Immigration & welfare: solving the welfare problem will solve the welfare problem - not the immigration problem

National Review, June 16, 1997 by George J. Borias

I BEGAN to investigate the link between immigration and welfare in 1987. Since that time, I have given countless presentations at universities and think tanks. Invariably, someone will come up after the seminar and say something like: "I believe the data and I agree with you that there is a problem. But the problem is not immigration; the problem is welfare." This response has recently been enshrined by Cato Institute analysts as their rallying cry against the accumulating evidence on immigrant use of welfare: "Immigration Yes, Welfare No!"

When I first heard this response a decade ago, it struck me as odd. Yes, there are things that are wrong with the welfare system. But if the social experimentation of the past few decades has taught us anything, it is that we have no clue about how to tackle poverty. In view of our resounding defeat in the War on Poverty, why would we consciously pursue policies -- such as our current immigration policy -- that exacerbate poverty?

Today's immigrants are more likely to receive welfare than natives and than earlier immigrants. In 1970, the Census indicated that immigrant households were less likely to receive cash benefits (such as AFDC, SSI, or General Assistance) than native households. By 1990, the Census showed that immigrants were more likely to receive cash benefits than native households. In fact, if one adds non-cash programs (such as Medicaid, Food Stamps, and housing assistance), it turns out that 21 per cent of immigrant households receive some type of aid, as compared to 14 per cent of native households and 10 per cent of white non-Hispanic native households. In short, the "welfare gap" between immigrants and natives has reversed direction and grown substantially in a very short time.

Why did immigrant use of welfare rise so rapidly? It's elementary: today's immigrants are relatively less skilled than those who came two or three decades ago. Since the enactment of the 1965 Amendments, the United States has been granting entry visas to persons who have relatives in the United States, with no regard to their skills or economic potential. Immigrants who arrived in the mid to late 1960s entered the U.S. labor market with a wage disadvantage of about 17 per cent; today's immigrants enter with a wage disadvantage of about 32 per cent. In the 1960s, the economic adaptation experienced by immigrants as they found out about job opportunities and learned to speak English guaranteed that the initial 17 per cent wage gap would disappear within a couple of decades. If today's immigrants have the same rate of adaptation as earlier immigrants, we can expect that they will have a wage disadvantage of about 15 per cent throughout much of their working lives. The inherently unstable combination of unskilled immigration and a generous welfare state has brought us to the current situation.

THE geographic clustering of immigrants in the United States is remarkable. In 1990, three-quarters of the immigrants lived in only six states. This clustering has created a mosaic of ethnic neighborhoods or enclaves in some American cities, and has fostered the creation and growth of ethnic networks that transmit information about life in these United States to potential migrants in the source countries.

Do these ethnic networks provide information about welfare programs to new immigrants? Case studies of the Russian and Chinese communities leave little doubt that they do. Russian- and Chinese-language newspapers print detailed reports about the application process and eligibility requirements for particular programs. There are "Dear Abby"-style columns in newspapers to help readers with welfare problems. And bookstores in Taiwan, Hong Kong, and the United States sell a Chinese-language book that contains a 36-page guide to SSI and other benefits.

Network effects probably grew in importance as the networks became more established. It is well known that "take-up" rates (i.e., the fraction of eligible persons who actually receive benefits from a particular welfare program) are well below 100 per cent. As the ethnic networks expanded, the take-up rates of immigrants probably increased.

The welfare state can also have a magnetic effect on immigrants. Welfare programs in the United States, though not generous by Western European standards, stack up pretty well when compared to the standard of living available in most of the world's less-developed countries. While it is true that many immigrants come to the United States for job opportunities, decades of economic research into the determinants of migration decisions have demonstrated that it is potential income that is the significant factor. And the welfare state provides a lot of income opportunities, especially for persons with few skills. As a result, the question is not whether magnetic effects exist -- they do. Rather, the question is whether these magnetic effects are numerically important.

Three different types of magnetic effects influence immigrant behavior. It is possible that welfare programs attract persons who otherwise would not have migrated to the United States. This is the magnetic effect most people have in mind, but is also the one about which there is least empirical evidence.