Low-Skilled Immigrants Are Not a Fiscal or Economic Drain: Another Reason for More Immigration

When it comes to immigration policy, one distinction that is made in the debate is between low-skilled and high-skilled immigration. "High" is associated with advanced degrees, such as the STEM field and doctors.  "Low" is associated with manual labor that typically does not require a postsecondary degree, whether that is such professions as construction or farming. Both from a political and economic standpoint, the case for high-skilled immigration is more obvious. The case for high-skilled immigrants is more intuitive because their innovation and entrepreneurial spirit create a more obvious, long-term economic growth. Their economic contributions vastly outweigh whatever economic or fiscal costs might arise. 

The case is less clear for low-skilled immigrants because they earn a lower salary on average, as well as having a higher demand for government benefits than their higher-income counterparts. This is why such countries as Canada had opted for a merit-based immigration policy. A recent research paper from the American Economic Association helps but that notion to rest (Colas and Sachs, 2024). The researchers revealed "an indirect fiscal benefit for one average low-skilled immigrant of roughly $750 annually [in the United States]." 

These findings are hardly a shock for me. I made the argument back in 2015. A detailed scenario analysis from the National Academies of Science in 2017 showed that the net fiscal impact of immigrants was positive. The only exception in the NAS research was a small, negative impact on native high school dropouts since they are the closest substitute for low-skilled immigrants. 

How is this the case? In part, all immigrants, regardless of immigration status or socio-economic status, pay taxes. Not only do they contribute to the economy, but they have a higher labor participation rate than native workers. 

Most immigrant comes to the United States because wages are higher. Higher wages result in greater marginal value product (MVP), which happens because the relative price of capital increases in the short-run, which raises wages in the long-run. This increase of MVP helps contribute to the greater macroeconomic growth that low-skilled immigrants bring to the table. 

Yes, we need immigrants that can write code and perform surgery. We also need immigrants who can harvest vegetables, construct buildings and roads, care for children, supply landscaping services, and provide caregiver support to the elderly. Whether we are talking low-skilled or high-skilled immigrants, the United States needs to cut through the red tape that makes it nigh impossible to enter legally and let more immigrants into its borders so that immigrant workers and native workers alike can reap the benefits.