United States General Accounting Office

GAO Report to Congressional Requesters

July 1995 ILLEGAL ALIENS

National Net Cost

Estimates Vary Widely

GAO/HEHS-95-133

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-252730 

July 25, 1995

The Honorable Alfonse M. D’Amato

United States Senate

The Honorable Lamar S. Smith

Chairman, Subcommittee on

 Immigration and Claims

Committee on the Judiciary

House of Representatives

The Honorable Elton Gallegly

House of Representatives

The Honorable Bill McCollum

House of Representatives

The Honorable Dana Rohrabacher

House of Representatives

In recent years, growing public concern about illegal aliens in the United

States has focused on their use of public benefits and their overall costs to

society.1

 Some 3-1/2 to 4 million illegal aliens resided in the United States

in 1994, according to government estimates. States’ concerns about the

strain on their budgets from providing public benefits and services to

illegal aliens have prompted six states to file suit against the federal

government for reimbursement of some of these costs.2

 In one state,

California, voters recently passed a measure that would deny state-funded

public benefits to illegal aliens, including education, nonemergency health

services, and other social services.3

Information on the effects of illegal aliens residing in the country can be

useful to lawmakers in developing appropriate policy responses to address

the problems created by illegal immigration. For example, information on

1

An illegal alien is a person who is in the United States in violation of U.S. immigration laws. Such a

person may have entered (1) illegally; that is without the Immigration and Naturalization Service (INS)

inspection (undocumented), or by using fraudulent documentation or (2) legally, under a

nonimmigrant visa or other temporary condition but subsequently violated the terms of the visa or

other terms of entry.

2

Florida, California, Arizona, Texas, New Jersey, and New York.

3

California voters approved Proposition 187 on November 8, 1994. Many of the restrictions on

eligibility for public services have not taken effect because lawsuits blocked implementation of the

measure.

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the extent, if any, to which illegal aliens impose a fiscal burden on U.S.

taxpayers provides one indication of the magnitude of the effects of illegal

aliens. The current debate about how to address the problems of illegal

immigration has generated a renewed interest in the findings of studies

that have attempted to estimate the public fiscal impact of illegal aliens.

You asked us to examine existing estimates of the overall costs, to all

levels of government, of providing benefits and services to illegal aliens.

Because illegal aliens not only receive public benefits but also pay taxes,

we examined estimates of the public net costs of illegal aliens: the

government costs they generate, minus the revenues they contribute to

government. We previously reported to you on estimates of selected costs

for illegal aliens incurred by the states in which most of this population

resides.4

 This report (1) assesses existing estimates of the national net cost

of illegal aliens to all levels of government, (2) examines the items that

account for much of the variation in these estimates, and (3) identifies

areas in which the estimates could be improved.

In developing this information, we identified 13 studies of the net costs of

illegal aliens issued between 1984 and 1994; only 3 of these studies

estimated the national net cost, and we examined them in detail. They are

(1) Donald Huddle’s5

 initial study of 1992 net costs, The Costs of

Immigration; (2) the Urban Institute’s critique of that study, How Much Do

Immigrants Really Cost? A Reappraisal of Huddle’s “The Cost of

Immigrants”;

6

 and (3) Huddle’s updated study, The Net National Costs of

Immigration in 1993.

7

 In addition, we consulted various experts in the field

of immigration about issues that arose in assessing estimates of the fiscal

impact of illegal aliens (see app. IV for a list of persons consulted).

Results in Brief All three national studies concluded that illegal aliens in the United States

generate more in costs than revenues to federal, state, and local

4

Benefits for Illegal Aliens: Some Program Costs Increasing, But Total Costs Unknown

(GAO/T-HRD-93-33, Sept. 29, 1993). This testimony included estimates of costs for illegal aliens in

California, New York, Texas, Florida, and Illinois.

5

Donald Huddle is a professor emeritus of economics at Rice University.

6

The methodology of the revenue estimates in this study is set out in greater detail in a study by Jeffrey

Passel, Immigrants and Taxes: A Reappraisal of Huddle’s “The Cost of Immigrants” (Washington, D.C.:

The Urban Institute, 1994).

7

Huddle’s updated study was issued with an accompanying paper that discusses some of the major

areas of difference in the national net cost estimates. See A Critique of the Urban Institute’s Claims of

Cost Free Immigration: Huddle Findings Confirmed (Washington, D.C.: Carrying Capacity Network,

1994).

Page 2 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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governments combined. However, their estimates of the national net cost

varied considerably, ranging from $2 billion to $19 billion. Because little

data are available on illegal aliens’ use of public services and tax

payments, the various indirect approaches used to estimate costs and

revenues were often based on assumptions whose reasonableness is

unknown. Moreover, the studies varied considerably in the range of costs

and revenues they included and their treatment of certain items, making

them difficult to compare. As a result, a great deal of uncertainty remains

about the actual national fiscal impact of illegal aliens.

We did find that a relatively small number of costs and revenues account

for much of the variation in the estimates of the national net cost of illegal

aliens. For example, one study included costs of $3.9 billion for certain

benefits, such as education, provided to U.S. citizen children of illegal

aliens and the other two studies did not include these costs. In addition,

the two studies that included estimates of Social Security

costs—$3.3 billion versus $0—differed in their approaches to this item and

appear to have estimated different costs. In these and other instances, the

estimates were difficult to assess because the studies did not always

clearly explain the criteria used to determine which items were

appropriate to include.

Better data on the illegal alien population and clearer explanations of

which costs and revenues are appropriate to include would help improve

the usefulness of estimates of the national net cost. Recognizing the

difficulties inherent in collecting better data on a population with an

incentive to keep its status hidden from government officials, any future

studies would benefit from focusing on some of the key characteristics of

the illegal alien population. These include the population’s size, geographic

distribution, age distribution, income distribution, labor force

participation rate, tax compliance rate, and extent of school participation.

Clearer explanations of which costs and revenues are appropriate to

include also would be helpful. The appropriateness of including any

particular item may depend on the policy questions addressed by a study.

If studies were more explicit about the questions they address, their

estimates would be easier to compare and more useful to lawmakers.

Background Illegal immigration is an important issue, especially in California, New

York, Texas, Florida, Illinois, Arizona, and New Jersey—the states

estimated to account for over three-fourths of the illegal alien population.

Illegal aliens are a concern not only because they are breaking

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immigration laws but for various other reasons. For example, state and

local governments are especially concerned about the effect on their

budgets of providing benefits and services to illegal aliens. In addition,

there are concerns about whether the presence of illegal alien workers has

negative effects on the employment of U.S. workers.

Size of the Population Public concern about the number of illegal aliens residing in the United

States led to the passage of major immigration legislation in the 1980s. In

an effort to reduce the size of the nation’s illegal alien population,

estimated at 3 to 5 million in 1986, the Congress enacted the Immigration

Reform and Control Act of 1986 (IRCA). IRCA attempted to deter the inflow

of illegal aliens by prohibiting employers from hiring anyone not

authorized to work. IRCA also provided that under certain circumstances,

an illegal alien’s status could be adjusted to lawful permanent resident.8

Almost 3 million illegal aliens acquired lawful permanent residence as a

result of IRCA.

Despite a brief drop in the estimated number of illegal entries to the

United States after IRCA was enacted, the inflow of illegal aliens has

subsequently increased, so that the size of the illegal alien population is

now estimated to have increased once more to pre-IRCA levels. INS

estimated that there were 3.4 million illegal aliens residing in the country

in October 1992. Updating this estimate would place the illegal alien

population at about 4 million in 1994.9

 The Bureau of the Census estimated

that the size of the illegal alien population was between 3.5 million and

4 million in April 1994.10

Eligibility for Federal

Benefits

Illegal aliens are not eligible for most federal benefit programs, including

Supplemental Security Income, Aid to Families With Dependent Children

(AFDC), Food Stamps, unemployment compensation, financial assistance

8

Aliens who either entered the United States before January 1, 1982, and had been living illegally in the

country continuously since that time or who worked in agriculture were eligible to seek adjustment of

their status.

9

Robert Warren, “Estimates of the Unauthorized Immigrant Population Residing in the United States,

by Country of Origin and State of Residence: October 1992,” unpublished report, U.S. Immigration and

Naturalization Service (Washington, D.C.: 1994). We updated the estimate to 1994 by using the report’s

estimate of a 300,000 annual increase in the size of the national illegal alien population.

10Edward W. Fernandez and J. Gregory Robinson, “Illustrative Ranges of the Distribution of

Undocumented Immigrants by State,” U.S. Bureau of the Census, Population Division, technical

working paper no. 8 (Washington, D.C.: U.S. Department of Commerce, 1994).

Page 4 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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for higher education, and the Job Training Partnership Act (JTPA).11

However, they may participate in certain benefit programs that do not

require legal immigration status as a condition of eligibility, such as Head

Start, the Special Supplemental Food Program for Women, Infants, and

Children (WIC), and the school lunch program.12 In addition, they are

eligible for emergency medical services, including childbirth services,

under Medicaid if they meet the program’s conditions of eligibility. Illegal

aliens may apply for AFDC and food stamps on behalf of their U.S. citizen

children. Although it is the child and not the parent in such cases who

qualifies for the programs, benefits help support the child’s family.

Illegal aliens may not work in the United States or legally obtain Social

Security numbers for work purposes. However, many illegal aliens do

work and have Social Security taxes withheld from their wages based on

falsely obtained numbers.13 Illegal aliens are not explicitly barred from

receiving Social Security benefits; nonetheless, some illegal aliens may not

be able to collect benefits because an individual generally must have

obtained a valid Social Security number to receive credit for work

performed.

Types of Revenues

Generated

Illegal aliens generate revenues as well as costs; these revenues offset

some of the costs that governments incur. Research studies indicate that

many illegal aliens pay taxes, including federal and state income taxes;

Social Security tax; and sales, gasoline, and property taxes. However,

researchers disagree on the amount of revenues illegal aliens generate and

the extent to which these revenues offset government costs for benefits

and services.

State Efforts to Estimate

Fiscal Impact of Illegal

Aliens

Over the past few years, the states with the largest illegal alien populations

have developed estimates of the costs they incur in providing benefits and

services to illegal aliens. These estimates vary considerably in the range of

11While illegal aliens are ineligible by law for housing assistance, the Department of Housing and Urban

Development (HUD) allowed them to receive assistance until final regulations implementing eligibility

restrictions were issued. HUD issued that final rule on eligibility of aliens for housing assistance on

March 20, 1995 (60 Fed. Reg. 14816, 1995); the rule became effective June 19, 1995.

12Certain welfare reform proposals being considered by the Congress would further restrict the

eligibility of illegal aliens for federal benefits. For example, the Personal Responsibility Act of 1995

(H.R. 4) would make illegal aliens ineligible for federal means-tested public benefit programs, except

for certain emergency assistance.

13This can occur in various ways. For example, an illegal alien might provide an employer with (1) a

Social Security number that had been assigned to another person, (2) a counterfeit Social Security

card, or (3) a genuine Social Security card that was obtained by furnishing fraudulent documents to

the Social Security Administration.

Page 5 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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costs included and methodologies used. Two states, California and Texas,

also have estimated the public revenues that illegal aliens generate.

In a recent report, we reviewed California’s estimates of three costs for

illegal aliens—elementary and secondary education, Medicaid, and adult

incarceration—and various revenues from this population.14 Although we

adjusted the cost estimates based on our assessment of the state’s

assumptions, we cited several data limitations that prevented us from

developing precise estimates. The even more extensive data limitations on

the revenue side precluded us from making any assessment of the revenue

estimates.

Most Studies Conclude

Illegal Aliens Generate

More in Costs Than in

Revenues

The literature on the public fiscal impact of illegal aliens reflects

considerable agreement among researchers that illegal aliens are a net

cost, though the magnitude of the cost is a subject of continued debate.

We identified 13 studies issued between 1984 and 1994 that developed

estimates of the net costs of illegal aliens. Many of the studies focused on

the illegal alien population in specific states, such as California or Texas,

or specific areas, such as San Diego County or Los Angeles County. In

addition, the range of costs and revenues included in the studies varied

depending on the level of government examined: local, state, federal, or

some combination of these. All but one study concluded that illegal aliens

generated more in public costs than they contributed in revenues to

government. (See app. I for a list of the studies.) Only 3 of the 13 studies

estimated the fiscal impact of all illegal aliens in the United States on all

levels of government.

National Net Cost of

Illegal Aliens

Uncertain

The three studies that have estimated the national net cost of illegal aliens

have generated considerable media attention and public discussion. Each

concluded that illegal aliens generate more in costs than revenues at the

national level, but their estimates of the magnitude of the net cost varied

considerably. The studies faced the difficult task of developing estimates

of the public fiscal impact of a population on which little data are

available. They generally relied on indirect approaches; as a result, the

reasonableness of many of their assumptions are unknown. In addition,

the studies differed considerably in the range of costs and revenues they

included and their treatment of certain items, which makes them difficult

14Illegal Aliens: Assessing Estimates of Financial Burden on California (GAO/HEHS-95-22, Nov. 28,

1994).

Page 6 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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to compare. For these reasons, a great deal of uncertainty remains about

the actual national net cost of illegal aliens.

Studies’ Estimates of Net

Costs Vary Considerably

Donald Huddle estimated that the national net cost of illegal aliens to

federal, state, and local governments was $11.9 billion in 1992.15 This

estimate was followed by an Urban Institute review of Huddle’s work,

which adjusted some of Huddle’s cost and revenue estimates and

estimated a much lower net cost for 1992—$1.9 billion.16 Responding to

the Urban Institute’s criticisms, Huddle subsequently produced an updated

estimate for 1993 that was higher than his initial estimate—$19.3 billion.17

(See app. II for a list of the costs and revenues included in each of the

estimates.)

The net cost estimates in each of the national studies are derived from

three major components: (1) the direct costs of providing public benefits

and services to illegal aliens, (2) displacement costs—the costs of

providing various types of public assistance to U.S. citizens displaced from

their jobs by illegal aliens, and (3) public revenues attributable to illegal

aliens. A comparison of Huddle’s initial study with the Urban Institute’s

study indicates that the major differences were in their estimates of

displacement costs and revenues. Their estimates of direct program costs

were relatively similar, as shown in figure 1.

15This study and Huddle’s updated study were commissioned by the Carrying Capacity Network, a

nonpartisan, nonprofit, national organization whose stated mission is to increase understanding of the

interrelated nature of population growth, environmental degradation, resource conservation, and

quality-of-life issues in the United States.

16The Urban Institute is a nonprofit, nonpartisan, policy research organization. The two lead analysts in

this research were Jeffrey S. Passel and Rebecca L. Clark, director and senior research associate,

respectively, in the Institute’s Program for Research on Immigration Policy.

17Huddle recently updated his national net cost estimate to 1994. The updated estimate relies on the

same methodologies as the estimate for 1993. However, the 1994 estimate uses higher per capita costs

for various public assistance programs, a higher estimate of the income of illegal aliens, and an

updated estimate of the size of the illegal alien population. Huddle concluded that the national net cost

of illegal aliens in 1994 was between $16 billion and $21.6 billion. The lower figure is based on an

estimated illegal alien population of 4 million; the higher figure on a population of 5.4 million. See

Donald L. Huddle, The Net National Costs of Immigration into the United States: Illegal Immigration

Assessed (Washington, D.C.: Carrying Capacity Network, 1995).

Page 7 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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Figure 1: Estimated Net Costs to

Federal, State, and Local Governments

for Illegal Aliens in the United States 30

28

26

24

22

20

18

16

14

12

10

8

6

4

2

0

Total Costs

Components

of estimate

Net Costs

Dollars in Billions

Huddle's

Initial

Estimate

(1992) a

Huddle's

initial

estimate

(1992) a

Urban

Institute's

Estimate

(1992) b

Urban

Institute's

estimate

(1992) b

Huddle's

Updated

Estimate

(1993) c

Huddle's

updated

estimate

(1993) c

Direct program costs

Displacement costs

Less revenues

Total costs

Net costs

$25.008

4.290

9.961

$29.298

$19.337

$8.861

0

6.973

$8.861

$1.888

$10.096

4.291

2.486

$14.387

$11.901

Page 8 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

aDonald Huddle, The Costs of Immigration (Washington, D.C.: 1993), exhibits 5, 6, and 12.

bJeffrey S. Passel and Rebecca L. Clark, How Much Do Immigrants Really Cost? A Reappraisal of

Huddle’s “The Cost of Immigrants” (Washington, D.C.: 1994), pp. 1-8, supplemented by data from

Jeffrey Passel providing a breakdown of the cost estimates for individual items; and Jeffrey S.

Passel, Immigrants and Taxes: A Reappraisal of Huddle’s “The Cost of Immigrants” (Washington,

D.C.: 1994), table 7c.

cDonald Huddle, The Net National Costs of Immigration in 1993 (Washington, D.C.: 1994),

exhibits 5, 6, and 12.

In their study, the Urban Institute researchers did not develop a

completely independent estimate but instead adjusted some of the cost

and revenue estimates in Huddle’s initial study to obtain what they

believed to be a more reasonable estimate. The Urban Institute study also

added certain revenues that were not included in Huddle’s initial study,

such as payroll taxes (Social Security and unemployment compensation)

and federal gasoline tax. In developing their own estimate, Urban Institute

researchers used some of Huddle’s assumptions. In particular, the Urban

Institute study used Huddle’s estimate of the size of the illegal alien

population—4.8 million illegal aliens—for purposes of comparability,

though the study maintained that this estimate was too high.18

Huddle’s update of his earlier study differs substantially from the Urban

Institute study in all three components of the net cost estimates, with the

largest difference occurring between the estimates of direct program costs

(see fig. 1). The reason for this difference is primarily because Huddle’s

updated study includes over $10 billion for direct cost items that were not

included in either his initial study or the Urban Institute study.

Studies’ Estimates Based

on Limited Data on Illegal

Alien Population

National data on illegal aliens’ use of public services and level of tax

payments generally are not available. Various national databases that

contain extensive data on the resident population’s use of public services

and household characteristics, for example, do not have data on the

immigration status of respondents who are not U.S. citizens.19 Questions

about immigration status are not included on Census surveys because they

might provoke untruthful responses and thereby affect the quality of the

survey data, according to a Census official.

18In other studies, the Urban Institute researchers have used significantly lower estimates of the size of

the illegal alien population. For example, in Rebecca L. Clark and others, Fiscal Impacts of

Undocumented Aliens: Selected Estimates for Seven States, the researchers used INS’ national

population estimate of 3.4 million illegal aliens as of 1992.

19These include Census Bureau databases such as the decennial census, the Current Population

Survey, and the Survey of Income and Program Participation.

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Because of such data limitations, the national studies relied on indirect

approaches to estimate the costs and revenues attributable to illegal

aliens. In using these approaches, the studies made assumptions whose

reasonableness is often unknown. To estimate direct program costs, for

example, the studies multiplied their estimates of the average number of

illegal aliens who received a benefit or service times the average annual

program cost per illegal alien. However, data generally are not available to

assess whether the assumptions used in estimating illegal aliens’

recipiency rates20 and average costs were reasonable.

For example, for some programs, one or more of the studies assumed that

illegal aliens had the same recipiency rate and average cost as the overall

population served by the program. Huddle’s updated study made this

assumption in estimating costs for Head Start and adult education. For

other programs, the studies adjusted the national recipiency rate or

average cost upward or downward to reflect a presumed difference in the

use of the program by illegal aliens. For example, in estimating the cost of

housing assistance, Huddle’s initial and updated studies assumed that the

recipiency rate and average cost were higher for illegal aliens than for the

overall population served by this program. The Urban Institute’s study

assumed that the recipiency rate was higher but that the average cost was

the same.

For still other programs, the studies estimated the public service use of

illegal aliens by using data on populations that included groups in addition

to illegal aliens. For example, in their estimates of the cost of primary and

secondary education, the studies used data on the school enrollment rates

of populations that included foreign-born children who were legal

residents. The studies’ estimates of the enrollment rate of school-age

illegal aliens ranged from 70 to 86 percent.21

To estimate revenues attributable to illegal aliens, Huddle’s initial study

and the Urban Institute’s study started with a preexisting estimate of

revenues collected from illegal aliens in Los Angeles County for various

20Recipiency rate refers to the percentage of a population that receives benefits from a particular

program.

21Subsequent to its national net cost study, the Urban Institute developed more detailed estimates of

the costs of providing certain education and public welfare benefits to illegal aliens. The Urban

Institute also expanded its critical analysis of the estimates for these benefits in Huddle’s initial study.

See Rebecca L. Clark, The Costs of Providing Public Assistance and Education to Immigrants

(Washington, D.C.: The Urban Institute, 1994).

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federal, state, and local taxes.22 The studies calculated the per capita

payments by illegal aliens in Los Angeles County for each of these taxes.

The studies then used different methodologies to adjust these per capita

tax estimates to apply them to the national illegal alien population.23

In contrast, Huddle’s updated study used a different approach to estimate

revenues. The study developed an estimate of the income distribution of

the national illegal alien population from data on the foreign-born

population and on illegal aliens who were legalized under IRCA. Based on

this income distribution, the study used data on the tax payments or tax

rates associated with different levels of income for the general population

to estimate revenues from illegal aliens.

Studies Difficult to

Compare

The national net cost studies vary considerably in the range of costs and

revenues they included and their treatment of certain items, making the

studies difficult to compare. The variation in the studies reflects an

absence of clear standards for determining the items that are appropriate

to include in such estimates. A consensus on standards has not yet

emerged because the three national studies represent the initial efforts of

researchers to develop estimates of the total public fiscal impact of the

illegal alien population.

Because the studies attempted to develop comprehensive estimates of the

fiscal impact of a population, it is important to determine whether the

items they included are appropriate. However, this is difficult to determine

because the studies did not always clearly explain the rationale for

including items that were excluded by other studies or treating items

differently from the way they were treated by other studies. As a result, it

is difficult to ascertain whether the large variations in the studies’

estimates for such items stem from their addressing different policy

questions or from differing views about how to respond to the same

question.

Why National

Estimates Vary

A relatively small number of costs and revenues account for much of the

variation in the estimates of the national net cost of illegal aliens. Some of

these cost and revenue items were included in one study but not the

22The estimates of tax payments by illegal aliens were developed in a study by the Los Angeles County

Internal Services Department titled Impact of Undocumented Persons and Other Immigrants on Costs,

Revenues and Services in Los Angeles County, prepared for the Los Angeles County Board of

Supervisors (Los Angeles: 1992).

23For example, the Urban Institute study maintained that Huddle’s initial study inappropriately used

data on geographic differences in tax payments as a proxy for differences in tax rates.

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others. In the case of other items, the studies differed considerably in the

approaches or assumptions they used to develop their estimates.

Our review focuses on differences between the Urban Institute’s study and

Huddle’s updated study. Four areas account for about 88 percent of the

difference between the studies’ estimates of total costs: (1) costs for

citizen children of illegal aliens, (2) costs for the portion of some services

provided to the general public that are used by illegal aliens, (3) Social

Security costs, and (4) costs for workers displaced from jobs by illegal

aliens. On the revenue side, about 95 percent of the difference in the

studies’ estimates is attributable to differences in their estimates of local

revenues (see table 1).24

24Huddle’s updated study used a slightly higher estimate of the size of the illegal alien population than

his initial study and the Urban Institute’s study—5.1 million versus 4.8 million. This factor, in addition

to price inflation from 1992 (the year of the Urban Institute’s estimate) to 1993 (the year of Huddle’s

updated estimate), accounts for about $1.0 billion of the $17.5 billion difference between the net cost

estimates, based on our calculations.

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Table 1: Major Areas of Difference

Between Urban Institute’s Estimate

and Huddle’s Updated Estimate of

National Net Costs

Dollars in billions

Areas of difference

Amount of difference (Huddle’s

updated estimatea minus Urban

Institute’s estimateb)

Costs

Citizen children $4.58

General public servicesc 5.77

Social Security 3.27

Displacement 4.29

Otherd 2.53

Total difference in costs 20.44

Revenues

Local 2.85

Federal and state 0.14

Total difference in revenues 2.99

Total difference in net costs 17.45

aDonald Huddle, The Net National Costs of Immigration in 1993, (Washington, D.C.: 1994),

exhibits 5, 6, and 12.

bJeffrey S. Passel and Rebecca L. Clark, How Much Do Immigrants Really Cost? A Reappraisal of

Huddle’s “The Cost of Immigrants” (Washington, D.C.: 1994), pp. 1-8, supplemented by data from

Jeffrey Passel providing a breakdown of the cost estimates for individual items; and Jeffrey S.

Passel, Immigrants and Taxes: A Reappraisal of Huddle’s “The Cost of Immigrants” (Washington,

D.C.: 1994), table 7c.

cThese consist of county and city costs and state and federal highway costs.

dThese include items that are in Huddle’s updated estimate but not in the Urban Institute’s

estimate. For example, Huddle’s updated estimate includes three federal programs for which

illegal aliens are ineligible: unemployment compensation, federal student aid, and job training

under JTPA. If illegal aliens receive these benefits, they likely do so through fraudulent means.

However, data generally are not available to quantify the extent of fraud by illegal aliens in these

programs.

Costs for Citizen Children

of Illegal Aliens

Huddle’s initial study and the Urban Institute’s study included estimates of

costs for U.S. citizen children of illegal aliens for only one

program—AFDC.

25 These costs represent cash payments received by illegal

aliens on behalf of their citizen children. However, Huddle’s updated study

includes estimates of citizen children costs for additional programs:

primary and secondary education; school lunch; Food Stamps; and English

as a Second Language, English for Speakers of Other Languages, and

25Huddle’s initial study estimated $820 million in AFDC costs; the Urban Institute’s study estimated

$202 million. In our 1993 testimony, we estimated that AFDC costs for fiscal year 1992 were

$479 million, based on administrative data from the Department of Health and Human Services.

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bilingual education. Huddle’s estimate of these additional items totals

$3.9 billion.26 In all these programs except Food Stamps, the benefits or

services are provided directly to citizen children.

The appropriateness of including these additional citizen children costs

depends on the policy question under consideration. For example, if the

question concerns the overall public fiscal impact associated with illegal

immigration, then including these costs would be appropriate because

they are a consequence of the failure to prevent aliens from illegally

entering and residing in the United States. In addition, it would also be

appropriate to include costs and revenues attributable to adult citizen

children of illegal aliens (children 18 years old and older).27 Alternatively,

if the question concerns the cost of benefits or services provided only to

persons residing unlawfully in the country, then it would not be

appropriate to include these costs. None of the three national studies,

however, clearly specifies the question it addressed.

Costs for General Public

Services

Huddle’s initial study and the Urban Institute’s study included estimates of

costs for the portion of some county government services provided to the

general public that are used by illegal aliens, such as public safety, fire

protection, recreation, roads, and flood control. Huddle’s updated study

includes over $5.3 billion in additional costs for miscellaneous public

services not included in his initial study or the Urban Institute’s study,

including federal and state highway costs and costs for a range of city

services, such as police, fire, sewerage, libraries, parks and recreation,

financial administration, and interest on debt.28

The studies’ inclusion of costs for services to the general public raises two

issues: the specific services that should be included and the appropriate

methodology for estimating the costs of the services attributable to illegal

aliens. With regard to the first issue, the national studies focused on local

services provided to the general public; the only such state or federal

service that any of them included was highway services. However, because

there are other state and federal services provided to the general public

that illegal aliens may use or benefit from, it is not clear that the studies’

26This cost estimate is difficult to assess because Huddle’s updated study does not explain the

methodology used to estimate the number of citizen children of illegal aliens.

27Huddle’s updated study does not include such costs or revenues.

28Huddle’s updated study double-counts certain local costs, such as those for education and public

welfare. The study includes these costs both in the estimates of miscellaneous county and city costs,

and in the estimates for specific program items, such as elementary and secondary education, and

AFDC.

Page 14 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

estimates included all the appropriate items.29 None of the studies clearly

addressed this issue.

A second issue involves the methodology used to estimate the costs of

services provided to the general public. Huddle’s updated study calculates

the costs of the additional miscellaneous public services on an average

cost basis. However, this may yield questionable estimates because the

additional cost that governments incur for these services due to the

presence of each illegal alien could be substantially lower or higher than

the average cost per person of providing the services. Using marginal

cost—the cost of providing a service to one additional user—would better

reflect the additional costs due to the presence of illegal aliens. For

example, in areas where illegal aliens constitute a small percentage of the

population, the marginal cost of providing them fire protection could be

lower than the average cost. On the other hand, if the number of illegal

aliens in an area necessitates the construction of new fire stations, the

marginal cost of fire protection for them could be higher than the average

cost. While using marginal costs would yield better estimates, the data

needed to estimate these costs are difficult to obtain.

Social Security Costs Social Security (the Old Age, Survivors, and Disability Insurance program)

has both a revenue side—payroll contributions from workers and

employers—and a cost side—benefits paid out. Huddle’s initial study did

not include either Social Security revenues or costs. Huddle’s updated

study, in response to the Urban Institute’s study, included both. On the

revenue side, the researchers’ estimates are fairly close: Huddle estimates

$2.4 billion in Social Security revenues, compared with the Urban

Institute’s estimate of $2.7 billion.30 However, on the cost side, the

researchers draw sharply different conclusions: Huddle estimates that

illegal aliens generated $3.3 billion in Social Security costs; the Urban

Institute estimates that no Social Security costs were generated by illegal

aliens.

This difference reflects a disagreement about the conceptual approach to

measuring Social Security costs. The Urban Institute study views the

Social Security costs for illegal aliens in a given year as the amount of

benefits paid to this population in that year. The rationale for this view is

29For example, state governments provide various environmental, public safety, health, and judicial

services; they also pay interest on debt incurred to finance the broad range of services they provide.

30The estimate in Huddle’s updated study contains an arithmetical error in the calculation of Social

Security revenue from the highest income group. Correcting this error would raise the estimate of

Social Security revenues to $2.7 billion, the same as the Urban Institute’s estimate.

Page 15 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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that the federal government treats Social Security costs and revenues on a

current accounts basis: in calculating the annual federal budget deficit (or

surplus), Social Security taxes are treated as revenues and Social Security

benefits as expenses. However, the Social Security Administration does

not have data on the amount of Social Security benefits paid to illegal

aliens; as a result, it is unclear whether the Urban Institute’s assumption

that this amount was zero is reasonable.

In contrast, Huddle’s updated study views Social Security costs in terms of

the “present value of future benefits” that illegal aliens will collect. The

study’s cost estimate for 1993 represents the present value of the portion

of future Social Security benefits that illegal aliens will receive that is

attributable to their earnings in 1993.31 Huddle’s rationale for using this

approach to Social Security costs is the belief that the federal government

is incurring a substantial obligation for future benefits to illegal aliens.

However, the data needed to develop a reasonable estimate of the amount

of Social Security benefits that illegal aliens will collect in the future are

not available.32

These different conceptual approaches to measuring Social Security costs

appear to address different questions. The current accounts approach is

relevant to the question of the current-year cost of benefits provided to

illegal aliens who generally have reached retirement age. In contrast, the

present value approach is more appropriate for answering the question of

the long-term costs that will result from the presence of illegal aliens

currently in the labor force. The explanation of the Social Security cost

estimate in Huddle’s updated study makes it difficult to discern whether

he explicitly sought to address a different question than the one addressed

by the Urban Institute’s study.

Displacement Costs Although illegal aliens by law are not entitled to work in this country, they

often find employment. This raises questions about the extent to which

illegal aliens take jobs away from legal residents—U.S. citizens and aliens

residing legally in the country. Job displacement can generate costs to all

levels of government for various forms of public assistance provided to

legal residents who lose their jobs. Huddle’s initial and updated studies

31The present value of a future benefit is the amount that would be sufficient, if invested at a given

interest rate, to fund the expected future stream of payments.

32For example, Huddle’s estimate assumes that 75 percent of illegal aliens in the work force eventually

will collect Social Security benefits, but data are not available to determine whether this is a

reasonable assumption.

Page 16 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

include $4.3 billion in costs for public assistance—Medicaid, AFDC, Food

Stamps, unemployment compensation, and general assistance—provided

to displaced U.S. citizen workers. In contrast, the Urban Institute’s study

concludes that any job displacement costs are offset by the positive

economic effects of illegal aliens. These positive economic effects include

the new jobs and additional spending (the multiplier effect) generated by

illegal aliens’ spending on goods and services. Huddle’s subsequent

response to the Urban Institute’s position is that the social and economic

costs associated with each of the claimed economic benefits would have

to be assessed.33

It is very difficult to quantify the positive and negative effects of illegal

aliens on the economy. With regard to job displacement, our analysis

indicates that Huddle’s $4.3 billion estimate is based on a job displacement

rate that is inconsistent with research findings on this topic. While some

studies have shown that job displacement may occur, recent studies using

national data generally have concluded that displacement is either small in

magnitude or nonexistent. Huddle’s estimate assumes a displacement rate

of 25 percent; that is, for every 100 low-skilled illegal alien workers, 25

U.S. citizens were displaced from their jobs in 1993. The estimate cites

Huddle’s own studies on job displacement to support the 25-percent rate.

However, these studies assume a correlation between the employment of

illegal aliens and the unemployment of native workers that is not

supported by any evidence. (See app. III for a more complete discussion of

Huddle’s displacement cost estimate.)

With regard to positive economic effects, economic models have been

developed to estimate multiplier effects; however, the models have not

been used to measure the effects of subpopulations such as illegal aliens.

As a result, the extent to which the positive economic effects of illegal

aliens offset the costs they generate is unclear.

Local Revenues The national net cost studies estimated the amounts of various revenues

from illegal aliens collected by federal, state, and local governments.

These include income, sales, property, Social Security, and gasoline taxes.

(See app. II for a list of the revenues included in the studies.) Developing

reasonable estimates of these revenues requires information about various

characteristics of the illegal alien population, such as its size, age

33For example, he maintains that researchers must ask “what is the net enhancement of consumer

spending if one consumer population displaces another, or if added consumption must be financed by

higher public sector outlays.” See A Critique of the Urban Institute’s Claims of Cost Free Immigration:

Huddle Findings Confirmed, Carrying Capacity Network (Washington, D.C.: 1994).

Page 17 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

distribution, income distribution, labor force participation rate,

consumption patterns, and tax compliance rate. However, limited data are

available on these characteristics. Furthermore, the studies differ in some

of the revenues they include.

Huddle’s initial estimate of the total revenues from illegal aliens was

$2.5 billion. The Urban Institute’s study criticized Huddle’s estimate for

omitting several revenues—the largest being Social Security tax—and

estimated $7 billion in total revenues. Huddle’s updated study, which

estimated total revenues at $10 billion, added several revenues that were

not included in his initial study, such as Social Security tax, federal and

state gasoline taxes, and city taxes. As shown in table 2, the major area of

difference between the revenue estimates in the Urban Institute’s study

and Huddle’s updated study was in their estimates of local revenues.

Table 2: Revenue Estimates in Urban

Institute’s Study and Huddle’s Updated

Study

Dollars in billions

Revenues

Urban Institute’s

estimate (1992)a

Huddle’s updated

estimate (1993)b

Federal 3.740 3.691

State 2.146 2.337

Local 1.087 3.933

Total 6.973 9.961

aJeffrey S. Passel and Rebecca L. Clark, How Much Do Immigrants Really Cost? A Reappraisal of

Huddle’s “The Cost of Immigrants” (Washington, D.C.: 1994), pp. 1-8, supplemented by data from

Jeffrey Passel providing a breakdown of cost estimates for individual items; and Jeffrey S. Passel,

Immigrants and Taxes: A Reappraisal of Huddle’s “The Cost of Immigrants” (Washington, D.C.:

1994), table 7c.

bDonald Huddle, The Net National Costs of Immigration in 1993 (Washington, D.C.: 1994), exhibit

6.

Two factors help explain the difference in their estimates of local

revenues. First, Huddle’s updated study includes some local revenues not

included in the Urban Institute’s study, such as property taxes paid by

businesses.34 Second, the researchers’ estimates of the per capita income

of illegal aliens differ. The researchers use income as a factor in estimating

the different revenues because the amount of revenues from illegal aliens

is a function of their income levels. The per capita income figure in

Huddle’s updated study ($7,013) is 36 percent higher than that in the

Urban Institute’s study ($5,155). However, more recent work by the Urban

34The source used by Huddle’s updated study to estimate county revenues does not break out the

amounts of property taxes collected from individuals versus businesses. The Urban Institute’s study

included only the portion of county property taxes paid by individuals.

Page 18 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

Institute for the same general time period can be used to obtain an income

figure closer to Huddle’s—about $7,739.35 If this higher figure was

substituted in the Urban Institute’s study, the estimate of total revenues

from illegal aliens would increase to $10.5 billion, placing it closer to the

$10 billion figure in Huddle’s updated study.

The reasonableness of the revenue estimates would remain unclear even if

the gap between the estimates was narrowed, due to the limited data

available on the characteristics of the illegal alien population. For

example, the estimates of illegal aliens’ incomes cited above are derived

from two main sources: survey data on former illegal aliens who were

legalized under IRCA and 1990 Census data on the foreign-born population

(which does not distinguish illegal from legal aliens). By using these

sources to develop estimates, the researchers assumed that the average

income of illegal aliens was similar to that of aliens legalized under IRCA or

to the foreign-born population (either to the population overall or

subpopulations from specific countries). However, the reasonableness of

these assumptions is unknown.36

Estimates of National

Net Costs Could Be

Improved

Our review of the national net cost studies highlighted two key issues: the

limited data on the illegal alien population and the considerable variation

in both the items that the studies included and their treatment of some of

the same items. These issues led us to conclude that considerable

uncertainty remains about the national fiscal impact of illegal aliens.

Obtaining better data on the illegal alien population and providing clearer

explanations of which costs and revenues are appropriate to include

would help improve the usefulness of the national estimates.

Better Data on Illegal Alien

Population Needed

The limited availability of data on illegal aliens is likely to remain a

persistent problem because persons residing in the country illegally have

35In Rebecca L. Clark and others, Fiscal Impacts of Undocumented Aliens: Selected Estimates for

Seven States, Urban Institute researchers developed estimates of the per capita income of illegal aliens

in the seven states estimated to account for about 86 percent of the illegal alien population. To obtain

the $7,739 figure, we assumed that the per capita income of illegal aliens in all other states was the

average of the seven states. We then weighted these income estimates based on the INS estimate of the

geographic distribution of illegal aliens cited in the report.

36For instance, the average income of illegal aliens who were legalized under IRCA may have been

lower than that of illegal aliens who were not legalized because the former group included a much

higher percentage of persons born in Mexico than the latter, and Mexican-born residents have among

the lowest incomes of the foreign-born population. See Rebecca L. Clark and others, Fiscal Impacts of

Undocumented Aliens: Selected Estimates for Seven States, chapters 2 and 6. Similarly, foreign-born

residents who reside legally in the United States may have higher or lower incomes than illegal aliens

who immigrated from the same countries and in the same time period.

Page 19 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

an incentive to keep their status hidden from government officials. Yet as

researchers explore new possibilities for overcoming some of the

obstacles to collecting data on this population, some progress may be

achieved.37

Given the data gaps in so many areas, any effort to collect better data

should focus on those data that would have the greatest impact in

improving the estimates of net costs. Thus, emphasis could be placed on

obtaining data on illegal aliens’ use of those public benefits associated

with the largest cost items or their payment of those taxes associated with

the largest revenue items. For example, elementary and secondary

education is estimated to be the single largest program cost; thus,

researchers could focus on obtaining data on the number of illegal alien

schoolchildren. However, researchers may confront legal barriers in

attempting to collect these data.38

Another approach, which could be used in conjunction with the first,

would be to obtain data on characteristics of the illegal alien population

that would have broad usefulness by permitting researchers to estimate

several cost or revenue items. For example, data on the illegal alien

population’s size, geographic distribution, age distribution, income

distribution, labor force participation rate, and tax compliance rate would

be useful in estimating many types of revenues. Better data on the size of

the population also would be useful in estimating most of the public costs

of illegal aliens.

Clearer Explanation

Needed of Items That

Should Be Included in Net

Cost Studies

Obtaining better data on the illegal alien population will not resolve all the

problems associated with estimating the net costs of illegal aliens.

Researchers will still face issues about which items are appropriate to

include in the estimates and how the items should be treated. As we have

seen, different decisions on these issues can generate considerable

variation in estimates of net costs. Researchers need to clearly explain

how they handled such issues in order to facilitate comparisons of their

estimates. For example, when the decision about whether an item should

37We are in the initial process of developing an estimation methodology that may prove useful in

obtaining better data on the illegal alien population. The methodology involves surveying foreign-born

residents about their immigration status in a way that does not cause any respondent to identify

himself or herself as an illegal alien, yet would permit the development of reliable estimates regarding

the size and characteristics of the illegal alien population.

38As we noted in our California report, many school districts in California believe that the U.S.

Supreme Court decision, Plyler v. Doe, prohibits them from asking about the immigration status of

students. See Illegal Aliens: Assessing Estimates of Financial Burden on California (GAO/HEHS-95-22,

Nov. 28, 1994).

Page 20 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

be included or how it should be treated depends on the policy question

being asked, a study should clearly acknowledge the question it addresses.

The variations in the national studies’ treatment of costs for citizen

children of illegal aliens and Social Security costs were difficult to assess

because the studies did not make clear which questions they were

addressing.

Federal Effort to Improve

Estimates of Aliens’ Fiscal

Impact

Recognizing the need for better information on the effects of immigration,

a federal effort is under way to improve estimates of the fiscal impact of

legal and illegal aliens. The U.S. Commission on Immigration Reform, a

bipartisan congressional commission created by the Immigration Act of

1990, is working on a final report to the Congress, due in 1997, on a wide

range of immigration issues. The Commission provided an interim report

to the Congress in September 1994.39 The Commission has convened a

panel of independent experts organized by the National Academy of

Sciences to review the methodologies and assumptions of studies of the

costs and benefits of immigration. The panel will develop

recommendations on the data sources and methodologies that hold the

greatest promise for more precise measurement of the economic and

social impacts of legal and illegal immigration.

Conclusions The three national studies that we reviewed represent the initial efforts of

researchers to develop estimates of the total public fiscal impact of the

illegal alien population. The little data available on this population make it

difficult to develop reasonable estimates on a subject so broad in scope.

Moreover, the national studies varied considerably in the range of items

they included and their treatment of certain items, making their estimates

difficult to compare. As a result, a great deal of uncertainty remains about

the national fiscal impact of illegal aliens.

Obtaining better data on the illegal alien population would help improve

the national net cost estimates. Recognizing the difficulties inherent in

collecting better data on a population with an incentive to keep its status

hidden from government officials, any effort to collect better data should

focus on those characteristics of the illegal alien population that are useful

in estimating the largest net cost items, or many of them. These

characteristics include the population’s size, geographic distribution, age

39U.S. Immigration Policy: Restoring Credibility, U.S. Commission on Immigration Reform

(Washington, D.C.: U.S. Government Printing Office, 1994).

Page 21 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

distribution, income distribution, labor force participation rate, tax

compliance rate, and extent of school participation.

Clearer explanations of which costs and revenues are appropriate to

include would also help improve the usefulness of the estimates. The

appropriateness of including any particular item may depend on the policy

questions addressed by a study. If studies were more explicit about the

questions they address, their estimates of net costs would be easier to

compare.

The expert panel convened by the U.S. Commission on Immigration

Reform could serve as a forum for discussing some of these data and

conceptual issues. By exploring ways to provide lawmakers with better

information on the public fiscal impact of illegal aliens, researchers could

help provide a basis for the development of appropriate policy responses

to address the problems of illegal immigration.

Comments and Our

Evaluation

We obtained comments on a draft of this report from the Urban Institute

and Donald Huddle (see apps. V and VI). In their comments, the

researchers restated their disagreements with each other on a number of

topics, including the size of the illegal alien population, the appropriate

treatment of costs for citizen children of illegal aliens and Social Security

costs, and the magnitude of indirect costs such as those attributable to job

displacement. The researchers also cited areas in which they maintained

that our report did not sufficiently identify the problems with each other’s

estimates. In addition, they provided technical comments that we

incorporated where appropriate to better characterize the methodologies

they used in their net cost estimates.

The Urban Institute researchers agreed with much of the report’s analysis

and its conclusions about the need for better data on the illegal alien

population and sharper definitions of the accounting framework used.

However, they took exception with two points in our report. They

maintained that it is possible to test the reasonableness of the underlying

assumptions used in the net cost estimates by developing estimates for

reference groups40 and that their estimate of Social Security costs

attributable to illegal aliens was reasonable. Huddle disagreed with several

of the report’s findings. He maintained that the report was too negative in

40The reference groups are citizens and groups of immigrants other than illegal aliens. Urban Institute

researchers noted that estimates of total costs for a program (or total tax payments) attributable to

illegal aliens and reference groups can be tested by comparing them with actual government program

expenditures (or revenues collected).

Page 22 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
B-252730 

claiming that the reasonableness of many of the assumptions in the net

cost estimates is unknown. In elaborating this point, Huddle argued that

the results of various surveys of illegal aliens’ use of public benefits are

consistent with the utilization rates in his cost estimates. Huddle also

asserted that our report’s criticism of his Social Security and displacement

cost estimates were unjustified.

We believe that our report accurately describes the problems researchers

face in developing estimates of the national fiscal impact of the illegal

alien population. With regard to the reasonableness of the assumptions in

the net cost estimates, we agree with Urban Institute researchers that

developing cost and revenue estimates for reference groups can provide a

“reality check” on estimates for illegal aliens, as well as a useful context

for assessing the net cost estimates. However, the use of reference groups

provides only a limited test and does not ensure that the estimates for a

particular immigrant group are reasonable. We find Huddle’s claim that the

assumptions in his estimates are consistent with the results of survey

studies problematic for several reasons. The utilization rates reported by

these studies vary considerably, the reliability of some of the studies has

been questioned, and the extent to which the findings of these studies can

be generalized to the illegal alien population nationwide is unclear.

On the issue of Social Security costs for illegal aliens, we continue to

believe that data limitations preclude the development of a reasonable

estimate. To support their estimate that these costs are zero, the Urban

Institute researchers cited some reasons why illegal aliens are not likely to

be receiving Social Security benefits. Huddle, on the other hand, criticized

the Urban Institute’s estimate by citing several reasons for believing that

illegal aliens are receiving benefits. Given the researchers’ disagreement

and the lack of national data on the number of illegal aliens receiving

benefits, we have no basis for supporting either of these positions. Data

limitations also lead us to question Huddle’s estimate of Social Security

costs. For example, Huddle claimed that at least 75 percent of illegal aliens

in the work force have valid Social Security numbers, but he did not

provide sufficient evidence to support this claim. Moreover, data are not

available to assess his claim.

Finally, with regard to the magnitude of displacement costs, we continue

to believe that Huddle’s estimate overstates these costs because it is based

on a displacement rate that is inconsistent with research findings on job

displacement. (See pp. 32-33 for a more detailed discussion of Huddle’s

comments and our responses on this issue).

Page 23 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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The comments from the Urban Institute and Huddle reinforce our

assessment of how difficult it is to develop estimates of the national fiscal

impact of illegal aliens, given the limited data available. As noted in this

report, obtaining better data on some of the key characteristics of the

illegal alien population could help narrow the gap between the

researchers’ widely varying estimates of the national net cost. Moreover,

clearer explanations of the approaches used would make the net cost

estimates more useful.

Our work was conducted in accordance with generally accepted

government auditing standards. If you or your staff have any questions

concerning this report, please call me on (202) 512-7215. Other GAO

contacts and staff acknowledgments are listed in appendix VII.

Jane L. Ross

Director, Income Security Issues

Page 24 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Page 25 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Contents

Letter 1

Appendix I 

Studies of the Net

Fiscal Impact of

Illegal Aliens

28

Appendix II 

Cost and Revenue

Items Included in

Estimates of the

National Net Costs of

Illegal Aliens

29

Appendix III 

Review of Huddle’s

Displacement Cost

Estimate

31

Appendix IV 

Experts Consulted by

GAO

34

Appendix V 

Comments From the

Urban Institute

35

Appendix VI 

Comments From

Donald Huddle

46

Page 26 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Contents

Appendix VII 

GAO Contacts and

Staff

Acknowledgments

56

Bibliography 57

Related GAO Products 64

Tables Table 1: Major Areas of Difference Between Urban Institute’s

Estimate and Huddle’s Updated Estimate of National Net Costs

13

 Table 2: Revenue Estimates in Urban Institute’s Study and

Huddle’s Updated Study

18

Figure Figure 1: Estimated Net Costs to Federal, State, and Local

Governments for Illegal Aliens in the United States

8

Abbreviations

AFDC Aid to Families With Dependent Children

HUD Department of Housing and Urban Development

INS Immigration and Naturalization Service

IRCA Immigration Reform and Control Act

JTPA Job Training Partnership Act

WIC Special Supplemental Food Program for Woman, Infants,

and Children

Page 27 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix I 

Studies of the Net Fiscal Impact of Illegal

Aliens

Author(s) and date

of study

Geographic area

and time period

studied

Level of

government

studied

Estimated net

fiscal impact

Huddle (1994) United States, 1993 Federal, state, and

local

($19 billion)

Passel and Clark

(Urban Institute)

(1994)

United States, 1992 Federal, state, and

local

($2 billion)

Huddle (1993) United States, 1992 Federal, state, and

local

($12 billion)

Huddle (1994) Florida, 1992 Federal, state, and

local

($913 million)

Huddle (1994) Texas, 1992 Federal, state, and

local

($1 billion)

Huddle (1993) California, 1992 Federal, state, and

local

($5 billion)

Parker and Rea (1993) San Diego County,

fiscal year 1992-93

State and local ($244 million)

Parker and Rea (1992) San Diego County,

fiscal year 1991-92

State and local ($146 million)

Texas Governor’s

Office of Immigration

and Refugee Affairs

(1993)

Texas, 1993 State and local ($130-$166 million)

Romero and others

(1994)

California, fiscal

year 1994-95

State ($2.7 billion)

Los Angeles County

Board of Supervisors

(1992)

Los Angeles County,

fiscal year 1991-92

Local ($272 million)

Los Angeles County

Chief Administrative

Office (1991)

Los Angeles County,

fiscal year 1990-91

Local ($276 million)

Lyndon B. Johnson

School of Public

Affairs (1984)

Texas, fiscal year

1982

Six Texas cities,

fiscal year 1982

State

Local

$60-$227 million

($4-$30 million)

Source: GAO analysis of studies.

Page 28 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix II 

Cost and Revenue Items Included in

Estimates of the National Net Costs of

Illegal Aliens

Dollars in millions

Items

Huddle’s

initial

estimate

(1992)a

Urban

Institute’s

estimate

(1992)b

Huddle’s

updated

estimate

(1993)c

Direct program costs

Primary and secondary education $3,909 $3,679 $4,369

Primary and secondary education (citizen

children) d d 2,828

Federal student aid d d 72

Public higher education 342 257 485

School lunch 109 107 121

School lunch (citizen children) d d 63

Adult education d d 28

Head Start 17 9 12

English as a Second Language, English for

Speakers of Other Languages, and bilingual

education 858 771 1,074

English as a Second Language, English for

Speakers of Other Languages, and bilingual

education (citizen children) d d 556

Compensatory education 101 101e 122

AFDC 820 202 919

Food Stampsf d 4 414

WIC 81 46 93

Elderly nutrition 1 1 1

Housing assistance 295 153 326

Low-income home energy assistance 32 16 27

Criminal justice (corrections) 1,031 1,031e 541

Unemployment compensation d d 856

JTPA d d 72

General assistance d d 92

Medicaid 479 463 509

Earned Income Tax Credit and health care tax

credit d d 278

State and federal highway costs d d 435

Community block grants d d 90

County costs 2,021 2,021e 2,472

City costs d d 4,887

Social Security d 0 3,266

Total direct program costs $10,096 $8,861 $25,008

(continued)

Page 29 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix II 

Cost and Revenue Items Included in

Estimates of the National Net Costs of

Illegal Aliens

Dollars in millions

Items

Huddle’s

initial

estimate

(1992)a

Urban

Institute’s

estimate

(1992)b

Huddle’s

updated

estimate

(1993)c

Displacement costs 4,291 0 4,290

Total costs $14,387 $8,861 $29,298

Revenues

Federal income tax $368 $515 $890

Federal excise tax 499 181 250

Federal gas tax d 155 166

Social Security tax d 2,721 2,385

Unemployment insurance tax d 168 d

State revenues 1,335 2,146 2,337

Local revenues 284 1,087 3,933

Total revenues $2,486 $6,973 $9,961

Net costs (costs less revenues) $11,901 $1,888 $19,337

aDonald Huddle, The Costs of Immigration (Washington, D.C.: 1993), exhibits 5, 6, and 12.

bJeffrey S. Passel and Rebecca L. Clark, How Much Do Immigrants Really Cost? A Reappraisal of

Huddle’s “The Cost of Immigrants” (Washington, D.C.: 1994), pp. 1-8, supplemented by data from

Jeffrey Passel providing a breakdown of the cost estimates for individual items; and Jeffrey S.

Passel, Immigrants and Taxes: A Reappraisal of Huddle’s “The Cost of Immigrants” (Washington,

D.C.: 1994), table 7c.

cDonald Huddle, The Net National Costs of Immigration in 1993 (Washington, D.C.: 1994),

exhibits 5, 6, and 12.

dThe estimate does not include this item.

eThe Urban Institute’s estimate uses Huddle’s initial estimate for this item.

f

The Urban Institute’s estimate is for the costs of benefits received fraudulently by illegal aliens;

Huddle’s updated estimate is for the cost of benefits to U.S. citizen children of illegal aliens.

Page 30 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix III 

Review of Huddle’s Displacement Cost

Estimate

In our view, Huddle’s estimate of $4.3 billion in displacement costs is

based on a displacement rate that is too high. The estimate assumes that

for every 100 low-skilled illegal alien workers, 25 U.S. citizens were

displaced from their jobs in 1993. This assumption of a 25-percent

displacement rate is inconsistent with research findings on job

displacement.

Huddle’s Research on

Displacement

Huddle’s study cites his own work on job displacement to support the

claim that the level of displacement is at least 25 percent. In several field

surveys that focused on the labor market in the Houston metropolitan

area, Huddle claimed to have found displacement rates that ranged from

23 to 53 percent in the 1980s.1

 The figures that Huddle cited in his 1982-83,

1985, and 1989-90 “microstudies of job displacement” are based on the

percentages of unemployed native workers he surveyed who were still

unemployed after some period of time. However, these figures cannot be

construed as measures of displacement by illegal aliens because the

studies did not show that the unemployed natives lost their jobs to illegal

aliens or were unable to find work because of the presence of illegal aliens

in the Houston labor market.

In effect, Huddle’s microstudies of job displacement assumed a correlation

between the employment of illegal aliens and the unemployment of native

workers that was unsupported by any evidence. In addition, even if the

studies had accurately measured the level of job displacement in Houston

in the 1980s, the phenomenon of job displacement is so sensitive to the

locality where it is measured that the studies’ results for Texas cannot be

generalized to the nation.

Other Research on

Displacement

In his national net cost study, Huddle maintains that the 25-percent

displacement rate is a conservative figure because an even higher

displacement rate can be derived from a study by Altonji and Card.2

However, this contradicts the conclusion that the authors draw from their

own research. Altonji and Card summarize the results of their study as

indicating that immigrants have a small and potentially zero effect on the

employment rates of natives. Furthermore, Huddle’s interpretation of

1

Donald L. Huddle, “Immigration and Jobs: The Process of Displacement,” The NPG Forum

(May 1992), pp. 1-5.

2

Joseph G. Altonji and David Card, “The Effects of Immigration on the Labor Market Outcomes of

Less-skilled Natives,” Immigration, Trade and the Labor Market, eds. John M. Abowd and Richard B.

Freeman (Chicago: University of Chicago Press, 1991).

Page 31 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix III 

Review of Huddle’s Displacement Cost

Estimate

Altonji and Card’s econometric results is based on an incorrect use of

statistics. Huddle sums the coefficients from three separate regression

equations, each with a different dependent variable.3

The work of other researchers does not support the claim of a 25-percent

displacement rate. Our 1986 review of the literature on job displacement

concluded that illegal aliens may displace native workers. However, it

found that the available research was inconclusive because it was limited

and suffered from important methodological weaknesses.4

 In addition, the

experts that we consulted during our review agreed that while there is no

consensus on what the average displacement rate might be, the literature

on displacement does not support the claim of a rate as high as 25 percent.

Recent studies using nationwide data have concluded that job

displacement by aliens is either small in magnitude or nonexistent.5

 The

literature on job displacement that focuses specifically on illegal aliens has

reached the same conclusion.6

Huddle’s Comments

and Our Evaluation

In his comments on a draft of our report, Huddle maintained that our

criticism of his displacement cost estimate was unjustified (see app. VI).

Huddle made four main points about our discussion of displacement. First,

he contended that we had misunderstood his definition of displacement

and were not including other types of displaced workers, such as

teenagers who could not find first-time jobs and workers who had to

physically move in order to look for work. Second, Huddle maintained that

the coefficients from the four different equations in the Altonji and Card

study are additive. Third, Huddle claimed that we did not consider the

effect of illegal immigrants on wage depression as well as job

displacement. Finally, Huddle maintained that his interpretation of the

literature on job displacement was valid and that other experts would

agree with him.

3

This is an inappropriate use of the results of multivariate regression analysis and has no statistical

meaning.

4

Examples of methodological weaknesses included the use of unreliable methods, such as hearsay, to

identify illegal alien workers and inappropriate statistical procedures to support inferences (for

example, cross-sectional or single-period data used to support cause-and-effect inferences that implied

a temporal sequence). See Illegal Aliens: Limited Research Suggests Illegal Aliens May Displace Native

Workers (GAO/PEMD-86-9BR, Apr. 1986).

5

See the studies by Altonji and Card, Enchautegui, Greenwood and Hunt, and Greenwood and

McDowell.

6

See the studies by Winegarden and Khor, and Taylor and others.

Page 32 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix III 

Review of Huddle’s Displacement Cost

Estimate

With respect to Huddle’s definition of displacement, we do not agree that

it is valid to apply this broader definition in calculating the costs of the

array of social service benefits he cites. Workers who have never entered

the labor force cannot collect unemployment benefits, for example, and

teenagers in particular are not likely to be individually eligible for the full

range of welfare benefits. Workers who migrate elsewhere, that is, those

who are physically displaced due to the presence of illegal aliens in the

work force, may not necessarily be jobless or earning such a low wage in

their new place of residence that they would be eligible for welfare

benefits. Most importantly, there is no evidence of how many displaced

workers remain permanently unemployed and, therefore, continue to

collect welfare over a long period of time. In our view, ascribing full costs

to this broader set of workers overstates the true cost of displacement.

With respect to Huddle’s claim that the coefficients in table 7.7 of the

Altonji and Card study are additive, we disagree. Adding the coefficients

on the first equation, which measures the ratio of people in the labor force

to the population as a whole, and the second equation, which measures

the ratio of employed persons to the population as a whole, effectively

double-counts all employed persons, because the second ratio is a subset

of the first. In addition, no other researcher we consulted, including one of

the authors, interpreted the Altonji and Card study in the way that Huddle

did, nor did they agree with Huddle’s methodology of adding coefficients

from separate regression equations to get a measure of total labor

displacement.

With respect to Huddle’s claim that we overlooked the phenomenon of

wage depression, we did not make an evaluation of the impact of illegal

aliens on wage depression because that was outside the scope of the net

cost studies we reviewed. These studies specified job displacement only,

and it is our judgment that the evidence on job displacement is much

weaker than the evidence on wage depression. Huddle’s claim that job

displacement and wage depression are close substitutes in terms of their

impact on the low-skill native work force and on the net cost of public

services is not supported by any empirical evidence or reference to any

relevant literature.

Finally, with respect to our overall conclusion and our interpretation of

the literature, we thoroughly reviewed the literature and consulted with

recognized experts on immigration (see app. IV for a list of these persons).

None of the experts we consulted believes that a displacement rate as high

as 25 percent is supported by the research literature.

Page 33 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix IV 

Experts Consulted by GAO

George J. Borjas, Professor of Economics, University of California, San

Diego.

David Card, Professor of Economics, Princeton University.

Richard Fry, Division of Immigration Policy and Research, Bureau of

International Labor Affairs, U.S. Department of Labor, Washington, D.C.

Briant Lindsay Lowell, Division of Immigration Policy and Research,

Bureau of International Labor Affairs, U.S. Department of Labor,

Washington, D.C.

Demetrios Papademetriou, Carnegie Endowment for International Peace,

Washington, D.C.

Stephen J. Trejo, Associate Professor of Economics, University of

California, Santa Barbara.

Sidney Weintraub, Center for Strategic and International Studies,

Washington, D.C.; Dean Rusk Chair in International Affairs, Lyndon B.

Johnson School of Public Affairs, University of Texas, Austin.

Page 34 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on pp. 3 and 6.

Page 35 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now p. 6.

Page 36 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on p. 9.

Now on p. 3.

Now on p. 10.

Page 37 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Page 38 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on pp. 13-14.

Now on p. 14.

Now p. 15.

Page 39 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on pp. 15-16.

Now on p. 16.

Page 40 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on p. 16.

Now on pp. 16-17

and 31.

Now on p. 18.

Page 41 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on p. 15.

Page 42 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Now on p. 10.

Now on p. 20.

Now on pp. 17-18,

20 and 21.

Page 43 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Page 44 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix V 

Comments From the Urban Institute

Page 45 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 46 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 47 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Now on p. 7.

Now on p. 9.

Now on p. 14.

Page 48 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 49 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Now on pp. 15-16.

Page 50 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 51 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 52 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 53 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Now on p. 32.

Page 54 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VI 

Comments From Donald Huddle

Page 55 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Appendix VII 

GAO Contacts and Staff Acknowledgments

GAO Contacts Cynthia M. Fagnoni, Assistant Director, (202) 512-7202

Andrew Sherrill, Evaluator-in-Charge, (202) 512-7252

Acknowledgments In addition to those named above, the following persons also made

important contributions to this report: Deborah A. Moberly, Evaluator;

Alicia Puente Cackley, Senior Economist; Steven R. Machlin, Senior Social

Science Analyst; and William McNaught, Assistant Director, Office of the

Chief Economist.

Page 56 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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Page 61 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Page 62 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Page 63 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
Related GAO Products

Illegal Aliens: Assessing Estimates of Financial Burden on California

(GAO/HEHS-95-22, Nov. 28, 1994).

Benefits for Illegal Aliens: Some Program Costs Increasing, But Total

Costs Unknown (GAO/T-HRD-93-33, Sept. 29, 1993).

Illegal Aliens: Despite Data Limitations, Current Methods Provide Better

Population Estimates (GAO/PEMD-93-25, Aug. 5, 1993).

Trauma Care Reimbursement: Poor Understanding of Losses and

Coverage for Undocumented Aliens (GAO/PEMD-93-1, Oct. 15, 1992).

Undocumented Aliens: Estimating the Cost of Their Uncompensated

Hospital Care (GAO/PEMD-87-24BR, Sept. 16, 1987).

Illegal Aliens: Limited Research Suggests Illegal Aliens May Displace

Native Workers (GAO/PEMD-86-98BR, Apr. 21, 1986).

(105906) Page 64 GAO/HEHS-95-133 National Net Cost of Illegal Aliens
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