Summary: Open borders and a massive flow of low-skill immigrants create social and political stresses, but economists tell us they boost the economy. That ignores their costs.
Economists extol the boost to GDP produced by poorly educated and low-skill immigrants. That boosts corporate profits and makes America bigger. But it is quite daft as an overall measure of low-skill migrants’ economic impact. Economists seldom mention how this flow depresses per capita income (which is what citizens care about) and wages of low-skilled workers. Economists seldom mention that these migrants pay insufficient taxes to cover the government services they “consume” (these costs are increasing as illegal aliens become eligible for free medical care and college education).
Look at California, the extreme example in America of open borders at work. In fiscal year 2015, California’s state and local governments’ total spending total per capita was $10,586 vs. the national average of $8,856. Low skill migrants generate only a fraction of that in new taxes. On highways alone, per capita spending was $424 from general funds vs. the US average of $525. Data from the Tax Policy Center.
California’s illegal aliens are the extreme case showing how this works. Estimates vary, but there are roughly 2 million plus illegals in California. They generate very roughly $3 billion in State and local taxes each year. Granting them full Medi-Cal coverage, as recently proposed, would cost $3 billion per year. For more about this, see Choose: open borders or the welfare State?
There is another set of costs almost never mentioned, and just as serious. More people means more spending required to maintain and expand public infrastructure. The flood of low skill migrants to California generates only a fraction of taxes required. Decades of this has helped transform California from the nation’s leader in government services (e.g., among the best schools) and infrastructure to one of the worst States. As of approx 2016, from a 24/7 Wall Street report, California ranked as having the fifth worse infrastructure in the nation.
- Roads in poor condition: 17% (5th highest).
- Deficient bridges: 6.% (19th lowest).
- Dams at high hazard risk: 53% (6th highest).
- State highway spending per driver: $269 (4th lowest).
More low-income migrants put pressure on State services and infrastructure, but insufficient tax revenue to pay for them. Taxes rise (as does debt), but never enough to cover the need for funds. Infrastructure deteriorates from overuse; conditions worsen because of inadequate capital spending. California, and especially the San Francisco region, have entered the next (and terminal) phase of this process: middle-class out-migration (go here to see why).
The US had roughly $37 trillion in “built assets” – public and private buildings and infrastructure (per Arcadis). That is $110 thousand dollars per capita, 15th highest in the world. We have to spend several hundred billion dollars (several thousand dollars per capita) each year to maintain and replace those assets. Additional spending is needed to keep it stable in per capita terms. New low-income migrants do not generate the funds.
Low skill migrants boost GDP. But it is growth that can financially wreck a nation. California is demonstrating that for us, but we seem likely to ignore the lesson until too late.
Afterword – Eventually, the big quake will hit California, knocking down that mad mess and creating the worst disaster America has ever experienced. Then conditions there will get much worse, and America will face difficult choices.
This was obvious long ago
P. J. O’Rourke saw this long ago, as he explained in Parliament of Whores (1991). Affluence forces difficult choices when a society’s population grows.
“It the sad truth of local government, like the sad truth of national government, is that people are no longer an asset* Humans do not benefit the modern state. Total 1989 Blatherboro town expenditure – including the town’s share of county government and school-system costs – was $9.5 million, or about $1,860 per person.
“Almost all this money was raised through property taxes and automobile registration fees. A typical new family moving to Blatherboro, with a mom, dad and two kids (for families still come in that configuration in New Hampshire), would be buying a town-house condominium with a tax-assessed value of $100,000. The current property tax rate on that condominium is $2,860 a year. If the new family owns two late-model cars, Registration fees (which are based on the blue-book value of the automobile) would be about $340.
“Add in a few miscellaneous levies and charges, and the new family ends up contributing approximately $3,500 per annum to the Blatherboro town coffers. But that is almost $4,000 less than what the town will spend on these people. A family of four must own at least a quarter of a million dollars worth of property to carry its own weight in the Blatherboro town budget.”