Thursday, September 10, 2015

Are Immigrants Using So Many Welfare Services That It Is Causing a Fiscal Drain?

Immigration reform has been receiving quite the attention since the presidential debates have been taking place. Certain presidential hopefuls want to scapegoat immigrants for our country's woes. We see this sentiment in the Republic primaries when Donald Trump proposes the idea of mass deportation. Fortunately, most Americans want comprehensive immigration reform that provides immigrants a path towards citizenship. The bad news is that the Center for Immigration Studies (CIS) put out a recent study on immigrants' welfare usage, which had the key finding of 51 percent of immigrants benefiting from at least one welfare program, in spite of restrictions on immigrants receiving welfare. I call this bad news because it can be something to solidify confirmation bias against immigrants. Looking at the CIS study, can the real takeaway be that immigrants use way too much welfare?

I do like that the study used Survey and Income Participation Program (SIPP) data from 2008-2012 to come to its conclusions because the dataset is comprehensive. However, I do have to question the study's overall methodology.

For one, the study groups people by household. This might sound great, but the issue is that Steve Camorata, the author of the report, defines a household as "as using welfare if any one if its members used welfare during 2012." It doesn't matter if the household has an American spouse that is using welfare or a child born in the United States to an "immigrant household" benefits (e.g., school lunches). They still all count as immigrants. This ambiguous definition of household allowed CIS to exaggerate the numbers of immigrants on welfare.

Second, the welfare programs that look at are SSI (Supplemental Security Income), Temporary Assistance for Needy Families (TANF), School Lunches, WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children), Medicaid, and housing subsidies. As the Government Accountability Office points out, there are over 80 types of welfare programs. Most notably, the CIS does not include Social Security and Medicare. How can this study be considered an understanding of welfare usage when two large programs are not even included in the analysis? CIS says that Social Security and Medicare are different because just about everyone uses Social Security and Medicare, whereas only some use welfare. Yet these are programs in which the welfare of many are determined, or at least guided, by the government. CIS wants to skirt by saying that "immigrant households are creating a significant fiscal drain in a way that is not true for natives." More on fiscal drain in a moment.

Even with all of these methodological flaws, let's assume for a moment that 51 percent of immigrants are consuming at least one form of welfare services.  Even so, this study suffers from a similar omitted variable bias that we see when one capriciously throws out the misleading statistic that women make 77¢ for every dollar a man earns. How so? When saying that women make 77¢ for every dollar a man earns, it aggregates the salaries of all men and the salaries of all women to make the comparison. Essentially, it's a false analogy because it assumes that women work the same types of jobs for the same hours at the same skill level. The statistic does not filter out for differences between the groups. When one factors in the variables that differentiate the difference between the wage-earning of women and men, women earn 94¢ for every dollar a man earns. It's not a 1:1 ratio, but it's interesting to see that the statistic exaggerates the problem by about fourfold.

There is that similar "apples to oranges" comparison in the CIS study on immigration. It assumes that the demographic composition between immigrant families and native families are identical, and the truth is that they're not. As CIS points out, immigrant households are more likely to be on welfare than native households because they are poorer and less educated. If that is the case, shouldn't we filter out those who are 300 or 400 percent above the federal poverty line so one can determine whether it is poverty or being an immigrant that makes one more likely to consume welfare? CIS also doesn't filter out illegal immigrants (something it says it will do in a forthcoming study), and it does not factor in the fact that immigrant households are larger than native households. At the very least, illegal immigrants/undocumented workers work in the underground market, which means they will be less likely to pay income or payroll taxes (CIS, Figure 9), which simply illustrates the non-analogous nature of this study.

What is even more glaring is that this study only provides the percentage of households in each category (i.e., immigrant versus native), which misleads the reader to assume that welfare consumption, regardless of household or welfare program, is done on a 1:1 ratio. For instance, TANF spending does not have the same fiscal impact on the American economy as Medicaid. More to the point, in order to prove fiscal drain, there needs to be revenues and expenditures for each program. CIS' study falls woefully short because it does not provide the amount in dollars that immigrant households consume versus native households. How can CIS make the claim that "significantly higher welfare use associated with immigrants means that it is very likely immigration is a drain on public coffers" without providing figures on cost?

Setting that glaring omission aside for a moment, in order to determine if immigrants are indeed a drain, you need to calculate net fiscal costs, which means that you need to also add in the economic benefit that they are creating. If the economic benefit exceeds the cost, then immigrants are an asset to the United States economy. If cost exceeds benefit, then and only then could immigrants be considered a net drain. Which is it then: economic boon or drain? After looking through the available fiscal data and empirical research, not only do immigrants consume less welfare in dollar terms, but the conclusion that I came to is that immigrants, even the low-income households, are a net benefit to the United States economy.

If determining fiscal drain were the primary purpose for CIS to release this study, then it should have provided fiscal data to affirm that claim. Some will use this study to confirm their biases against immigration, but I hope that you, the reader, decide to review the fiscal data yourself to determine the fiscal effects of immigrants on the American economy. What I will end with is this: providing non-analogous percentages of ambiguously defined households and their welfare consumption without fiscal data is specious, to say the least.

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