Low-skill immigrants have low wages and thus don’t pay much in taxes but they do use some government services, especially education for their children. What’s the net fiscal impact? The National Academy of Sciences did a
detailed scenario analysis looking at the impact over 75 years, thus including second and third generations. Overall the NAS concluded that the net fiscal impact of the average immigrant was positive. The impact was negative, however, for immigrants with just a high school education and even more so for immigrants with less than a high-school education.
Two recent papers qualify this conclusion. The NAS study estimated the direct fiscal effects of an immigrant–what do they pay in taxes and what do they take out in services? Immigration, however, has indirect effects on the native born population. In the
The Case for Getting Rid of Borders I wrote:
"The immigrant who mows the lawn of the nuclear physicist indirectly helps to unlock the secrets of the universe."
More prosaically, low-skill immigrants can complement higher-skilled native labor, increasing native productivity. Go to any fine restaurant in DC, for example, and you will typically see a native-born front of the house and a Mexican born back-of-the house. As Tyler quipped at lunch recently, all restaurants in the United States are Mexican restaurants only the type of food they are cooking changes. The opportunity to hire Mexican cooks increases the number of restaurants and the opportunities and wages of the native-born front of the house. Higher native wages mean higher taxes so there is a beneficial indirect fiscal effect of low-skill immigration.
A recent paper by Colas and Sachs,
The Indirect Benefits of Low-Skilled Immigration finds that under plausible assumptions the indirect effects are large enough to make the net effects of immigration positive for almost all US immigrants.