrants from Asia, 36% for
immigrants from Latin America, and 49% for immigrants from Mexico (Costanzo et al.,2001). Not surprisingly, illegal immigration is correlated with economic conditions in
Mexico, Central America, and other sending regions. Attempted illegal immigrationfrom Mexico surges following contractions in the Mexican economy, which tend to be32

See note 25 on methods used to estimate the illegal immigrant population.

25

particularly severe in the aftermath of one of the country’s periodic currency crises.
Border Patrol apprehensions at the U.S.-Mexico border increase 6% for every 10%
decline in real wages in Mexico (Hanson and Spilimbergo, 1999). Mexico’s real wages
fall sharply any time the peso collapses (or there is unexpected inflation), meaning that
economic crises in the country are typically followed by a large increase in the U.S.
inflow of illegal immigrants from Mexico.
Immigrants are over-represented at the extremes of the U.S. skill distribution andunder-represented in the middle of the U.S. skill distribution. Immigrants are much more
likely than natives to have low levels of schooling. In 2003, 33% of immigrants 25 years
and older had not completed the equivalent of a high-school education, compared to only
13% of U.S. natives (Figure 3). At the same time, immigrants are as likely as natives tobe highly educated, with 27% of each group having completed a bachelor’s degree (andwith more immigrants than natives completing an advanced degree). Where immigrants
are under-represented is among individuals with moderate schooling. Workers with ahigh-school degree or with some college account for 60% of U.S. native-born adults but
only 41% of immigrants.

The skill gap between natives and immigrants is one

consequence of the shift in immigration from Europe, where schooling levels are similar
to those in the United States, to Asia and Latin America, where schooling levels are well
below those in the United States (Borjas, 1999a).
By increasing the supply of labor, immigration tends to drive down wages for
U.S. workers. Borjas (2003) estimates that over the period 1980 to 2000 immigration
contributed to a decrease in average wages for U.S. native workers of 3%. This estimate
accounts for the total change in the U.S. labor force due to immigration, including both26

legal and illegal sources. Since immigration is concentrated among certain skill groups,
its wage effects are largest for low-skilled and high-skilled native workers, with lowskilled workers suffering the largest wage declines. Borjas estimates that over the 19802000 period immigration lowered wages by 9% for native workers without a high-school
degree, 3% for native high-school graduates, a negligible amount for natives with somecollege, and 5% for native college graduates.
Immigrants tend to earn less than U.S. native-born workers and are more likely tobe employed in low-wage occupations. A low level of schooling and a lack legal statusconfine many immigrants to low-wage jobs.

In 2003, while 62% of natives weremanagers, professionals, or technical or administrative staff, only 43% of immigrants
were in one of these occupations (Figure 4). And, while only 25% of natives worked in
low-paying manual labor or agricultural occupations, 43% of immigrants held one ofthese jobs.

Low-skilled immigrants are even more concentrated in low-paying

occupations, with 70% of immigrants with less than a high-school education working as
manual laborers or in agriculture.
These differences in native and immigrant occupational outcomes are reflected in
the earnings of the two groups. Among full-time, year-round workers in 2003, 45% of all
immigrants and 72% of immigrants with less than a high-school education earned lessthan $25,000 a year, compared to only 25% of natives (Figure 5).

Given native-

immigrant differences in educational attainment, it is not surprising that immigrants areunder-represented in the middle of the earnings distribution. While 40% of native-bornworkers earned between $35,000 and $75,000 a year, only 21% of immigrants fell into
this category. Overall, median earnings for native workers were 30% higher than for27

immigrants.33

As with the native-immigrant skill gap, the gap between native andimmigrant earnings has grown over time (Borjas, 1999b).
Illegality contributes to the low earnings potential of some immigrants. Sherri
Kossoudji and Deborah Cobb-Clark (2002) examine illegal immigrants who attained
legal status as a result of the IRCA amnesty in the late 1980’s and early 1990’s. They
estimate the penalty for being an illegal immigrant in the 1980’s was a wage that was
14% to 22% lower than for legal workers. Much of this wage penalty appears to be dueto the limited ability of illegal immigrants to move between occupations, which may
decrease their bargaining power vis-à-vis employers. Low wages for illegal immigrants
may be one reason employers oppose increased enforcement against illegal immigration(Hanson and Spilimbergo, 2001; Boeri, Hanson, and McCormick, 2002).
Immigrants tend to settle in specific U.S. regions. In the past several decades,
upon arriving in the United States immigrants tended to settle in the "gateway" states ofCalifornia, Florida, Illinois, New Jersey, New York, and Texas. In 2003, these six states
were home to 67% of immigrants but only 40% of the total population (Table 3).
California, on its own, is home to 28% of all immigrants, but only 12% of all U.S.
residents. Within the gateway states, most immigrants live in a few large cities. In 2003,
46% of immigrants, but only 17% of the native born, lived in one of just five
metropolitan areas:

Los Angeles, New York, San Francisco, Miami, and Chicago.

33

These differences in earnings do not control for differences in annual hours worked or for differences inage, education, and other characteristics between immigrants ant natives. Using data from 1990, Borjas(1999b) finds that controlling for differences in hours worked, natives earned 16% more than immigrants;
and controlling also for age, education, and other observable characteristics, natives earned 10% more than
immigrants. This pattern has changed markedly over time. In 1960, natives earned 4% less than
immigrants (controlling for hours worked) and 1% less than immigrants (controlling for hours worked andother observable characteristics).

28

Illegal immigrants are also regionally concentrated. In 2000, 68% of illegal immigrants
lived in gateway states, with 32% living in California alone (INS, 2001).
In recent years, immigrant settlement patterns have begun to change. During the1990’s, the states with the fastest growth in their immigrant populations were located in
the Southeast (Georgia, North Carolina), Mountain West (Arizona, Colorado, Nevada),
and Great Plains (Nebraska, Kansas) (Figure 6). These states also had high growth innative employment (Figure 7), suggesting that immigrants tend to move to regions where
job growth is strong.34 As the next section will show, these states are not known for thegenerosity of their welfare benefits, suggesting that their attraction to immigrants isdriven by jobs and not by a desire to gain access to entitlement programs. The shift in
population out of gateway states is even more notable among the illegal foreign-born
population. Between 1990 and 2000, the share of illegal immigrants residing outside thesix gateway states increased from 20% to 32% (INS, 2001).

The influx of low-skilled immigrants from Asia and Latin America is changing
the U.S. economy. While increasing the supply of low-skilled labor tends to drive down
wages for low-skilled native workers, it also helps resuscitate U.S. industries that rely on
manual labor. The arrival of immigrant workers appears to have helped meat-packing
plants in the Great Plains, poultry-processing facilities in the South, and textile factories
in the Southeast. Without immigrant labor, these industries may have shut down, withgrave consequences for their regional economies.

Immigrant labor has also helped

sustain the 1990’s and early 2000’s construction boom in the Southwest and Southeast.

34

The correlation between the log change in the share of the state population that is foreign born and thelog change state native employment from 1990 to 2000 is a highly statistically significant 0.53.

29

Economic theory suggests that the wage losses associated with immigration are morethan offset by income gains to factors that are complementary to immigrant labor.
However, there is no reason to expect these offsetting gains to make immigration popular
politically. By redistributing income away from manual labor and towards factory or
farm owners, immigration creates winners and losers, who are each likely to appeal totheir political representatives, either to reverse their losses or to secure their gains.

30

3. Immigrant Demands on Public Benefits
The predominance of the low-skilled among recent U.S. immigrants means thatmany new arrivals work in low-wage occupations and have incomes towards the bottomof the earnings distribution. As low wage-earners, these immigrants are likely to pay
little in taxes and to make large demands on public expenditures, relative to other U.S.
residents. Compounding their demands on public services, immigrants also tend to havelarge families. These facts have raised concern that immigration causes a net drain on
U.S. public finances and increases the net fiscal burden on native taxpayers.
The tendency for immigrants to concentrate in certain geographic areas meansthat the public-finance consequences of immigration are likely to vary regionally within
the United States. Residents of states with larger populations of low-skilled immigrants
will naturally bear a larger share of the fiscal cost associated with immigration. Adding
to regional disparities in these costs, states also vary in the generosity of the publicbenefits they provide. Residents of states that both attract immigrants and offer generous
benefits are those most exposed to immigration’s net fiscal burden.

Immigrant and Native Use of Welfare Programs
Individuals demand public services in many forms, including public safety (fireand police protection), public spaces (parks and recreation facilities), public education,
public health care, and public assistance (welfare). For immigrants, it is their access topublic health care and public assistance that is the most controversial. The Current
Population Survey (CPS) has information on individual participation in various types ofsocial assistance in its Annual Demographic Files (the March Supplement). I use CPS
data from 1994 to 2003 to examine immigrant and native receipts of welfare benefits. As

31

with the U.S. Census of Population and Housing, the CPS includes both legal and illegal
immigrants and among legal immigrants includes both those who are permanent residents
and those who are in the country on temporary work or study visas.35
I classify individuals as living in households headed either by a foreign-born or anative-born individual and then examine usage of social assistance by members of thehousehold. In so doing, I count the U.S.-born children of immigrants as members ofimmigrant-headed households, as long as they reside with their parents or other foreignborn relatives. This in effect ascribes the welfare behavior of children to their parents.
Households are natural groupings to examine. They are the units on which government
agencies assess income taxes, property taxes, and other levies.

When determining

individual eligibility for means-tested benefit programs, it is typically the characteristicsof the household that are taken into account (Zimmerman and Tumlin, 1999). Following
the academic literature, I classify households as receiving welfare if anyone in thehousehold received any type of social assistance, be it cash or in-kind benefits. I also
examine the specific participation by immigrant and native households in four major
entitlement programs: general assistance or Temporary Assistance for Needy Families(TANF), Supplemental Security Income (SSI), Medicaid, and food stamps.36
In 2002, immigrant-headed households were much more likely than native-headedhouseholds to participate in welfare programs (Table 4). Among immigrant households,
24.2% had at least one member who used some type of social assistance, compared to35

As discussed in note 25, the census and the CPS are likely to undercount illegal immigrants, with mostestimates of the undercount rate for recent surveys ranging from 5% to 15%.
36
The other non-cash benefits on which the CPS has data are energy assistance, housing assistance, school
breakfasts and lunches, and Women Infants and Children (WIC). A household shown to receive some typeof assistance has at least one member that receives at least one type of cash or non-cash benefit. Prior towelfare reform in 1996, TANF was known as Aid to Families with Dependent Children (AFDC). SSI
provides cash benefits to the disabled and to the elderly who lack other means of support.

32

14.9% of native households.

Immigrant households were thus 9.3% more likely thannative households to receive public benefits.

Since the early 1990’s, academic

researchers have consistently found that immigrants are more likely than natives toreceive social assistance (Borjas and Hilton, 1996; Borjas, 1999a and 2002). Given that
immigrants are relatively likely to earn low incomes and to live in poverty, this is hardly
surprising. Participation in welfare programs is means tested. Household income andsize are the key determinants of eligibility for public benefits.
The immigrant-native differential in overall welfare use has fluctuated over time,
but does not show a consistent trend (Figure 8). In 1994, the share of households
receiving welfare was 24.6% for immigrants and 15.3% for natives, which represents thesame differential (9.3%) as in 2002. Between 1994 and 1999, both immigrants andnatives reduced welfare use, with native use of social assistance falling by 2.2% (15.3%
to 13.1%) and immigrant use falling by 4.6% (24.6% to 20.0%). During the late 1990’s,
the immigrant-native differential in overall welfare use thus declined from 9.3% to 6.9%.
Initially, academic researchers attributed the 1990’s decline in immigrant welfare
uptake to welfare reform (Fix and Passel, 2002; Borjas, 2002). In 1996, Congressundertook a major overhaul of federal welfare programs. The reform mandated workrequirements as a precondition to receive benefits, limited the life-time use of certain
benefits, gave states more discretion over program design, and excluded non-citizens
from access to many benefits. Congress substituted state entitlements to open-ended
federal funds with block grants, leaving states with considerable autonomy overindividual eligibility criteria. For legal immigrants arriving before 1996, states have theoption of whether to use their federal block grants to provide this group with TANF,

33

Medicaid, and other benefits (Table 2). For legal immigrants arriving after 1996, states
may not use federal block grants to provide non-citizens with these benefits, but they are
free to use other state funds to create substitute programs.37 States now vary considerably
in the programs they offer to immigrants (Zimmerman and Tumlin, 1999) (Table 5).
After five years, immigrants may apply for citizenship, which guarantees their access topublic benefits for which they meet standard eligibility criteria. For new immigrants, thisin effect mandates a minimum five-year waiting period for access to most benefits, since
they may not apply for citizenship until they have completed five years of residence inthe United States. Denying non-citizens access to benefits thus raises the incentives tonaturalize. Borjas (2002) finds that since welfare reform naturalization rates among
immigrants have risen sharply, especially in California where the gains to naturalizationin terms of access to public assistance are relatively high.
The late 1990’s were a difficult period in which to evaluate the effects of welfare
reform. It was late in a sustained economic expansion in the United States. If the lateyears of the boom helped low-income workers more than other workers, then during thisperiod immigrants may have enjoyed relatively large income gains, causing them to leave
welfare rolls in relatively large numbers. The early 2000’s, which brought a recession
and a slow economic recovery to the United States, allow us to examine immigrant andnative welfare use during a period of slow economic growth. From 1999 to 2002, use ofsocial assistance increased by 4.2% for immigrants and 2.7% for natives. The larger

37

Despite welfare reform, some states, including California and Texas, have chosen to provide healthservices to illegal immigrants. The motivation for this appears to be that it is more cost effective thanhaving these individuals use emergency medical services, instead. See Clay Robison, “Senate approvescare for illegal immigrants”, Houston Chronicle, 5 May 2003, p. A19.

34

increase in welfare use by immigrants erased the effects of the late 1990’s and left theimmigrant-native differential in overall welfare use in 2002 identical to that in 1994.
Does this mean welfare reform has not affected the frequency with which
immigrant households use social assistance? While the immigrant-native differential in
overall welfare use hasn’t changed over time, the composition of benefits received byimmigrants and natives has changed. In 1994, immigrant households were 5.2% more
likely than native households to receive some type of cash benefit (general assistance,
AFDC, SSI) (Table 4, Figure 8). By 2002, this differential had fallen to 2.0%. Similarly,
between 1994 and 2002 the differential between immigrant and native use of food stamps
declined from 5.3% to 1.0%.

Medicaid is the only major category in which theimmigrant-native welfare differential didn’t fall (and in fact increased from 9.1% to9.6%). The share of immigrant households using of all types of social assistance except
Medicaid has declined, both in absolute terms and relative to natives. This suggests thatwelfare reform has had the intended effect of limiting immigrant access to many types ofpublic benefits. What appears to explain immigrants continued access to Medicaid is that
it is a program for which U.S.-born children are eligible, regardless of the citizenship of
their parents. Many immigrant-headed households may have retained their access to
Medicaid by virtue having children that are U.S. citizens.38
That many immigrant families have lost access to cash benefits but not healthbenefits may reflect variation in the cost that voters ascribe to different types of public
assistance. Native voters may be more willing to support immigrant access to health carethan to provide unconstrained cash payments to immigrants, especially when the health38

See Leighton Ku, Shawn Fremstad, and Mathew Broaddus, “Noncitizens’ Use of Public Benefits Has
Declined since 1996: Recent Report Paints Misleading Picture of Impact of Eligibility Restrictions on
Immigrant Families,” Center for Budget and Policy Priorities, http://www.cbpp.org/4-14-03wel.htm.

35

care is targeted to children (who as the only U.S. citizens in many immigrant households
may be the only ones eligible to use Medicaid).

Variation in Immigrant Welfare Use across U.S. States
An important consequence of welfare reform was to grant states discretion insetting eligibility requirements for non-citizens and in allocating funds for the provisionof social assistance. However, even before welfare reform states varied in the generosityof the public benefits they offered. In the mid 1990’s, the share households receiving
some type of public assistance among natives ranged from 4% in Nevada to 24% in
Tennessee and among immigrants ranged from 3% in Alabama to 37% in New Mexico(Figure 9a). After welfare reform, states also varied in the extent to which they granted
non-citizens access to entitlement programs (Figure 9b). A recent study by the Urban
Institute shows that states that offer more expansive benefits also tend to make theirbenefits more available to non-citizens (Zimmerman and Tumlin, 1999). States in theupper-right corner of Table 5 (e.g., California, Massachusetts, New Jersey, New York)
have relatively generous benefits and high availability of these benefits to non-citizens;states in the lower-left corner (e.g., Arizona, Colorado, Georgia, Nevada, North Carolina,
Texas) have relatively stingy benefits and low availability of these benefits to noncitizens.

Few states are in the off-diagonal upper-left corner (low generosity of

benefits/high availability to non-citizens) or lower-right corner (high generosity of
benefits/low availability to non-citizens).
Not surprisingly, immigrant uptake of welfare is higher in states that are moregenerous in the benefits they provide. Table 6 shows usage of social assistance byimmigrant and native households in more and less generous states. More generous states36

are defined to be those in the four upper-right cells of Table 5, such that they have bothgenerous benefits overall and high availability of these benefits to non-citizens. In 2002,
relative to immigrants in less generous states, immigrants in more generous states were
4.8% more likely to use any type of social assistance (25.5% to 20.7%), 4.9% more likely
to receive cash benefits (8.3% to 3.4%), and 5.3% more likely to receive Medicaid(24.7% to 19.4%).

Each of these differentials in welfare use is larger than thecorresponding differential for native households between more and less generous states.
Since benefit programs are means tested, the more low-income immigrants there
are in a state the more households there are that will be eligible to receive welfare.
Household income depends heavily on the education of the household head. Figure 10
shows a strong negative relationship between the average income of immigranthouseholds in a state and the fraction of immigrant households headed by an individualwith less than a high-school education. Controlling for other observable characteristics,
households headed by an immigrant with less than a high-school education are 8% more
likely to receive cash welfare benefits than households headed by an immigrant with acollege education and 4% more likely to receive cash benefits than households headed by
an immigrant with a high-school education.39
The interaction of state welfare policies and the size and characteristics of thestate immigrant population determines total immigrant welfare usage in a state. To gauge
the potential fiscal burden represented by immigrant uptake of social assistance, Figure
11 plots the ratio of immigrant households receiving some type of welfare benefit to the
39

These estimates are based on an OLS regression in which the dependent variable is a 0-1 indicator forwhether an immigrant household receives some type of cash welfare benefit (general assistance, SSI) andthe independent variables are the age, age squared, years of education, marital status, and year of entry into
the United States of the household head; the size of the household; and state dummy variables. Data arefrom the 2000 United States Census of Population and Housing 5% Public Use Microsample.

37

number of native households in the state. This gives a crude metric for the number of
immigrant households each native household must support. In 2002-2003 there wereover 20 native households for each immigrant household on welfare in Texas, Florida,
Nevada, and New Jersey, but 10 or fewer native households for each immigranthousehold on welfare in California and New York.

All of these states have large

immigrant populations. What separates California and New York from the others is thatthese states have a large, low-skilled immigrant population and generous welfare
policies. Native taxpayers in California and New York are highly exposed to the fiscal
costs associated with immigration.

Taxpayers in Texas, Florida, Nevada, and New

Jersey, in contrast, appear likely to face a smaller burden. In the next section, I examine
the costs of providing public services to immigrants in more detail.

The Costs and Benefits of Immigration
Immigration increases the incomes of U.S. residents by allowing economic actors
to utilize domestic resources more efficiently. These benefits, however, are not sharedequally.

Immigration redistributes income away from factors that compete withimmigrants in the labor market. This redistribution is one source of political opposition
to immigration. A second source of opposition to immigration comes from the costs that
immigration imposes on resident taxpayers. If immigrants receive more in government
benefits than they pay in taxes, then immigration imposes a net fiscal burden on U.S.
natives. To lower their fiscal burden, taxpayers may favor reducing immigration.
Immigration generates benefits to a nation in the form of extra income todomestic factors of production, which is known to economists as the immigration
surplus.

By increasing the supply of labor in an economy, immigration raises the38

productivity of factors that are complementary to labor. More low-skilled workers, forinstance, allow U.S. capital, land, natural resources, and skilled labor to be exploited
more efficiently. These gains in productivity result in income gains to owners of thesefactors. As discussed in Section 2, increasing the supply of labor also drives down wages
for some U.S. workers. To calculate the net change in national income associated withimmigration, we sum up the income changes associated with immigration for all
domestic factors of production.

Using a simple model of the U.S. economy,40 theimmigration surplus takes a tractable form:

Immigration Surplus as a % of GDP = -0.5*(% change in wages due to immigration)*(% change in labor force due to immigration)*(labor share of national income)

Applying this formula to results in Borjas (2003) for 1980 to 2000, a crude calculation of
the immigration surplus for the U.S. economy in 2000 would be

0.5*(3.2%)*(11%)*(0.70) = 0.12%

In this formulation, immigration raises U.S. GDP by slightly more than one-tenth of apercent. The benefits from immigration don’t appear to be very large.41 They would belarger if the wage changes associated with immigration were larger, which would require
either a higher the level of immigration or a shift in the composition of immigrants
towards individuals whose skills are in scarce supply.
40

This model assumes there is one good and two factors of production. It is straightforward to extend thismodel to allow for a more complicated environment.
41
This estimate of the immigration surplus ignores many factors and so should be treated with caution.
One can produce more sophisticated estimates of the immigration surplus by allowing for labor of different
skill types and by allowing for varying effects of immigration on wages (see Borjas, 1999b). Dynamic
effects of immigration, which are ignored here, are very hard to gauge. If they are important, static
estimates of the immigration surplus will tend to understate immigration’s true economic impact.

39

In an economy without distortions due to market failure or government
intervention, there would be no costs associated with immigration. However, U.S. tax
and spending policies distort individual decisions about how much to work, how much tosave, and how much to invest. Immigration, by admitting large numbers of low-skilledindividuals, may exacerbate these distortions by expanding the U.S. welfare system. If
immigrants pay less in taxes than they receive in government benefits, then immigration
would generate a net fiscal burden on native taxpayers – natives would in effect bemaking an income transfer to immigrants. Paying for this transfer would require somecombination of tax increases on natives, reductions in government benefits to natives, andincreased borrowing from future generations (by issuing government debt). The total
impact of immigration on U.S. residents is positive only if the immigration surplus
exceeds the fiscal transfer made to immigrants.
The National Research Council (NRC) recently conducted case studies of the
fiscal impacts of immigration in New Jersey and California (Smith and Edmonston,1997). While both states have large immigrant populations, they differ in their skill
profiles and in their patterns of welfare usage.

In 2002, the share of immigranthouseholds headed by someone with less than a high-school education was 37% in
California but only 22% in New Jersey; and the share of immigrant households receiving
some type of social assistance was 30% in California but only 15% in New Jersey.
Based on federal, state, and local government expenditures and tax receipts, the
NRC estimates that the short-run fiscal impact of immigration is negative in both New
Jersey and California.42 In New Jersey, using data for 1989-1990, immigrant households

42

The study included as many federal, state, and local government services and sources of tax revenue on
which it was feasible to collect data. See Smith and Edmonston (1997) for details.

40

received an average net fiscal transfer from natives of $1,484, or 2% of average state
immigrant household income.43

Spread among the more numerous state native

population, this amounted to an average net fiscal burden of $232 per native household,or 0.4% of average state native household income. In California, using data for 19941995, immigrant households received an average net fiscal transfer of $3,463, or 9% of
average immigrant household income, which resulted in an average fiscal burden on
native households of $1,178, or 2% of average native household income. In California,
and less so in New Jersey, the net fiscal transfers that native households make toimmigrant households are large.

The continuing increase in the U.S. immigrant

population suggests that these transfers are likely to grow over time, raising the potential
for political opposition to immigration from native taxpayers.
The political response of natives to making fiscal transfers to immigrants surely
depends on the nature of the public services that these transfers support. If transfers areseen as facilitating investments in immigrants or their children, such as through educationor preventative health care, they may not provoke much opposition. The NRC estimatesthat the share of K-12 education in state and local government expenditures on services
received by immigrant households was 37% in California and 66% in New Jersey. The
higher share of education in expenditure for New Jersey reflects the state’s low provisionof other types of services, relative to California. If native voters place less weight on
government expenditures related to education, estimates of total net transfers received byimmigrants may overstate the fiscal impact that voters in these states perceive.
The NRC finds that two factors explain why natives make net fiscal transfers to
immigrants: (1) immigrant households are larger with more children, leading them to
43

All figures based on the NRC study are in 1996 dollars.

41

make greater use of public education, and (2) immigrant households earn lower incomes,
leading them to make greater use of welfare programs and lower contributions to taxes.
Native taxpayers in California, with its less-skilled immigrant population and highimmigrant uptake of welfare, make relatively large fiscal transfers to immigranthouseholds. This suggests that within the United States, the fiscal costs of immigration
are borne unevenly.

States with poorer immigrant populations and more generous

policies are likely to shoulder a much larger share of the fiscal burden associated withimmigration.

Further magnifying the distributional consequences of immigration,

California and some other high-immigration states have progressive tax systems, inwhich high-income taxpayers account for a disproportionate share of tax revenues. Thus,
higher-income taxpayers in high-immigration states are likely to pay much of the fiscal
cost of immigration.
The estimated fiscal transfers associated with immigration are due entirely totransfers at the state and local level. Immigration has a decidedly negative impact onstate and local public finances. At the federal level, immigrants make a positive net fiscal
contribution. This is because national defense accounts for a large fraction of the federal
benefits immigrants receive. As a public good, the cost of national defense is unaffectedby immigration. Adding taxpayers through immigration lowers the effective amount thefederal government must charge native taxpayers to cover defense outlays.
For the nation as a whole, the NRC estimates that immigration imposes a shortrun burden on the average native household of $166 to $226, or 0.20% to 0.25% of U.S.
GDP in 1995. Comparing the average of these two estimates to the immigration surplus
of 0.12% of GDP, a back of the envelope calculation suggests that in the short run

42

immigration reduces the income of U.S. residents by about 0.1% of GDP. Going from ashort-run to a long-run estimate of the fiscal cost of immigration can change the results
dramatically.44 However, under any scenario, the long-run fiscal impact of immigration
on state and local governments is negative. Thus, in both the short-run and the long-run
state and local governments (and the taxpayers that support them) pick up much of the
fiscal tab associated with immigration.

The benefits and costs of immigration appear to be distributed quite unevenly.
Capital owners, land owners, and employers appear to capture most of the benefits
associated with immigration, which they enjoy in the form of higher factor returns.
Taxpayers in high-immigration states are likely to shoulder most of immigration’s fiscal
costs, which they bear in the form of higher taxes that go to pay for net fiscal transfers to
immigrant households. On net the economic impact of immigration on the United States
appears to be small. However, small net changes in national income can mask largechanges in the distribution of income. It is these distributional consequences that arelikely to shape individual opinions over immigration policy.

44

The NRC estimates the average immigrant admitted in 1990 would produce a net fiscal contribution of$80,000 over the next 300 years (in present discounted value terms). Going 300 years forward requiresvery strong assumptions about the future economic environment. For the average immigrant, the annual
net fiscal contribution is negative for the first 25 years after arriving in the United States. The long-run
estimate rests on the assumption that the federal government will later raise taxes to bring the federal
budget into balance. If this doesn’t happen, the long-run fiscal contribution of the average immigrant
would be negative. See Borjas (1999a) for a discussion.

43

4. Public Preferences over Immigration Policy
Changes in U.S. policy have contributed to more immigration overall and to more
immigration from Asia and Latin America in particular. Since poor countries tend tohave populations with low educational attainment, it comes as little surprise that a large
fraction of recent U.S. immigrants arrive with relatively little schooling. The influx of
immigrants appears to have depressed average wages in the United States, with thelargest wage losses endured by low-skilled native workers.
Immigration also appears to affect native incomes through its impact on publicfinances. In admitting foreigners to the United States, U.S. immigration policy increases
the population of individuals that demand public services, the population of taxpayersthat contribute to public coffers, and the population that is eligible to gain citizenship andto vote. In the absence of immigration, the short-run net tax burden on native taxpayers
in the nation as a whole would have been smaller and in high-immigration states such as
California the burden would have been smaller.
The distributive consequences of immigration are likely to affect public attitudes
about U.S. immigration policy. Kenneth Scheve and Matthew Slaughter (2001a,b,c) havefound that less-skilled workers are more likely than high-skilled workers to favor
reductions in U.S. immigration. This is consistent with the fact that less-skilled workers
have been the group most subject to the adverse labor-market consequences of admitting
more foreign workers. Evidence presented in section 3 suggests that taxpayers who bear
the fiscal costs of immigration may have an incentive to join low-skilled workers infavoring the closing of U.S. borders. In this section, I outline what economic theory has
to say about who will support and who will oppose immigration and then use data from44

the 1992 and 2000 National Election Studies surveys to examine how opposition to
immigration varies across individuals according to their exposure to increased labormarket competition from immigrants and increased public-finance pressures due toimmigration. This analysis, which draws on the framework and results in Hanson,
Scheve, and Slaughter (2005), will help identify the types of political coalitions that arelikely to form either for or against open immigration policies.

Individual Preferences about Immigration Policy
To predict individual opinions about admitting foreigners to the United States, I
examine how immigration affects the determinants of an individual’s income.

The

analysis I present, while simple, is helpful for relating the labor-market and publicfinance impacts of immigration to individual well being.
Individuals receive income from a variety of sources. They earn wages andsalaries on the job, they receive profits from shares of any businesses they own, theyreceive interest or capital gains from any financial investments they have made, and theyobtain transfers from the government both in terms of cash and in terms of goods andservices. The first three of these items are the main sources of an individual’s pre-tax
income. What they take home, their after-tax income, equals their pre-tax income lesscontributions to state and federal income taxes and payroll taxes. Putting this together, anindividuals’ total income has three components,

Total real income = Pre-tax real income + Government transfers – Tax payments.

45

To relate an individual’s total income to his or her overall well being, it is important toaccount for the fact that the available data sources never report all of the factors that
affect individual outcomes. A simple way to account for this is to write well being as thesum of an individual’s total income and other residual factors,

Well being = Total real income + E.

The new term, E, accounts for the possibility that individuals may care about immigration
for reasons other than its impact on their monetary income. Ideological or religious
beliefs may influence how a person feels about admitting foreigners to the country. Selfdescribed cultural or political conservatives may oppose immigration on ideologicalgrounds, even if they benefit from open borders in monetary terms. Similarly, politicalliberals, multiculturalists, or individuals whose families arrived in the United States
recently may favor immigration, even if it is not in their strict economic self-interest.
When it comes to the empirical analysis, it will be important to account for these noneconomic considerations to the extent possible.
Returning to the determinants of income, the difference between governmenttransfers and tax payments represents the net fiscal transfer an individual receives fromthe government, which may be positive or negative. Rewriting total income in terms ofthe net fiscal transfer changes the expression for well being to,

Well being = Pre-tax real income + Net fiscal transfer + E,46

which reflects earnings in factor markets (pre-tax income), net receipts from thegovernment (net fiscal transfers), and residual factors (E).
Naturally, pre-tax income is likely to be higher for individuals who are moreskilled or who have greater financial assets or real-estate holdings. Net fiscal transfers
are likely to be positive for low-income individuals, as they tend to pay relatively little intaxes and to be eligible to receive cash benefits, Medicaid, the Earned Income Tax Credit,
and other forms of assistance. Net fiscal transfers are likely to be negative for highincome individuals. By virtue of being in high tax brackets, they tend to make large tax
payments and to be ineligible for means-tested benefits. Both low-income and highincome individuals and their family members enjoy many types of public services thatare not means tested and so not contingent on earnings, such as national defense, public
safety, roads and bridges, public schools, parks and public spaces, etc.
How does immigration change individual well being? To make the analysis
concrete, compare effects for two individuals, one a business executive with a college
degree and the other a janitor who never finished high school. To begin, suppose thateach lives in Houston, Texas, is a married father of two children (whose spouse doesn’t
work outside the home), and is considering the impact of a 10% decrease in immigration
on his family’s well being. The total impact of immigration on well being simply equals
the sum of its impacts on the three components:

Change in well-being due to 10% decrease in immigration =Change in pre-tax income due to a 10% decrease in immigration+

Change in net fiscal transfer due to a 10% decrease in immigration+

Change in E due to a 10% decrease in immigration.

47

Consider the case of the janitor. Since immigration is concentrated among thelow-skilled and Texas is a high immigration state, a reduction in immigration would
mean a lower supply of low-skilled labor in Texas and less competition for the janitor in
the labor market. This would tend to raise his hourly wage and his pre-tax income. Whatabout his net fiscal transfer? The janitor’s low income may qualify him or his family for
one or more types of social assistance. Since Texas neither is generous in the benefits it
provides nor is a state that gives immigrants access to many benefits (Figure 5), thereduction in immigration would be unlikely to change the state supply of social assistanceby much. This means the reduction in immigration would not greatly affect the publicbenefits the janitor’s family receives, leaving his net fiscal transfer more or lessunchanged. Regarding the change in E, it is hard to say much without knowing more
about the janitor’s beliefs and values. As a residual term, the average change in E (after
netting out the component that is common across individuals) is by definition small,though it may be large in one direction or the other for particular individuals. Putting all
this together, for the janitor reduced immigration is likely to raise his pre-tax earnings
and leave his net fiscal transfer unchanged, leading to an improvement in his family’s
economic well being. On purely economic grounds, the janitor appears likely to support
greater restrictions on immigration.
The decrease in immigration is likely to do less to benefit the business executive.
While a substantial fraction of immigrants do have a college education, many of these
individuals appear to have specialized training in engineering, medicine, math andscience, and other technical areas. Reduced immigration would thus be unlikely tochange the competition that the executive faces in the market for managerial labor.

48

However, by raising wages for low-skilled labor, reduced immigration would increase
labor costs the executive incurs both in running his business and in maintaining his home.
This suggests reduced immigration reduces his real pre-tax income. Again, since Texas
doesn’t provide generous benefits to immigrants and lacks a progressive income tax, thereduction in immigration wouldn’t do much to lower the tax bill of the executive, leaving
the net fiscal transfer he makes to other households in his state more or less unchanged.
For the executive, reduced immigration would be likely to lower his economic wellbeing. All else equal, the janitor would be more likely to favor increased restrictions on
immigration than would the business executive.
How would the outcome change if the janitor and the business executive lived in
California instead of in Texas? Like Texas, California is a high immigration state, but
unlike Texas, California offers generous public benefits, makes many of these benefits
available to immigrants, and finances them in part through a progressive state income tax.
In California, reduced immigration would decrease the net fiscal drain on the state,leading to some combination of increased public services (perhaps including social
assistance) and decreased taxes. For the janitor, reduced immigration would raise his
pre-tax income, as in Texas, but now would perhaps also raise the net fiscal transfer hereceives (if California uses part of the fiscal gain from decreased immigration to fund anincrease in social assistance). If his net fiscal transfer rises, we would enjoy a larger
increase in his economic well being than would be the case in Texas. This suggests lowskilled, low-income workers in states that are generous toward immigrants may be more
supportive of immigration restrictions than low-skilled, low-income workers in states thatare not generous toward immigrants. For the business executive, reduced immigration is49

likely to lower his pre-tax income, as in Texas, but now may lower the net fiscal transfer
he makes to other households (if California uses part of the fiscal gain from decreased
immigration to support a decrease in tax rates). This would yield a smaller decrease (orlarger increase) in the executive’s well being than in Texas. For high-skilled, highincome workers, support for restrictive immigration policies is likely to be higher instates that are more generous toward immigrants.
To sum up the argument, there are two broad economic motivations for
opposition to immigration. One is the concern that immigration increases labor supply
and puts downward pressure on wages. Given that immigration is concentrated among
the low skilled, low-skilled native workers are likely to be the most opposed immigrationon the basis of its labor-market consequences. The concentration of immigration incertain states suggests this opposition will be most intense in high-immigration regions.
A second motivation for opposition to immigration is its effect on public finances. Stateswith large immigrant populations and generous welfare policies toward immigrants arelikely to bear the highest fiscal costs associated with immigration. Individuals in moregenerous states are likely to be more opposed to a given level of immigration than
individuals in less generous states.

The more generous the state (and the moreprogressive the state’s taxation of income), the more opposed individuals in high-income
brackets are likely to be toward immigration.

Public Opinion about Immigration
To evaluate individual policy preferences about immigration, a key ingredient is ameasure of policy opinions. The American National Election Studies (NES) (Sapiro, etal, 1998) contains extensive surveys of current political opinions based on an individual-

50level stratified random sample of the U.S. population. These surveys also report details
on respondent characteristics, including age, gender, race, ethnicity, educational
attainment, occupation, industry of employment, and details about political values andbeliefs. Regarding immigration, the NES asks,"Do you think the number of immigrants from foreign countries who arepermitted to come to the United States to live should be increased a little,
increased a lot, decreased a little, decreased a lot, or left the same as it is now?"

I use data from the 1992 and 2000 NES, which together provide 3,400 observations on
native-born U.S. adults. I classify a respondent as favoring restrictions on immigration if
he or she answers that the number of immigrants admitted should be decreased a little ordecreased a lot. This question requires respondents to reveal their general position on theproper direction for U.S. immigration policy. The question does not ask what skill-mix
immigrants affected by the policy change would have relative to U.S. natives. I assume
respondents think any decrease (increase) in immigrant inflows would decrease (increase)
the relative supply of less-skilled workers in the U.S. labor force, which is consistent withrecent U.S. immigration patterns shown in section 2.45
To begin, I examine the fraction of native-born respondents favoring new
restrictions on immigration in 1992 and 2000 by three levels of education: those notcompleting high school, those completing high school but not a college degree (who may
have completed some college), and those with a college degree. By virtue of their skill
profile, high-school dropouts are the most exposed to the labor-market consequences ofimmigration; by virtue of their income-earning potential, college graduates are the most
45

There are many reasons to be concerned about the quality of the data contained in surveys of individual
attitudes toward public policy. See Scheve and Slaughter (2001a) for an excellent discussion of how tointerpret results of opinion surveys regarding changes in immigration policy or trade policy.

51

exposed to the public-finance consequences of immigration. An alternative approach
would be to classify individuals by income rather than education. For labor economists,
education is preferable to income because it is a better indicator of the types ofindividuals with whom a respondent competes in the labor market and it does notfluctuate over time or across regions in response to unobserved economic shocks. Since
education is highly correlated with income, it is not surprising that the results are very
similar if I break respondents out by income level, instead.
Overall, the fraction of respondents favoring reductions in U.S. immigration is
50% in 1992 and 48% in 2000 (Table 7). In either year, the most educated are the least
opposed to immigration. In 2000, the fraction of college graduates favoring reductions inimmigration is 34%.

In that year, high-school dropouts are the most opposed toimmigration, with 59% favoring greater restrictions on the number of foreigners
admitted.

In 2000, the implied differential in support for immigration restrictions

between high-school dropouts and college graduates is 26%, up from 8% in 1992.46
Why does educational attainment help predict opposition to immigration? Scheveand Slaughter (2001c) argue that the opposition of low-skilled natives to immigration
comes from the fact that the wages of these workers have been the most adversely
affected by recent U.S. immigrant inflows. This interpretation is quite consistent with thetheory presented earlier in this section. An alternative possibility is that education iscorrelated with the political beliefs of respondents. More educated individuals may be
more tolerant of foreigners or more open to interacting with individuals from other ethnic
groups (Hainmueller and Hiscox, 2004), making them less opposed to immigration.
46

These changes and those I report below are all statistically significant at conventional levels (the one
exception being the differential in college-graduate support for immigration restrictions in 2000 between
high-immigration and low-immigration states).

52Based on the information in Table 7, both interpretations appear valid. To gauge which
has more empirical traction, I need to delve deeper into the data.
To see whether the relation between education and opposition to immigration isgrounded in economic concerns, I split respondents into two groups, those living in stateswith large immigrant populations (an immigrant share of the state population greater than
10%, which is the mean national share in 2000) and those living in states with small
immigration populations (an immigrant share of the state population less than 10%).47
Table 8 adds this regional dimension to the year and education splits in Table 7.
Consider high-school dropouts. In 1992, 56% of high-school dropouts in highimmigration states favored restrictions on immigration, compared to 45% in lowimmigration states.

This amounts to an 11% differential between high and low-

immigration states (comparing first two rows of column one). In 2000, the differential
rises to 16% (comparing the second two rows of column one), as support for immigration
restrictions is at 68% in high-immigration states and 52% in low-immigration states. The
low-skilled appear to be much more opposed to immigration in states where they arelikely to face greater labor-market competition from immigrants. They also appear tohave become more opposed to immigration over time, with support for immigration
restrictions rising by 12% (68% - 52%) in high-immigration states versus 7% (52% 45%) in low-immigration states. The time dimension is important, since labor-market
competition from low-skilled immigrants increased considerably during the 1990’s. Both47

The results are not very sensitive to how I classify high-immigration states. In unreported results, I triedalternative splits of the data, classifying states as high-immigration based on a threshold immigrant
population share of 12.5%, 15%, or 17.5%; year-specific thresholds (equal to the national mean of theimmigrant population share for that year); and thresholds specific to the year and education category of the
respondent (the national mean immigrant population share in the respondent’s education group for thatyear). The results for each of these splits are quite similar to those reported in Tables 7-10.

53

across regions and time, the opposition of low-skilled natives to immigration appears to
be strongest where labor-market competition from immigrants is most intense.
Among college graduates, opposition to immigration is also stronger in highimmigration states, but the regional differential is much weaker than for high-school
dropouts.

In 1992, 42% of college graduates in high-immigration states favored

restrictions on immigration, compared to 37% in low-immigration states, which
represents a differential of 5%. By 2000, the regional differential nearly disappears, withsupport for immigration restrictions at 34% for high-immigration states and at 33% for
low-immigration states. Over time, it appears that more-skilled workers have becomeless opposed to immigration. One explanation for this is that welfare reform has softened
the opposition of high-skilled, high-income individuals to immigration.

Below, Ievaluate additional evidence on this interpretation.
The size of the state immigrant population tells only part of the story about theeconomic consequences of immigration. While labor-market effects are likely to belarger in states with larger immigrant populations, the public-finance consequences ofimmigration depend not just on the size of the immigrant population but also on theavailability of state public services to immigrants. Table 5 suggests high-skilled, highincome workers in states like California are more exposed to the fiscal consequences ofimmigration than high-skilled, high-income workers in states like Texas. It makes sense,
then, to further differentiate states by the generosity of their welfare programs. Table 9
splits respondents along four dimensions: year, education, size of state immigration
population, and access of the state immigrant population to social assistance. I classify astate as giving immigrants high access to social assistance if the state falls into one the54four upper-right cells in Table 5 – that is, if the state both provides more generous publicbenefits and makes these benefits more available to immigrant households.
For high-school dropouts, opinions on immigration policy depend strongly on thesize of the state immigrant population, consistent with Table 8. Support among highschool dropouts for restrictions on immigration is much stronger in states with large
immigrant populations, irrespective of whether states have high or low immigrant accessto public benefits. The differential in support for immigration restrictions between highimmigration and low-immigration states (comparing by row the first two columns ofTable 9) is similar in high-access and low-access states, ranging from 8% to 9% in 1992
and from 14% to 15% in 2000. In contrast, the differential in support for immigration
restrictions between high-access and low-access states (comparing the first two rows or
second two rows of column one) shows no discernible pattern over time. For high-school
dropouts, the potential labor-market consequences of immigration appear to be aconsistent predictor of their support for immigration restrictions. However, there is no
consistent evidence that their opinions on immigration are related to immigrant access topublic assistance.
For college graduates, what appears to matter for their preferences on immigration
policy is the interaction between the size of the immigrant population and immigrant
access to public benefits. In either 1992 or 2000, there is no consistent difference insupport for immigration restrictions in going from low-immigration to high-immigration
states (comparing columns five and six in rows one and two or comparing columns fiveand six in rows three and four) or in going from low-access to high-access states(comparing rows one and two in columns five and six or comparing rows three and four55

in columns five and six). However, in both years support for immigration restrictions isstrongest in states that are high-immigration and high-access. Among high-immigration
states, support for immigration restrictions is higher in high-access states by 17% in 1992
(comparing rows one and two in column six) and by 7% in 2000 (comparing rows threeand four in column six). Similarly, among high-access states, support for immigration
restrictions is higher in high-immigration states by 15% in 1992 (comparing columns fiveand six in row two) and by 7% in 2000 (comparing columns five and six in row four).
In high-immigration, high-access states, more-educated workers, who are also
higher-income workers, are relatively exposed to the fiscal costs associated withimmigration. Were college graduates more supportive of immigration restrictions in all
high-immigration states – irrespective of their generosity – there would be no indicationthat it is the fiscal burden of immigration that motivates their opposition to admitting
foreigners. Similarly, were college graduates more supportive of immigration restrictions
in all high-access states – irrespective of the size of the state immigrant population – itwould also be difficult from this test to make inferences about the motivations for theirpolicy preferences. That the opposition of high-skilled individuals to immigration isstrongest in states where immigrants represent a larger fiscal burden, and not simply instates where immigrants have a larger presence, suggests that the public-financeconsequences of immigration are an important factor in shaping their policy preferences.
Table 9 also provides clues as to why support for immigration restrictions has
fallen over time among high-skilled workers. For college graduates, the largest reduction
in support for immigration restrictions is in high-immigration, high-access states(compare rows two and four of column six). This decline of 11% accounts for a large

56part of the average decline in college-graduate support for immigration restrictions
evident in Table 7. Natives in high-immigration, high-access states were the individuals
most likely to benefit from the provisions of federal welfare reform that restricted
immigrant access to public benefits. Figure 8 shows that after welfare reform usage ofsocial assistance by immigrant households declined relative to native households for all
categories except Medicaid.
One interpretation of the results in Table 9 is that welfare reform reduced theexposure of high-income individuals to the fiscal costs of immigration, softening theirsupport for immigration restrictions. Obviously, one should be cautious about making
this interpretation. During the 1990’s, many other factors changed across states andTable 9 controls only for education, size of the state immigrant population, andimmigrant access to state public benefits. As I discuss below, the large decline in support
for immigration restrictions among college graduates in high-immigration, high-accessstates holds up in regression analysis when additional controls are introduced (Hanson,
Scheve, and Slaughter, 2005). Nevertheless, there may be other important factors forwhich I have not unaccounted. This leaves us with intriguing but still tentative evidence
that welfare reform may have reduced support for immigration restrictions.
The tables presented so far do not control for the political beliefs or values of the
respondents. More conservative individuals may choose to avoid living in states thathave large immigration populations or that are generous in their public benefits, and more
liberal individuals may be more willing to live in high-immigration states or in states thatare generous with their benefits. A related possibility is that the political beliefs of native
residents in a state may affect how friendly a state’s policies are toward immigrants. Any

57

of these possibilities could artificially inflate observed differences in public opinions
toward immigration policy across regions.
To control for the possible effects of ideology on my results, Table 10 replicates
Table 9, dropping from the analysis individuals who describe themselves either as very
conservative or as very liberal, who together account for 10% of the sample. The patternof support for restrictions on immigration in Table 10 is very similar to that in Table 9.
Ideology, while certainly important for individual views on immigration policy, does notappear to be driving the results in Tables 7-9. I also obtain similar results if I exclude
individuals who describe themselves either as conservative to very conservative or liberalto very liberal, who together account for 38% of the respondents.
Even with controls for ideology, the analysis reported so far is somewhat crude.
A more rigorous approach would be to model individual preferences on immigration
policy econometrically. Hanson, Scheve, and Slaughter (2005) use the 1992 and 2000
NES data to estimate the probability that a respondent favors restrictions on immigration
as a function of individual characteristics (age, education, gender, race, ethnicity,
ideology, employment status), characteristics of the state in which the respondent lives(size of the state immigrant population, generosity of the state towards immigrants), andother factors. Their results are consistent with those I present here, suggesting that
adding additional controls to the analysis would not change the key qualitative findings.
In terms of individual characteristics, Hanson, Scheve, and Slaughter find that
support for restrictions on immigration is stronger among the less educated, whites, union
workers, unemployed workers, and political conservatives.

Clearly, individual

circumstance matter for policy preferences. Support for immigration restrictions is also

58

stronger in states with larger immigrant populations and in states in which immigrants
have greater access to public benefits. In high-immigration states, it is the least-skilledindividuals who are relatively more opposed to immigration. This is consistent with
political opposition to immigration originating in part through its impact on labor-market
competition. In states with larger immigrant populations and in which immigrants havegreater access to welfare, it is the more skilled who are relatively more opposed toimmigration. In these states, opposition to immigration may be due in part to its effects
on the net fiscal burdens of existing residents. Between 1992 and 2000, less-skilled
natives become more opposed to immigration and high-skilled natives become less
opposed to immigration. Again, there are important differences in these changes acrossstates. In high-immigration, high-access states all skill groups become less opposed toimmigration, with the largest changes occurring for college graduates, the group most
exposed to the fiscal effects of immigration on income taxes. This finding is consistent
with the idea that welfare reform has softened opposition to immigration in states where
the fiscal consequences of immigration are most acute. We conclude that though politicalbeliefs almost surely play a role in policy opinions, the education cleavage seems very
consistent with economic concerns of labor-market and public-finance pressures.48

The economic consequences of immigration appear to affect public opinion about
admitting foreigners to the United States. Individuals are more supportive of restrictions
on immigration if they are more exposed to the labor-market consequences ofimmigration – as are low-skilled natives living in states with large immigrant populations– or if they are more exposed to the public-finance consequences of immigration – as are48

See Scheve and Slaughter (2001a,c) and Hanson, Scheve, and Slaughter (2005) for further discussion.

59

high-skilled natives living in states with large immigrant populations and generous public
assistance for immigrants.

There is some evidence that changes in policy affectindividual policy preferences. After welfare reform, which reduced immigrant access topublic benefits, opposition to immigration fell among the individuals most exposed to thefiscal costs of admitting foreigners. It appears that one key to generating greater support
for immigration would be to reduce its adverse effects on the labor-market earnings or on
the fiscal burdens of U.S. residents.

60

5. Reforming U.S. Immigration Policy
Currently, there is political gridlock in the United States regarding immigration
policy. This gridlock makes it difficult to address pressing issues related to illegal
immigration – what to do about the 10 million illegal immigrants living in the country –and national security – how to get immigration authorities and intelligence agencies tocoordinate meaningfully with one another. There is currently no majority coalitionaligned behind efforts to resolve these problems. Even with his party in control of theexecutive and legislative branches of government, President Bush’s attempts to reform
immigration policy have so far been unsuccessful.
The results of Chapter 4 highlight two sources of opposition to immigration. One
is concern about labor-market pressures and a second is concern about public finances.
Naturally, those that feel immigration depresses their wages or increases their net tax
burden are likely to be opposed to admitting more foreigners to the country. To a large
extent, the labor-market consequences of immigration are inescapable. By definition,
immigration increases the relative supply of labor, which will tend to reduce the wages ofwhichever native workers substitute on the job for incoming foreign workers. The only
way to eliminate the labor-market consequences of immigration is to reduce the numberof foreigners admitted to the country.49

However, the adverse public-financeconsequences of immigration are controllable by public policy. If one were to reduce the49

Conceivably, one could compensate workers hurt by immigration by taxing those who gain. In practicesuch specific redistributive schemes appear to be hard to implement. However, the Earned Income Tax
Credit (EITC) is an existing policy that protects low-income workers against negative wage shocks (due toany source). When the EITC credit exceeds taxes owned, eligible taxpayers (who must have a valid Social
Security Number) receive a refund. In 2004, the income cutoffs for eligibility were $11,490 for an
unmarried taxpayer with no children and $30,388 for an unmarried taxpayer with one child. For poor
native workers, who appear to be the group most affected by labor-market competition from low-skilled
immigrants, the EITC offers some protection against policy changes that reduce their earnings. For atheoretical analysis of options to protect low-wage workers from immigration, see Sinn, (2004). Wage
subsidies, of which the EITC is one type, are the least inefficient policy option among those considered.

61

impact of immigration on the net tax burden of U.S. natives, it might be possible to forge
a coalition behind meaningful policy reform.
There are at least two strategies for reforming immigration policy that would
dampen its consequences for public finances. One is to change the skill composition of
those admitted. By shifting to a system that favors high-skilled immigrants, the UnitedStates would attract individuals with high income potential who would be likely to pay
more in taxes than they draw in public services. A second strategy is to restructure therights of immigrants regarding access to public benefits. If, during some initial period
after they entered the country, immigrants were prohibited from drawing on public
assistance or other forms of public services, then the fiscal drain associated withimmigration would be smaller. Either policy would implicitly favor those coming to theUnited States to work over those coming to obtain public benefits.
In the last decade, there have been tentative moves both in the direction offavoring high-skilled immigrants and in the direction of restricting immigrant access topublic benefits.

H-1B visas give high-skilled immigrants, mainly in occupations

associated with the software and electronics industries, the right to work in the UnitedStates for up to six years. In 2000, at the height of the technology boom, Congress
temporarily increased the number of H-1B visas available annually from 115,000 to
195,000.50 Welfare reform in 1996 in effect instituted a waiting period of five-years – thelength of time between obtaining permanent residence and being able to apply for
citizenship – before immigrants may gain access to many government benefits.

50

In 2003, after several years of slow economic growth, Congress allowed the number of H-1B visas to fallto 65,000. See details at http://uscis.gov/graphics/publicaffairs/.

62

In this chapter, I examine options for reforming U.S. immigration policy. I begin
with a discussion of recent proposals. I then evaluate the relative merits of a skills-based
immigration policy and of a rights-based immigration policy.

Proposals for Immigration Reform
In an economy without distortions associated with market failure or public-policy
interventions, the optimal immigration policy would be to have open borders.51 The logic
of free trade is symmetric to the logic of free immigration. Both contribute to theequalization of goods’ and factor prices across borders, which is necessary for economic
efficiency and help create the conditions for global welfare to be maximized. Barriers toeither the movement of goods or of factors lead to inefficient outcomes and leave gains
from trade unexploited. Such barriers tend to cause labor-abundant countries, such as
Mexico, to have low wages for labor and high relative prices for capital-intensive goods
and capital-abundant countries, such as the United States, to have high wages for laborand high relative prices for labor-intensive goods. In theory, it is possible to achieve
efficiency either through free trade or through free immigration, which lead Robert
Mundell (1957) to conclude that international trade in goods and international
movements of factors substitute for one another.
We are, of course, far from a world without distortions. Population growth –whether due to immigration or to other sources – tends to exacerbate distortions
associated with poorly defined property rights over air, waterways, highways, andcommon areas. More people inevitably mean more pollution and more congestion. More
low-income people tend to exacerbate distortions associated with welfare policies, which
51

This argument abstracts away from any perceived negative cultural consequences of immigration.

63

is why Milton Friedman has declared, “It’s just obvious that you can’t have freeimmigration and a welfare state.”52 The presence of these and other distortions meansthat the United States is setting immigration policy in a world of the second best. In thisenvironment, it seems likely that a policy with less than free immigration would be theconstrained optimum (Wellisch and Walz, 1998).
Distortions also exacerbate political conflict over immigration.

Some

environmentalists in the United States oppose immigration because it contributes topopulation growth. Some fiscal conservatives oppose immigration because in their view
it increases the pool of people who use U.S. welfare programs. Even without distortions,the redistributive effects of immigration create political conflict.

Immigration

redistributes income between factors of production, raising incomes for some factors(e.g., owners of capital) and lowering it for others (e.g., low-skilled labor). The longstanding opposition of labor unions to immigration, reversed only in the 1990’s when
U.S. labor unions begun to recruit more heavily among recent immigrants, owes in part toimmigration’s perceived negative effects on blue-collar workers.
Proposals to reform immigration policy tend to focus either on minimizing
immigration’s exacerbative effect on distortions or on minimizing its redistributive
effects on income.

Since the redistributive effects of immigration are unavoidable,

policies that attempt to limit the extent to which immigration makes existing distortions
worse are likely to be more appealing on efficiency grounds.
In recent years, there have been a variety of proposals, from both inside andoutside government, for how to reform U.S. immigration policy. President Bush’s plan,
52

Peter Brimelow, “Milton Friedman, Soothsayer,” Hoover Digest No. 2, 1998, http://wwwhoover.stanford.edu/publications/digest/982/friedman3.html.

64termed Fair and Secure Immigration Reform (FSIR), would offer an amnesty to someillegal immigrants and would expand the number of temporary work visas given tolaborers from Mexico. There is as yet little mention of how his plan change permanent
legal immigration or enforcement against illegal immigration. The U.S. Congress is also
considering legislation on immigration.

In 2003, Senators Edward Kennedy (D-Massachusetts) and Larry Craig (R-Idaho) proposed the Agricultural Job, Opportunity,
Benefits, and Security Act (AgJobs).

AgJobs would offer an amnesty to illegal

immigrants who had worked on U.S farms in the last 12 months and reform the H-2A
visa program for temporary agricultural workers by expanding the number of visas
awarded and creating a clearing mechanism for U.S. employers to bring in new foreign
agricultural workers more easily.53

In 2004, Democratic members of the House ofRepresentatives proposed the Safe, Orderly, Legal Visas, and Enforcement Act(SOLVE), which would legalize unauthorized workers who have been in the UnitedStates for at least five years, create a transitional work visa for illegal immigrants who
have been in the country for less than five years, and expand the number of low-skilled
temporary work visas to 350,000. The executive, Senate, and House plans all focus tovarying degrees on temporary immigration visas and amnesty for illegal immigrants.
None of the proposals offers specifics on how to modify border or interior enforcement to
reduce illegal immigration in the future.
Going back a decade, the early 1990’s Commission on Immigration Reform(created by the Immigration Act of 1990 and known as the Jordan Commission after thechair, Barbara Jordan) produced an influential set of recommendations that proposed53

See http://www.senate.gov/~gsmith/agjob.htm#a.

65

limiting family-based immigration to immediate family members, abolishing unskilledlegal immigration, expanding border and interior enforcement against illegal immigration(including creating a verifiable identification system), making all legal immigrants(including non-citizens) eligible for public benefits, and taking greater efforts to promote
the Americanization of immigrants (Jordan, 1995).
So far, none of these or other proposals have come close to becoming law. Of thefour proposals, only the Jordan Commission’s offers a systematic approach for defining
the level of immigration, the composition of immigration, the rights granted toimmigrants, and enforcement against illegal immigration. It would move the UnitedStates strongly in the direction of a skills-based immigration policy, which is also
advocated by Borjas (1999) and Huntington (2004), among others.

A Skills-Based Immigration Policy
A skills-based immigration policy would radically alter the composition ofindividuals admitted to the United States. It would require severely limiting immigration
based on family reunification.

The effects on the U.S. economy would likely be

profound. Incoming legal immigrants would go from being much more likely to usemeans-tested entitlement programs to being much less likely to do so. Since higherincome individuals also tend to have smaller families, the policy shift would also reduce
the total contribution of immigration to population growth (even if the number of
immigrants admitted to the country each year remained the same). Low-skilled native
workers would likely see their wages increase in absolute terms and relative to highskilled workers, reducing earnings inequality in the United States.

66

One disadvantage is that high-skilled immigration would tend to work against
globalization. Since the United States is a country that is already abundant in skills andcapital relative to the rest of the world, admitting primarily high-skilled workers would
increase international differences in relative factor supplies. This would tend to increase
the difference in wages for less-skilled workers between the United States and the rest of
the world and move the world farther away from factor-price equalization. In so doing,such a move could lower global economic efficiency and welfare.54 For poor countries,
losing high-skilled labor could have negative effects both on their GDPs and on theperformance of their political, legal, and educational institutions.
Another disadvantage for poor countries of a skills-based immigration in the
United States is that high-skilled emigrants appear to be less likely than low-skilled
emigrants to remit income to their family members at home (Orozco, 2003). In poor
countries, migrant remittances help offset the loss in GDP due to the labor outflow
associated with emigration. For Mexico, Prachi Mishra (2003) estimates that over theperiod 1970 to 2000 emigration increased average wages by 8%. By 2000, the number of
Mexican emigrants in the United States was equal to 16% of the labor force Mexico.
Based on these figures, the emigration loss for Mexico in 2000 was 0.5% of GDP.
However, in Mexico’s case, the loss is more than offset by income emigrants remit tofamily members in Mexico, which in 2003 was 2% of GDP. On net, residents of Mexico– those who don’t migrate abroad – appear to gain from emigration, with much of the54

In a Hecksher-Ohlin trade model, high-skilled immigration in high-skilled countries would increaseinternational factor-price differences and decrease global welfare. But in such a model there would be no
incentive for this sort of migration, because the wage for high-skilled labor would be lower in skillabundant countries. That is not the case in the United States. Wages for U.S. workers appear to be higher
than wages for workers in poor countries in all skill categories, which likely reflects superior technology inthe United States. In a world with cross-country differences in technology, how migration affects global
welfare depends on how such migration affects the creation and diffusion of technology.

67

gain presumably going to the family members of emigrants who receive remittances. In
other countries, remittances are an even larger share of economic activity, exceeding 10%
of 2003 GDP in Belize, the Dominican Republic, El Salvador, Guyana, Haiti, Honduras,
Jamaica, and Nicaragua (IADB, 2004). The Inter-American Development Banks findsthat in 2003 Latin American immigrants in the United States sent a total of $31 billion totheir home countries, amounting to 1.4% of the region’s GDP. If poor countries were tosend high-skilled rather than low-skilled labor abroad, remittances could decrease,guaranteeing that emigration reduces their GDPs.
Furthermore, shifting from low-skilled to high-skilled immigration may not havethe large effects on U.S. labor markets that some proponents expect. If the U.S. takes in
fewer low-skilled workers from poor countries, then wage differentials between the U.S.
and these countries would likely increase. This would tend to increase U.S. demand forimports from poor countries and poor-country demand for U.S. capital. For instance, byreducing the import of labor from Mexico, the United States would likely increase theimport of goods from Mexico and the export of U.S. capital to Mexico. In generalequilibrium, these increased trade and capital flows would decrease the relative demand
for low-skilled U.S. labor and partly offset the labor-market consequences of reduced
low-skilled immigration, perhaps leaving low-skilled U.S. native workers only modestly
better off than under their current situation.
Summing up these effects, the shift to a skills-based immigration policy would be
likely to reduce the fiscal costs of immigration and to reduce wage gap between highskilled and low-skilled labor in the United States. However, this would come at thepotential cost of lowering welfare in poor countries.

68

A Rights-Based Immigration Policy
The idea behind a rights-based approach to reforming immigration policy is tophase in more slowly over time immigrant access to government benefits. This could bedone by creating a graduated set of rights to draw on public benefits to which immigrants
would gain access after having worked in the United States for a specific time period.
One way to implement such a plan would be to have immigrants begin on temporary
work visas (of, say, three years) which would give them rights to certain benefits (public
education, self-financed medical benefits, participation in a self-financed pension plan)but not others (public assistance, food stamps, public housing, Medicaid). Satisfying theterms of the temporary work visa would lead to automatic renewal, and, after a specified
number of renewals, to permanent residence. Then, after five years as a permanent
resident an individual could apply for citizenship, as is the case currently. Such a plan –which could be easily incorporated into any of the existing proposals for immigration
reform – would increase the amount of time between when a foreign citizen enters theUnited States and when he or she is eligible to draw on the full set of governmentprovided public benefits. This would more strongly tie admission to the United States tothe desire to work, and, relative to the current policy (or the existing legislative
proposals), would reduce the fiscal drain associated with immigration.55

55

One issue in implementing this program would be whether to admit the immediate family members of
temporary visa holders. Currently, the United States allows immediate family members to join temporary
visa holders on longer-term visas (such as the H-1B) but not on shorter-term visas (such as the H-2A or H2B). These family members are not allowed to work in the United States and are ineligible to receive mosttypes of social assistance. To keep with this precedent, one would admit immediate family members alongwith temporary visa holders, but place strict limits on their ability to work or to draw public benefits.

69

This proposal would take welfare reform one step further. The current policy
distinguishes between permanent residents and citizens, with the former being ineligible
for a wide range in benefits in some states. Since an individual must be a permanent
resident for five years before applying for citizenship, this means there already is a fiveyear waiting period before immigrants can gain full access to public benefits.

Byrequiring immigrants to first complete one or more terms as temporary immigrants, arights-based approach would create a further distinction between earlier-tenure
immigrants on temporary visas and later-tenure immigrants with green cards.
A likely criticism of a rights-based approach is that it creates multiple classes of
U.S. residents. Immigrants on temporary work visas would spend a number of years
without access to the rights that permanent residents possess, who in turn have fewerrights than citizens. Advocates for immigrants often criticize guest worker programs forrelegating immigrants to second-class status. What distinguishes a rights-based approachfrom other guest worker programs is that it sets immigrants on a well-defined path toward
citizenship. Also, it would afford greater legal certainty to illegal immigrants who choseto convert to temporary legal status. Labor unions also complain about guest worker
programs, citing the lack of labor rights they provide to immigrants. However, it would
be feasible to grant temporary immigrants the full set of labor protections that apply tocitizens – collective bargaining, a federally mandated minimum wage, unemployment
insurance, legally mandated health and safety standards, etc. In this case, the only
difference between temporary immigrants and other workers is that the former would nothave access to the same public entitlement programs.

70

A skills-based immigration policy and a rights-based immigration policy are notmutually exclusive options.

In principle the United States could enact both, by

converting family-based admission slots to employment-based admission slots and by
converting illegal immigrants to temporary immigrants. This would raise the averageskill level of incoming immigrants and reduce the illegal immigrant population. To
develop either policy, it would be essential to specify additional details regarding
treatment of illegal immigrants, enforcement against illegal immigration, and thecomposition and level of immigration.
Illegal Immigrants. Temporary work visas would offer a solution for how to deal
with the 10 million illegal immigrants currently living in the country. A special pool ofvisas, much larger than what would be the typical annual allotment discussed below,
could be created for illegal immigrants now residing in the United States. The grantingof these visas would amount to a limited amnesty for these immigrants. Congress would
have to decide which illegal immigrants would be eligible for a visa from the special
pool. For instance, the last amnesty, which occurred in 1988 under the Immigration
Reform and Control Act, applied to individuals who could demonstrate they had been in
the United States continuously for the previous six years. Illegal immigrants ineligible
for visas from the special pool would still be eligible to apply for regular temporary work
visas, which the government would make available on an annual basis. This approach
has obvious parallels to President Bush’s plan and to the House and Senate plans,
although none of these has yet to specify how temporary legal immigrants would
progress to permanent residence.

71

To obtain a special-pool visa, an employer would have to apply on behalf of anillegal immigrant. In many cases, this would require employers to admit they had been
employing illegal immigrants, which is tantamount to admitting that they had been
breaking the law. To give employers an incentive to help their employees become
temporary legal workers, it would likely be necessary to offer immunity from prosecution
for some past illegal employment practices.
Groups that traditionally oppose immigration would likely be vehement in theirobjections to an amnesty for illegal immigrants. However, it is almost inconceivable that
the United States could reduce the illegal immigrant population without an amnesty ofsome sort. One alternative, mass deportations of illegal immigrants, would require apolice effort of the scale never seen in this country. Whatever the opposition to anamnesty, opposition to mass deportations would likely be much more intense. An aspectof a limited amnesty that might make it more politically palatable than a blanket amnesty
is that it would lead not directly to permanent residence but to a temporary work visa.
Former illegal immigrants would not be eligible to receive the full set of public benefits
until they had completed the required number of terms of temporary migrants and thefive-year period as a permanent legal resident. Another objection to an amnesty is that it
would raise the incentive for illegal immigration in the future. This is a serious concern.
To avoid inviting future illegal immigration, the United States would also have to change
the way it enforces against illegal entry.
Enforcement. Current U.S. enforcement policy, which has been in place since theearly 1990’s, involves heavy patrols in major cities along the U.S.-Mexico border, lightpatrols in unpopulated zones along the U.S.-Mexico border, and minimal presence in the72

U.S. interior (Boeri, Hanson, and McCormick, 2002). One notable aspect of U.S. interior
enforcement is that immigration authorities do not track most temporary legal immigrants
in the country, making it difficult to determine how many individuals overstay their entry
visas. The result of this policy is that once in the United States illegal immigrants appear
to face little risk of apprehension or deportation.
Clearly, current U.S. enforcement policy is ineffective.

One measure of its

ineffectiveness is that after the United States dramatically increased border enforcementin the early 1990’s illegal immigration actually increased. In the 1990’s, average annual
net illegal immigration was 300,000 to 500,000 individuals a year, up from 200,000 to
300,000 individuals in the previous decade (Boeri, Hanson, and McCormick, 2002).
About two-thirds of illegal immigrants enter the United States by crossing U.S.-Mexico
border and about one-third overstay temporary visas.
While effective enforcement against illegal immigration requires a strong
presence at U.S. borders, it also requires serious enforcement efforts in the U.S. interior.
Currently, immigration authorities devote few resources to investigating or monitoring
employers that appear likely to hire illegal immigrants (GAO, 2002).
Occasional attempts by immigration authorities to increase interior enforcement
are met with stern political opposition. Following INS raids of onion fields in the state ofGeorgia during the 1998 harvest, the U.S. Attorney General, both Georgia senators, andthree Georgia congressional representatives publicly criticized the INS for injuring
Georgia farmers.56 The raids ceased shortly thereafter. Large-scale raids of farms in
California, Florida, or Texas, which are home to the largest concentrations of56

See Mark Krikorian, "Lured by Jobs, Illegal Immigrants Risk Death at Border Crossings,” Santa Barbara
News-Press, April 25, 1999.

73

undocumented workers, are virtually unheard of. In 2000 and 2001, the INS investigatedthe meat-packing industry in Nebraska and Iowa, which is reputed to use illegal labor
intensively, but made no large-scale raids on any plants. Most plant visits by INS agentswere announced in advance, as has become standard practice.57
What makes current efforts at interior enforcement difficult is that employers
have plausible deniability. They are required to ask employees for legal documents (asocial security card, a green card) and to record this information on forms that
immigration authorities can review in the event they audit the plant. As long as the
documents appear to be genuine, employers are more or less free from any legal liability.
Since employers do not have to verify the authenticity of employee identification, thischeck serves only to weed out obvious forgeries.
An alternative approach would be to mandate immediate verification of an
employee’s legal status. Through the voluntary Basic Pilot Program, employers are
currently able to verify the authenticity of job applicant’s social security numbers with
the Social Security Administration (SSA) and the Department of Homeland Security(DHS).58

Thus, the SSA and DHS already have an electronic database to which

employers can submit electronic requests for information, which makes the verification
process trivial.

Converting electronic verification from a voluntary program to a

mandatory requirement for employment would eliminate plausible deniability on the partof employers. The only way they could hire illegal immigrants would be by keeping

57

The INS strategy was to announce plant visits, ask employers for permission to review employee records,
and then to interview workers whose records looked suspicious. The many workers who failed to report for
their INS interviews lost their jobs. The result of the INS investigation, then, was not monetary sanctions
on employers but (indirectly) forced quits by workers. See “Immigration: In the Vanguard,” Economist,
October 16, 1999, pp. 31-32.
58
See http://uscis.gov/graphics/services/SAVE.htm for a description of the Basic Pilot Program.

74

these workers off their official employment roles, in which case they would beunquestionably breaking the law. An alternative, or perhaps complementary, approach tomandatory electronic verification would be to implement a national identity card, but thiswould likely face political opposition from any quarters.
Mandatory verification would also make existing audits of employers byimmigration authorities more transparent. Any employer who had failed to verify theSocial Security status of an employee (on which there would be an electronic record)
would be guilty of an infraction. With these procedures in place, a modest increase ininterior enforcement by immigration authorities could potentially greatly increase its
effectiveness.

In addition, the DHS would have a record of employment for eachtemporary legal immigrant, which would be useful for evaluating applications forrenewal of temporary work visas.
Immediate verification of an employee’s legal status would not increase
information burdens on either employees or employers.

Currently, employers mustcomplete and retain I-9 identification verification forms on all employees.59 And thetechnology for electronic verification of employability clearly already exists.
Composition and Level of Immigration. Adopting a rights-based approach toimmigration policy could be implemented under current U.S. immigration quotas. Thesequotas reserve the majority of entry slots for family members of U.S. citizens and legal
residents.

The change would be that new immigrants, whether they were familysponsored or employer sponsored, would receive a temporary work visa rather than agreen card. New immigrants would not become permanent residents until they had

59

Employers do not have to submit these forms to the government. They only have to keep them in theevent of an audit by government inspectors.

75completed the required number of spells on temporary work visas. The advantage ofadopting a rights-based immigration policy is that it could create the political support foraddressing illegal immigration, including a limited amnesty to illegal immigrants,
mandatory employee verification procedures, and new enforcement capabilities.
However, there is no reason to believe that current admission criteria represent theconstrained optimum policy choice for the United States. Neither the skill compositionof new immigrants nor the level of immigration reflects economic conditions in the
country.

Both are mandated by legislation that changes slowly over time.

The

inflexibility of existing policy makes it attractive to imagine more extensive changes inwhich individuals and in how many individuals gain admission to the United States.
Under a rights-based program in which immigrants first enter under temporary
work visas, it would be straightforward to set entry criteria according to U.S. labormarket conditions. One possibility would be for U.S. employers to post informationelectronically on jobs that they desire to fill with temporary immigrants. These postings
would reflect the excess demand for labor in the United States. Occupations with thelargest number of postings would in principle indicate where excess demand for labor
was the greatest. Foreigners could then apply for job openings, providing information
about themselves electronically to prospective employers.60

The number of foreign

applicants per position would be an indication of the excess supply of foreign labor.
Occupations in which the number applicants exceeded the number of job postings(which, realistically, could be most of all occupations) would indicate the existence ofqueues for jobs in the United States. The length of these electronic job queues by

60

To give employers and employees an incentive to real information truthfully, it would probably benecessary to charge a fee for the service of listing employment opportunities and employment applications.

76

occupation would be an indication to immigration authorities of where the gains toimmigration might be the greatest.
To determine the overall number of immigrants admitted, immigration authorities
could also use information on economic conditions in the United States. Congress could
set a flexible cap on total admissions, such that any excess admissions in years withstrong labor demand would have to be offset by fewer admissions in years with weaklabor demand.

The cap could apply to the total number of temporary work visas

immigration authorities grant.

Each year, there would be flows out of temporary

immigrant status, as individuals either successfully completed the required number ofspells and obtained permanent residence or violated the terms of their visas and had themrevoked. Outflows would create openings for new temporary immigrants, with net total
admissions determined by the flexible cap.

It has been nearly two decades since the last major reform of U.S. immigration
policy. Since that time, illegal immigration has increased, the wages of low-skilled U.S.
workers have fallen, the short-run fiscal costs of immigration have grown, andimmigration has become a more contentious issue in American life. There is little
disagreement that a new round of reform of U.S. immigration policy is needed.
Meaningful reform will have to address, at the very least, an amnesty for illegal
immigrants and enforcement against future illegal immigration. Employers will only go
along with reform if they feel they will not lose access to foreign workers. The prospectof an amnesty and continuing high levels of immigration would likely face strong
opposition. One strategy for softening this opposition and for forging a coalition behind77reform is to convince some groups that currently oppose immigration – such as taxpayers
in high-immigration states – that reform is in their interest. It is hard to imagine that this
could be achieved without lowering the fiscal costs associated with immigration.
Distributive conflicts appear to be at the heart of disagreements over immigration policy.
Fortunately, policy options are available that can lessen the distributive consequences ofimmigration and move the United States toward an immigration policy that better serves
the national interest.

78

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83

Table 1: Source Countries for U.S. Immigration, 2003
Foreign-Born Pop.
Level
(000s)All Countries

34,612Pct.
Distbn.

100.0

Cohorts by Arrival Year
Pre1970

1970
to
1979

1980
to
1989

1990
or later

4,759(level in 000s)
4,983
8,213

16,657

11.7
25.6
57.6
5.0

34.1
3.7
4.6
3.8
1.3
3.3
1.9
2.5
2.0
1.4
2.2

Region of Birth
EuropeAsia
Latin America
Other Areas

5,415
8,994
18,285
1,918

15.6
26.0
52.8
5.5

40.6
14.0
35.3
10.1

(percent of cohort)
14.6
9.7
33.3
29.3
47.6
56.4
4.5
4.6

Country of Birth
1 Mexico
2 Philippines
3 India
4 China
5 Germany
6 El Salvador
7 Cuba8 Vietnam
9 South Korea
10 Canada
11 Dominican Rep.

10,237
1,458
1,184
1,168
1,091
1,025
1,005
947
916
853
726

29.6
4.2
3.4
3.4
3.2
3.0
2.9
2.7
2.6
2.5
2.1

16.0
2.9
0.8
2.6
12.5
0.6
7.9
0.5
1.3
8.2
1.3

26.4
5.9
3.5
3.0
2.6
2.0
2.9
4.5
4.1
2.2
2.3

30.1
4.9
2.5
3.1
1.8
4.3
2.2
3.4
3.8
1.4
2.3

Source: March 2003 Current Population Survey

84

Table 2: Immigrant Eligibility for Welfare Benefits

SSI

Food
StampsOther Federal
Means-Tested
Benefits

State/Local
Public Benefits

State option
Eligible forfirst 5 years

State option
Eligible forfirst 5 years

State option
Eligible forfirst 5 years

Barred for first
5 years; state
option afterward
Eligible forfirst 5 years

Barred forfirst 5 years; state
option afterward
Eligible forfirst 5 years

State option
Eligible forfirst 5 years

No

Nob

Noc

No

No

Noc

Medicaid

TANF

Qualified Immigrants Arriving before August 23, 1996
Legal
Permanent
Residents
Asylees,Refugeesa

Yes
Eligible forfirst 7 years

No
Eligible forfirst 5 years

State option
Eligible forfirst 7 years

Qualified Immigrants Arriving after August 23, 1996
Legal
Permanent
Residents
Asylees,RefugeesNo
Eligible forfirst 7 years

No
Eligible forfirst 5 years

Barred for first
5 years; state
option afterward
Eligible forfirst 7 years

Unqualified Immigrants
IllegalImmigrants
PRUCOL
Immigrants

No

No

Nod

No

Emergency
services only
Emergency
services onlya

Cuban and Haitian entrants, Amerasians, and aliens granted withholding of deportation are also included in this group.
States have the option to provide WIC to unqualified immigrants.
c
Selected programs are exempted, including short-term non-cash relief, immunizations, testing and treatment forcommunicable diseases, and selected assistance from community programs.
dThose immigrants receiving SSI as of August 22, 1996, will continue to be eligible until September 30, 1998.
b

PRUCOL= Persons Residing under Cover of Law

Source: Boeri, Hanson, and McCormick (2002).

85

Table 3: Immigration and Population in U.S. States
State Share of
National
Population
1994
2003

State Share of
Foreign-Born
Population
1994
2003

Share of Foreign
Born in Population
1994
2003

California

12.3

12.3

34.0

27.5

22.5

27.8

New York

7.0

6.7

11.7

11.7

13.6

21.0

Florida

5.4

5.7

9.3

8.8

13.9

18.6

Texas

7.0

7.5

9.0

10.4

10.4

16.8

New Jersey

3.1

3.0

4.5

4.4

12.0

17.6

Illinois

4.5

4.4

4.7

4.4

8.6

12.1

8.2

12.1

Nation

--

--

--

--

Source: March 1994 and 2003 Current Population Surveys.

86

Table 4: National Trends in Welfare Participation Rates(Percent of Households Receiving Assistance)

Some TypeofAssistanceSome Typeof CashBenefitTANF or
GeneralAssistance

SSI

Medicaid

Food
StampsNatives
1994
1995
1996
1997
1998
1999
2000
2001
2002

15.3
14.8
15.1
13.8
13.2
13.1
13.5
14.3
14.9

7.7
7.4
7.3
6.5
5.8
5.5
5.1
5.0
4.9

4.5
4.1
3.8
3.0
2.5
2.1
1.8
1.6
1.6

3.9
3.9
4.2
4.0
3.8
3.8
3.7
3.8
3.6

13.3
13.0
13.3
12.3
11.9
11.9
12.4
13.1
13.6

8.4
7.9
7.8
6.7
5.8
5.2
5.1
5.3
5.5

Immigrants
1994
1995
1996
1997
1998
1999
2000
2001
2002

24.6
24.7
22.8
21.0
20.6
20.0
21.4
23.4
24.2

12.9
12.7
11.6
10.0
9.2
8.5
7.6
7.2
6.9

8.1
7.8
6.5
5.0
4.2
3.5
2.7
2.6
2.3

6.2
6.2
6.1
5.8
5.7
5.6
5.3
5.1
5.0

22.4
22.6
21.3
19.4
19.3
18.9
20.3
22.5
23.2

13.7
12.7
11.3
10.0
8.2
7.3
6.2
6.3
6.5

Source: Current Population Survey, Annual Demographic Files, various years.

87

Table 5: State Generosity in Welfare Benefits
Illinois

MissouriNebraska

FloridaOregonDelawareDC
KentuckyMontana
NevadaN. Carolina
Tennessee
Virginia
Wyoming

AlaskaArizona
Colorado
Georgia
Iowa
KansasNew
MexicoNorth
DakotaUtah
IndianaOklahoma
S. Carolina
S. Dakota

4

3

PublicAssistance
Availability
toImmigrants

2

1

AlabamaArkansas
Idaho
Louisiana
Mississippi
Ohio
Texas
W. Virginia
1

California
Maine
Maryland
Massachusetts
Rhode Island
Connecticut
Minnesota
New Jersey
New York
Pennsylvania
Wisconsin
Michigan2
3
Public Assistance Generosity

Washington

HawaiiN. Hampshire4

Note: Higher numbers indicate greater generosity of benefits to all citizens (on thehorizontal axis) or greater availability of benefits to non-citizens (on the vertical axis).
Source: Zimmerman and Tumlin (1999).

88

Table 6: Welfare Participation in More and Less Generous States
A. Welfare Participation Rates(% of Households Receiving Some Type of Assistance)

B. Cash Program Participation Rates(% of Households Receiving Cash Assistance)

Less
More
Less
More
Less
More
Less
More
Generous Generous Generous Generous Generous Generous Generous Generous
Year
StatesStatesStatesStatesStatesStatesStatesStatesNatives
1994
1995
1996
1997
1998
1999
2000
2001
2002

16.7
15.8
16.2
14.7
13.9
13.6
14.0
15.2
16.0

Immigrants
13.9
13.7
13.9
12.9
12.6
12.6
12.9
13.4
13.7

22.8
22.9
19.3
17.1
16.9
15.5
15.4
18.5
20.7

25.2
25.2
24.0
22.4
21.9
21.5
23.7
25.3
25.5

C. Medicaid Participation Rates(% of Households Receiving Medicaid)

Natives
7.7
7.2
7.0
6.6
5.7
5.4
5.1
5.1
4.9

Immigrants
7.6
7.5
7.6
6.4
6.0
5.6
5.1
4.9
4.9

8.2
8.2
7.4
6.1
5.6
4.7
3.4
3.5
3.4

14.3
14.0
13.1
11.3
10.5
9.9
9.1
8.6
8.3

D. Food Stamp Participation Rates(% of Households Receiving Food Stamps)

Less
More
Less
More
Less
More
Less
More
Generous Generous Generous Generous Generous Generous Generous Generous
Year
StatesStatesStatesStatesStatesStatesStatesStatesNatives
1994
1995
1996
1997
1998
1999
2000
2001
2002

14.1
13.5
14.0
12.8
12.2
12.2
12.5
13.7
14.5

Immigrants
12.4
12.4
12.6
11.8
11.6
11.7
12.2
12.6
12.8

18.6
19.5
17.2
15.2
15.4
13.8
14.0
17.3
19.4

23.6
23.6
22.7
20.9
20.7
20.7
22.6
24.5
24.7

Natives
9.6
8.6
8.3
7.3
6.4
5.8
5.8
6.2
6.3

Immigrants
7.3
7.1
7.2
6.0
5.2
4.6
4.3
4.3
4.6

14.2
13.1
11.0
9.2
5.7
6.2
4.8
5.3
5.8

13.6
12.6
11.4
10.3
9.1
7.7
6.7
6.7
6.8

Source: Current Population Survey, Annual Demographic Files, various years.

89

Table 7: Support for Immigration Restrictions by Education GroupYear

No High
SchoolHigh School orSome College

College
Graduate

Total

1992

47.7%

55.0%

39.3%

50.2%

2000

59.4%

52.7%

33.6%

47.5%

Notes: Tables 7 to 10 report the percent of native-born respondents stating they would
prefer immigration to be decreased (by a little or by a lot) in the NES survey for a given
year. States with high immigrant populations have a share of immigrants in the state
population of greater than 0.104 (the U.S. mean in 2000); states with high immigrant
access to public assistances are those in the upper right four cells of Table 5. No highschool refers to those with up to 12 years of education but no high-school diploma, highschool or some college refers to those with 12 to 15 years of education (with a highschool diploma), and college graduates to those with 16 or more years of education.

Table 8: Support for Immigration Restrictions
by Education Group and Size of State Immigrant Population

Year

State Immigrant
Population

No High
SchoolHigh School orSome College

College
Graduate

1992

Low

45.4%

55.3%

38.3%

High

52.9%

54.5%

40.3%

Low

52.1%

55.5%

33.2%

High

68.4%

49.8%

33.9%

2000

Notes: See Notes to Table 7.

90

Table 9: Support for Immigration Restrictions by Education Group,
Size of State Immigrant Population, and Immigrant Access to Public Assistance

No High School
State Immigrant Population
Low
High

High School or Some College
State Immigrant Population
Low
High

College Graduate
State Immigrant Population
Low
High

Year

Immigrant Access to
Public Assistance

1992

Low

42.3%

51.1%

54.2%

56.1%

39.9%

30.8%

High

53.7%

61.8%

58.5%

52.3%

32.9%

48.1%

Low

53.1%

68.0%

56.3%

50.2%

34.0%

30.3%

High

46.2%

69.2%

52.6%

49.3%

30.6%

37.4%

2000

Notes: See Notes to Table 7.

Table 10: Support for Immigration Restrictions
Excluding Very Conservative and Very Liberal Individuals

No High School
State Immigrant Population
Low
High

High School or Some College
State Immigrant Population
Low
High

College Graduate
State Immigrant Population
Low
High

Year

Immigrant Access to
Public Assistance

1992

Low

43.3%

52.4%

54.3%

55.8%

39.1%

30.2%

High

51.3%

56.7%

58.9%

53.2%

33.8%

46.7%

Low

53.9%

67.4%

58.6%

52.5%

32.8%

30.1%

High

46.2%

70.8%

52.4%

50.6%

30.8%

36.6%

2000

Notes: See notes to Table 7.

92Foreign-born Population Share (%)

16

14

12

10

8

6

4
1900

1920

1940

1960

1980

Year

Figure 1: Share of the Foreign Born in the U.S. Population

2000

New Admissions

New Admissions with IRCA

Permanent Legal Immigration (000s)

1800
1600
1400
1200
1000
800
600
400
200
0
1820

1840

1860

1880

1900

1920
Year

1940

1960

1980

2000

Figure 2: Permanent Legal Immigration in the United States

94

Educational Attainment of Immigrants and Natives, March 2003
40.0

35.0

30.0

25.0
Natives
Immigrants

20.0

15.0

10.0

5.0

0.0
Less than 9th
grade

9th to 12th grade(no diploma)

High school
graduate

Some college or Bachelor's degree Advanced degree
associate degree

Educational Attainment

Figure 395

Occupational Distribution of Immigrants and Natives, March 2003

50.0
45.0
40.0
35.0
Natives

30.0
25.0

Immigrants
20.0
15.0
Immigrants withup to 12 years ofeducation (nodiploma)

10.0
5.0
0.0
Managerial and Technical, sales,
professional
and admin.
specialty
supportServiceoccupations

Production,
craft, and repair

Operators,
fabricators,
laborers

Farming,Fishing, Forestry

Major Occupation Group

Figure 496Earnings Distribution of Immigrants and Natives, 2002

45.0
40.0
35.0
30.0
Natives
25.0
20.0

Immigrants

15.0
Immigrants with up
to 12 years ofeducation (nodiploma)

10.0
5.0
0.0
$1 to 14,999

15,000 to 24,999 25,000 to 34,999 35,000 to 49,999 50,000 to 74,999 75,000 and up
Income Category

Figure 597Immigrant Share of State Population, 1990 and 2000
3

Imm Pop Share 2000 / Imm Pop Share 1990
(log scale)North Carolina
Georgia
Arkansas
Tennessee

Nebraska

2
KentuckyKansasSouth Carolina
Colorado
Utah
Minnesota
NevadaAlabamaOklahoma
Iowa
Arizona
OregonIndianaIdaho Delaware Virginia
MissouriMississippi
Texas
Washington
MarylandSouth Dakota
New Mexico
Illinois
Wisconsin
District of Columbia
New Jersey
FloridaAlaskaPennsylvania
Louisiana
Michigan
Wyoming
Massachusetts
California
Connecticut
RhodeislandNew York
West Virginia
Ohio
North Dakota

Hawaii
New Hampshire
Vermont

Montana

1
Maine

.01

.1
Immigrant Population Share 1990
(log scale).2.3

Figure 698Growth in Immigrant Population and Native Employment, 1990-2000
3

Imm Pop Share 2000 / Imm Pop Share 1990
(log scale)North Carolina
Georgia
Arkansas
NebraskaTennessee

2

District of Columbia

KentuckyKansasSouth Carolina
Alabama Minnesota
Oklahoma
Iowa
OregonIndiana
Missouri
Delaware
Virginia
Mississippi
Texas
SouthWashington
DakotaMarylandNew Mexico
Illinois
Wisconsin
New Jersey
Pennsylvania AlaskaFlorida
Louisiana
Michigan
Wyoming
Massachusetts
California
Connecticut
Rhode island
New York
West Virginia
Ohio
Hawaii

Colorado

Utah

NevadaArizona
Idaho

North Dakota
New
Hampshire
Vermont
Montana

1
Maine

.8

1
1.2
Native Employment 2000 / Native Employment 1990 (log scale)

1.4

Figure 799

Difference in Immigrant and Native Welfare Participation Rates(Percent of Immigrant Households Receiving Assistance)- (Percent of Native Households Receiving Assistance)

12.0

10.0

8.0
Any Type of Assistance
Any Type of Cash Benefit
Medicaid
Food Stamps

6.0

4.0

2.0

0.0
1994

1995

1996

1997

1998

1999

2000

2001

2002

Year

Figure 8100

.4

Share of Households Receiving Public Assistance, 1994-5.1

Immigrant Households.2.3

New Mexico

California
IndianaTexas
Idaho Arizona
New York
Iowa

NevadaLouisiana

FloridaKansas

Nebraska

Oklahoma

Hawaii
Massachusetts

Utah
Maryland
Virginia Wisconsin

Kentucky

Maine
North Carolina

OregonMinnesota
Michigan
Illinois
Pennsylvania
MissouriGeorgia

New Jersey
Colorado
Washington
Connecticut

Mississippi

South Carolina

Ohio

Arkansas
Tennessee

New Hampshire0

Alabama

.1

.15

.2

.25

Native Households

Figure 9a.4

Share of Households Receiving Public Assistance, 2002-03

New Mexico
Oregon.1

Immigrant Households.2.3

California

New York

Arizona
Texas

North Carolina
Nebraska
Washington
Massachusetts
Arkansas
Utah
Hawaii
Maine
FloridaOklahoma
Minnesota
Iowa
Michigan
Missouri
Wisconsin
KentuckyKansas Illinois
GeorgiaLouisiana
New Jersey
PennsylvaniaIdaho
Colorado
Connecticut
Ohio
South Carolina

Tennessee

Mississippi

Alabama

NevadaMarylandIndiana
Virginia0

New Hampshire

.1

.15

.2
Native Households

.25

.3

Figure 9b

101

Average labor income for Immigrant Household Heads
35000
40000
45000
50000
55000

Average Household Head Income and Share of Immigrant Households Headed by HS Dropout, 2002-3

MarylandNew Jersey
Connecticut

California

Massachusetts

New Hampshire

Michigan
Virginia

Minnesota
New YorkIllinois
Pennsylvania
Hawaii
Ohio

Washington
KansasGeorgiaLouisiana
FloridaTennessee

Indiana
KentuckyMissouriColorado

Arizona

Utah

Texas

NevadaAlabamaSouth Carolina

Wisconsin
North
Carolina
Oklahoma

Nebraska
Arkansas
Oregon

Idaho

Iowa
Maine

30000

Mississippi

New Mexico

.1

.2
.3
.4
Share of Immigrant Households headed by a High School Droupout.5

Figure 10

102

.15

Immigrant Households on Welfare, 2002-3

Imm HHs on Welfare/Native HHs.05.1

California

New York

New Mexico
OregonWashington

0

Utah
Colorado
North
Carolina
Michigan
Idaho
Georgia
Nebraska
Iowa
Minnesota
Kansas Virginia
Pennsylvania
Oklahoma
Wisconsin
Arkansas
Tennessee
Maine
Ohio
MissouriSouth
Carolina
Louisiana
Kentucky
New Hampshire
Alabama
Indiana
Mississippi

0.1

Massachusetts

Illinois
Connecticut
Maryland

Arizona
Texas
FloridaHawaiiNew Jersey

Nevada.2
Immigrant HHs/Native HHs.3.4

Figure 11103