# **4. CONTRIBUTIONS OF MIGRANTS TO NATIONAL TAX AND BENEFIT SYSTEMS**

How much do migrants typically earn? How much do they pay in taxes and consume in benefits?—how do these estimates compare to corresponding statistics for the non-migrant population? These and other such questions are examined in more detail in this section.

**Estimating the fiscal impact of migrants:** Estimating the size and composition of the migrant population using data from household surveys has a long and well-established tradition, with data from labor force surveys typically used to estimate and compare the demographic composition of native-born and migrant population groups. An added benefit of using survey data is that the migrant population as a whole can often be a heterogeneous group, and the survey data allow for a disaggregated examination of differences across different subgroups in the main variables of interest. In order to estimate the net fiscal impact of migrants on a given country’s budget, in addition to information on the size and composition of non-migrant and migrant groups, comprehensive data are also needed both on non-migrants’ and migrants’ consolidated contributions to overall public revenues (i.e. total taxes paid, both direct as well as indirect, contributions paid to the domestic social security system, etc.) as well as their share of consumption of overall public expenditures (i.e. direct benefits received, public goods and services consumed, etc.).

Such country-level studies are relatively rare in number. In the United Kingdom, a 2002 Home Office research study found that in 1999/00, first generation migrants in the UK made a net fiscal contribution of 2.5 billion pounds a year.<sup>10</sup> More recent work by the Institute for Public Policy Research found that migration to the UK has a positive and growing impact on the public finances: migrants contributed an estimated 10 percent of government receipts, and accounted for 9.1 percent of government expenditure.<sup>11</sup> In addition to the fairly onerous data requirements to carry out country-level analysis, an additional complicating factor is that ideally the fiscal contribution of migrants should be considered in both the short- and long-run. In one of the relatively rare such studies available, immigrants to the United States were estimated to make a contribution of around $80,000 to the US fiscal system in net present value terms in 1996 dollars.<sup>12</sup> However, while the surplus was quite large (and positive) for highly skilled migrants, it was estimated to be slightly negative for migrant individuals with less than secondary high school level, thus suggesting that the educational and skills profile of migrants was likely an extremely important determining factor.

Comparing the fiscal impact of migration across countries is even more difficult, as estimates for different countries are sensitive to definitions employed, timing of comparison, as well as duration of the period over which the comparison is being made, as the structure and behavior of the migrant population is subject to change over time in response to changing circumstances and conditions. In this regard, the EU-SILC data set is a particularly useful data set for the purposes of such a crosscountry comparison, given the emphasis according to ensure comparability of concepts and definitions applied across countries. Moreover, it is one of the few data sets available in which

> 10 Gott & Johnston (2002) The Migrant Population in the UK: fiscal effects. Home Office RDS Occasional Paper No. 77.

> 11 Sriskandarajah, Cooley, and Reed 92005) Paying their way: the fiscal contribution of immigrants in the UK, IPPR, as cited in “The Economic and Fiscal Impact of Immigration, Home Office, United Kingdom, October 2007.

> 12 Smith and Edmonston (eds) (1997) The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, Washington DC. National Research Council, National Academy Press, cited in ibid.

13