Why Americans Think Immigration Hurts the Economy

At the heart of the debate over illegal immigration lies one key question: are immigrants good or bad for the economy? The American public overwhelmingly thinks they're bad. In a recent New York Times/CBS News poll, 74 percent of respondents said illegal immigrants weakened the economy, compared to only 17 percent who said they strengthened it. Yet the consensus among most economists is that immigration, both legal and illegal, provides a small net boost to the economy. Immigrants provide cheap labor, lower the prices of everything from produce to new homes, and leave consumers with a little more money in their pockets. They also replenish—and help fund benefits for—an aging American labor force that will retire in huge numbers over the next few decades. Also, an increase in the number of American workers is needed to prevent the U.S. from having too few working-age adults to pay for retiree benefits in a few decades, as many European nations currently do. So why is there such a discrepancy between the perception of immigrants' impact on the economy and the reality?

There are a number of familiar theories. Some point to the ravages of the Great Recession, arguing that people are anxious and feel threatened by an influx of new workers (though anti-immigrant sentiment ran high at times prior to the crash of 2008). Others highlight the strain that undocumented immigrants place on public services, like schools, hospitals, and jails. Still others emphasize the role of race, arguing that foreigners provide a convenient repository for the nation's fears and insecurities. There's some truth to all of these explanations, but they aren't quite sufficient.

To get a better understanding of what's going on, consider the way immigration's impact is felt. Though its overall effect may be positive, its costs and benefits are distributed unevenly. David Card, an economist at the University of California, Berkeley notes that the ones who profit most directly from immigrants' low-cost labor are businesses and employers—meatpacking plants in Nebraska, for instance, or agribusinesses in California's Central Valley. Granted, these producers' savings probably translate into lower prices at the grocery store, but how many consumers make that mental connection at the checkout counter? As for the drawbacks of illegal immigration, these, too, are concentrated. Native low-skilled workers suffer most from the competition of foreign labor. According to a study by George Borjas, a Harvard economist, immigration reduced the wages of American high-school dropouts by 9 percent between 1980 and 2000. Not surprisingly, surveys show that those without a high-school diploma tend to oppose illegal immigration most fervently.

There's another distortion in the way immigration's costs and benefits are parceled out. Many undocumented workers pay money to the federal government, in the form of Social Security contributions and income taxes, and take less in return, says Gordon Hanson, an economist at the University of California, San Diego. At the state and local level, however, it's a different story. There, illegal immigrants also make contributions, through property and sales taxes, but on balance, they use more in public services, such as schools, health benefits, and welfare assistance. As a result, says Hanson, the federal government ends up with a net gain in its coffers, while "states get stuck with the bill."

This breeds resentment among taxpayers. In a 2005 paper, Hanson analyzed how the size of the undocumented population and its use of public assistance affected attitudes toward immigration. He found that among low-skilled workers, opposition to immigration stemmed mainly from the competitive threat posed by the newcomers. Among high-skilled, better-educated employees, however, opposition was strongest in states with both high numbers of immigrants and relatively generous social services. What worried them most, in other words, was the fiscal burden of immigration. That conclusion was reinforced by another finding: that their opposition appeared to soften when that fiscal burden decreased, as occurred with welfare reform in the 1990s, which curbed immigrants' access to certain benefits.

Beyond these economic rationales for anti-immigrant views, there's a demographic one as well. Illegal immigrants used to be clustered in a handful of big states, like California, Texas, and New York. But in the 1990s, they began dispersing en masse, chasing jobs in the remote reaches of the country. As a result, California's share of the undocumented population dropped from 42 percent in 1990 to 22 percent in 2008, according to the Pew Hispanic Center. A group of 28 fast-growing states, such as North Carolina and Georgia, more than doubled their share, from 14 percent in 1990 to 32 percent in 2008. Natives in those areas had barely any experience with undocumented immigrants, and they felt overwhelmed by the sudden change. The once distant debate over illegal immigration was now bubbling up in the heart of their communities.

In a new book, "Brokered Boundaries," Douglas Massey and Magaly Sánchez cite research showing that such rapid demographic change tends to trigger anti-immigrant sentiment when it gets entangled in inflammatory political rhetoric. They argue that in the past several decades, a "Latino threat narrative" has come to dominate political and media discourse. In the 1980s, President Ronald Reagan began framing immigration as an issue of "national security," they write. In the 1990s, the image of the immigrant-as-freeloader gained wide circulation. And in the 2000s, there was Lou Dobbs, railing against an "invasion of illegal aliens" that waged "war on the middle class." "The majority of Americans are more ambivalent than hostile [to undocumented immigration]," says Massey, a professor at Princeton. But "the hostile part can be mobilized from time to time," by what he calls "anti-immigrant entrepreneurs."

The irony is that for all the overexcited debate, the net effect of immigration is minimal (about a one tenth of 1 percent gain in gross domestic product, according to Hanson). Even for those most acutely affected—say, low-skilled workers, or California residents—the impact isn't all that dramatic. "The shrill voices have tended to dominate our perceptions," says Daniel Tichenor, a political science professor at the University of Oregon. "But when all those factors are put together and the economists crunch the numbers, it ends up being a net positive, but a small one." Too bad most people don't realize it.