Jason Richwine, PhD, is an independent public policy analyst in Washington, D.C., and a contributing writer at National Review.
In September 2015, the Center for Immigration Studies published a landmark study of immigration and welfare use, showing that 51 percent of immigrant-headed households used at least one federal welfare program — cash, food, housing, or medical care — compared to 30 percent of native households. Following similar methodology, this new study examines the dollar cost of that welfare use.
  • The average household headed by an immigrant (legal or illegal) costs taxpayers $6,234 in federal welfare benefits, which is 41 percent higher than the $4,431 received by the average native household.
  • The average immigrant household consumes 33 percent more cash welfare, 57 percent more food assistance, and 44 percent more Medicaid dollars than the average native household. Housing costs are about the same for both groups.
  • At $8,251, households headed by immigrants from Central America and Mexico have the highest welfare costs of any sending region — 86 percent higher than the costs of native households.
  • Illegal immigrant households cost an average of $5,692 (driven largely by the presence of U.S.-born children), while legal immigrant households cost $6,378.
  • The greater consumption of welfare dollars by immigrants can be explained in large part by their lower level of education and larger number of children compared to natives. Over 24 percent of immigrant households are headed by a high school dropout, compared to just 8 percent of native households. In addition, 13 percent of immigrant households have three or more children, vs. just 6 percent of native households.

Introduction

In September 2015, the Center for Immigration Studies published a landmark study of immigration and welfare use, showing that 51 percent of immigrant-headed households (legal and illegal) use at least one federal welfare program, compared to 30 percent of native households.1 "Welfare" refers to means-tested anti-poverty programs. These include direct cash assistance in the form of Supplemental Security Income (SSI) and Temporary Assistance for Needy Families (TANF); food aid such as free school lunch, the Women, Infants, and Children (WIC) nutrition program, and food stamps; Medicaid; and housing assistance in the form of rent subsidies and public housing. Not included are social insurance programs for which participants must generally pay into the system before drawing benefits, such as Social Security and Medicare.
Findings
The main findings are presented in Table 2. The average welfare cost in immigrant-headed households is $6,234, compared to $4,431 in native-headed households. Immigrant households consume more cash, food, and Medicaid dollars than native households, while housing costs are roughly the same for both groups. Figure 1 shows that Medicaid is the largest welfare program, driving a large part of the overall difference between immigrants and natives.
Workers. A popular misconception about the American welfare system is that it mainly benefits people who are not in the labor force. In fact, most means-tested anti-poverty programs are open to low-wage workers. For that reason, limiting the analysis to households with at least one worker, as Table 4 does, only modestly reduces the welfare cost estimates. The drop is especially small for immigrant households — from an overall cost of $6,234 in Table 2 to $5,340 in Table 4 — because 84 percent of immigrant households already contain a worker (vs. 73 percent of native households). Therefore, the higher welfare spending on immigrant households compared to native households is not due to a lack of work among immigrants. The difference is better explained by the demographic factors analyzed below.
Education. It is easy to understand why people with fewer skills are more likely to participate in welfare programs, since eligibility for those programs requires a low income. Unsurprisingly, Table 5 shows that welfare costs decrease as the education of the household head increases. Whereas immigrant households headed by a high school dropout cost an average of $10,329, immigrant households with college-educated heads cost just $2,455. The table demonstrates that the difference between immigrant and native household welfare costs becomes smaller after accounting for education.


Some differences remain. College-educated immigrant households consume substantially more welfare than comparably educated natives. At the other end of the skill spectrum, immigrant households headed by a high school dropout use less welfare than their native counterparts. More important than those intra-education differences, however, is the distribution of education across households. The "Percentage" rows in Table 5 show that over 24 percent of immigrant households are headed by a high-school dropout, vs. just 8 percent of native households. Such stark educational differences will inevitably lead to differences in welfare consumption.
Children. Another important cause of the difference between immigrant and native households is the presence of minor children. Table 6 shows that costs are similar for a given number of children, and immigrant households have more children on average than native households. However, the presence of children is not the only reason for the relatively higher welfare cost of immigrant households. Table 6 shows that immigrant households without children consume significantly more welfare dollars than childless native households.
Race and Ethnicity. Regardless of nativity, households headed by blacks or Hispanics consume more welfare dollars on average than households headed by whites or Asians. However, Table 7 shows some interesting immigrant-native differences within racial groups. Immigrant households headed by blacks and Hispanics cost less than their native counterparts, while white- and Asian-headed immigrant households cost more. Despite the lower cost among immigrant Hispanics compared to native Hispanics, a much larger proportion of immigrant households are headed by Hispanics, which contributes to the greater overall cost difference between immigrants and natives.


Explaining Immigrant-Native Cost Differences with Regression Analysis. What explains the cost difference between immigrant and native households? The preceding sections control one at a time for factors such as education and number of children. This section uses regression analysis to simultaneously control for multiple explanatory variables, giving a better sense of which factors are most important.
Table 8 shows how the difference between immigrant and native welfare costs varies depending on the controls. The first row gives the baseline estimate with no controls other than an indicator for immigrant status. In the no-control scenario, immigrant households cost $1,803 more than native households, which is consistent with Table 2 above. The second row shows that the immigrant-native difference becomes larger — up to $2,323 — when we control for the presence of a worker in the household. The difference then becomes gradually smaller as controls are added for education and number of children. The fourth row shows that immigrant households with the same worker status, education, and number of children as native households cost just $309 more, which is a statistically insignificant difference. The fifth row shows that immigrants use fewer welfare dollars when they are compared to natives of the same race as well as worker status, education, and number of children.



A related but different question is how much immigrant and native households cost once they are on the welfare program in question. Table 9 restricts the cost averages to households participating in the welfare program listed in each row. For example, among immigrant households receiving SSI, the average benefit is $6,561, compared to $6,274 for native households receiving SSI. Immigrant and native household costs are generally similar in Table 9, with the important exception of Medicaid. Once enrolled in Medicaid, immigrant households cost less on average than native households, perhaps due to immigrant coverage being more tilted toward children rather than the elderly and disabled. In fact, because of legal restrictions, immigrant households are more likely to be "child-only" welfare recipients.8
The Broader Fiscal Picture
This study focuses on the cost of major welfare programs used by immigrant and native households. By contrast, a complete fiscal analysis would measure the cost of all government services and compare those costs with the taxes paid by each type of household. Some readers may wonder whether broadening the analysis would reveal that immigrant households make up for their greater welfare cost by paying higher taxes. This is not the case. As the previous CIS study of welfare participation demonstrated, immigrant households pay only about 89 cents in federal income and payroll taxes for every dollar paid by native households.9
The aforementioned report by the National Research Council, which did measure all government expenditures and taxes paid, found that immigrant households cost taxpayers as much as $2,200 per year in the 1990s, depending on their state of residence.10 More recently, the Heritage Foundation's complete fiscal analysis (to which the author of this study contributed) estimated that the average legal immigrant household paid $4,344 less in taxes than it received in services in 2010, compared to a deficit of just $310 for the average native household.11 For the most up-to-date numbers, the National Research Council will release a new analysis later this year.
The studies mentioned above measure the direct fiscal effects of immigration by comparing the services households receive with the taxes they pay. But what about indirect effects? Immigration touches all aspects of American life, so one could give almost endless examples of immigrants influencing society in ways that indirectly change how much the government taxes and spends. Attempting to quantify some of those indirect effects is not objectionable in itself, but it does open a "Pandora's Box" of selectivity bias and
exaggeration.
For example, consider the reaction to the Heritage Foundation's estimate that illegal immigration and amnesty would generate a direct lifetime cost of $6.3 trillion. Supporters of amnesty quickly settled on a rebuttal point: Although illegal immigrants who receive amnesty may pay as a group $6.3 trillion less in taxes than they receive in benefits over their lifetimes, their labor boosts economic productivity so much that natives probably still end up in the black.12 That claim is, first of all, a tremendous exaggeration. Most of the gains from immigration go to immigrants themselves, not to natives.13 In a paper for CIS back in 2013, economist George Borjas estimated that illegal immigrants increased GDP by $395 billion to $472 billion. Of that amount, however, only about $9 billion went to natives.14 After extending that $9 billion annually over an adult lifetime of 50 years, productivity gains would add back just 7 percent of the $6.3 trillion fiscal cost.
Furthermore, an increase in productivity is just one of many indirect fiscal effects of immigration. What is the cost of additional welfare spending on natives when they are displaced from jobs or see their wages lowered by immigrant competition?15 What are the moving and commuting costs incurred by natives who flee overcrowding? What are the costs of less social trust and cooperation identified by Robert Putnam and others?16 How about the increase in English-language learners in public schools? One could go on and on with costs and benefits of immigration that indirectly impact the government's fiscal situation. But once advocates enter the world of indirect effects, they become decidedly selective with the effects they wish to include.

Conclusion

When researchers analyze welfare participation and costs, their dataset of choice has traditionally been the Annual Social and Economic Supplement (ASEC) of the Current Population Survey. While the ASEC is certainly useful — CIS uses it frequently — it substantially undercounts welfare participation. For that reason, CIS turned to the Survey of Income and Program Participation (SIPP), a more complex dataset developed by the Census Bureau specifically to analyze welfare use. CIS's analysis of the SIPP has now generated two major studies. The first study, published in September 2015, measured welfare participation rates. It showed that 51 percent of immigrant-headed households used some form of welfare, compared to 30 percent of native households.17 This second study extends the SIPP analysis by moving from rates to costs. It finds that immigrant-headed households consume an average of $6,234 in welfare spending, compared to $4,431 for native households. The highest-cost immigrant households tend to be those headed by a person from Latin America, while the lowest-cost households are headed by people from Europe and Asia.
This study implies that two competing narratives about immigration are both true. Immigrants do indeed have a strong attachment to the labor force, as immigration advocates often point out. At the same time, however, immigrants consume a large amount of welfare spending, just as critics claim. The reason that both narratives are true is that the American welfare system has become increasingly focused on buttressing low-wage workers rather than supporting non-workers. Put more simply, welfare and low-wage work go together. Just as natives with low levels of education and large numbers of children are apt to consume welfare, immigrants with those same characteristics are also likely to be on welfare. A strong work ethic does not change this reality.
In order to reduce the cost of immigrant welfare use, either the welfare system or the immigration system must change. The former option is sometimes described as "building a wall around the welfare state" to prevent new immigrants from accessing it. It is easier said than done. Loopholes and exceptions have weakened previous attempts to limit immigrant access to welfare.18 More importantly, Congress has no power to prevent the U.S.-born children of immigrants from using the same welfare programs that the children of natives do. No matter how strong the "wall around the welfare state" is built, it cannot stop immigrant parents from signing up their U.S.-born children for Medicaid, SNAP, free school lunch, etc., as long as native parents can do the same.
Only a full-scale rollback of the welfare state for both immigrants and natives would prevent immigrant families from consuming welfare dollars. Whatever one thinks of that proposal, it is not a policy change likely to occur in the near future.19In fact, importing new clients of the welfare state likely makes it even harder to roll back.20 As long as the U.S. continues to admit large numbers of low-skill immigrants (legal or illegal), then immigrant welfare consumption will remain high.