Immigrants are Using Less Welfare than US Citizens

In that respect, the title is correct. Immigrants whether legal or not do not use more welfare than U.S. citizens. That they do use welfare benefits can be an issue to many. However, I believe we should look more at the economic impact immigrants have on the economy whether they are legal or not. As far as welfare? It is true that immigrants use less welfare. A good read and an informative piece for Angry Bear readers.

Immigrants Use Less Welfare Than Native-Born Americans, Cato at Liberty Blog

Immigrant consumption of welfare benefits is one of the most serious economic objections to liberalized immigration. (I am not sure this is as big a problem as stated.)

Milton Friedman once said, “you cannot simultaneously have free immigration and a welfare state.” Elsewhere, he said, “The real hitch is in denying social benefits to the immigrants who are here.” Friedman went further when he argued that illegal immigrants are preferable to legal immigrants because the former don’t have access to welfare:

“Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as it’s illegal.”

At a basic level, there is a lot of wisdom in these points. The straight economic case for liberalized immigration is overwhelming because the median worker in the third world would earn wages about 4.1 times higher in the United States than in their home country. Immigrants have a small effect on the wages of native-born American workers mainly because immigrants don’t compete much with American workers, capital markets adjust well to increases in the number of workers, labor demand is relatively elastic, and immigrants increase demand – to say nothing about immigrants increasing GDP in the United States.

Wages are the most internationally distorted price because immigration restrictions prevent people from moving to locations with higher wages, which results in many trillions of dollars in lost production on the table annually. In a free market, goods or factors of production in a location with a lower price move or are moved to locations with a higher price, resulting in price convergence. This will not work as well with workers as there are many other reasons why people live where they choose to. Immigration restrictions distort the labor market to an incredible degree by locking workers in countries where their wages are low. Immigrants earn higher wages in the United States because they are more productive here than abroad. Still, the United States also has a large welfare state that imposes extra costs on Americans. This is true . . . perhaps to such an extent that the economic benefits of immigration could be much less or even turn negative.

As background, one must understand the truly massive scale of the U.S. welfare state. Total welfare state spending in the United States amounted to $2.6 trillion in 2020. In that year, the federal government spent roughly $2.4 trillion on welfare and entitlement programs, an amount equal to approximately 37 percent of all federal outlays, while the states spent an additional $229 billion. About $1.8 trillion of federal spending on the welfare state went to Social Security and Medicare, whose intended beneficiaries are the elderly. The other roughly $600 billion went to means-tested welfare benefits, intended beneficiaries are the poor.

The difference?

Immigrants consumed about 27 percent less welfare and entitlement benefits in 2020 than the native-born. Immigrants were 14.6 percent of the U.S. population and consumed just 11.1 percent of all means-tested welfare and entitlement benefits in 2020. Native-born Americans consumed $2.3 trillion of benefits in 2020, compared to $290.4 billion consumed by immigrants. All spending on means-tested welfare and entitlement programs would be about $635.5 billion less if native-born Americans consumed the same per capita dollar amount as immigrants.

Detailed Results

The average value of welfare benefits per immigrant was $6,063 in 2020. 27.3 percent less than the $8,335 average for native-born Americans. Figure 1 breaks down the numbers by type of welfare program. Immigrants consumed 36.9 percent less Social Security, 26 percent less Medicare, 10.7 percent less Medicaid, 11.5 percent less SNAP benefits, and 87.6 percent less TANF benefits than native-born Americans on a per capita basis.

However, immigrants consumed 11.4 percent more in SSI benefits than natives, which translates to $19 more than natives on a per capita basis. Immigrants individually also consumed 42.9 percent more WIC benefits than native-born Americans, which translates to $7 more than natives per capita.

Immigrants still consumed less than natives when the entitlement programs of Social Security and Medicare are excluded from the analysis. The average immigrant consumed $2,273 in means-tested welfare benefits in 2020, about $310 less than the average American who consumed $2,583. That’s a difference of 12 percent.

Separating native-born and immigrant welfare consumption by age shows more detail. Figure 2 shows the per capita welfare cost for native-born American and immigrant children aged 0–17. Total welfare costs for immigrant children are 45 percent lower than for native-born American children, and the former consume less per capita than the latter for all programs.

Figure 3 shows the per capita welfare cost for working-age immigrants and native-born Americans aged 18–64. The value of welfare benefits consumed by working-age immigrants is about 38 percent less than that consumed by working-age native-born Americans.

Figure 4 displays the per capita welfare cost for native-born Americans and immigrants aged 65 or older. Elderly immigrants consume, on average, about 19 percent less in welfare benefits than elderly native-born Americans. For Social Security benefits and Medicare, the two largest programs, elderly immigrants consume less than elderly natives; for most smaller programs and Medicaid, the opposite is true. This suggests that immigrants ineligible for Social Security and Medicare use cheaper means-tested programs as substitutes. Reducing means-tested benefits for elderly immigrants should be an easy lift for policymakers.

The Bigger Picture

Elderly immigrants consume more Medicaid benefits than elderly native-born Americans, but natives are more expensive than immigrants in the same age groups on a per capita basis for all large programs and most smaller ones. Immigrants are legally restricted from accessing most welfare programs for some years after their arrival. Minor legal changes along the lines we suggest here would also reduce immigrant access to all these programs. Rep. Grothman (R‑WI) has introduced multiple bills ending welfare access to non-citizens, which is second best to massively scaling back welfare for all.

The theory? Immigrants having immediate access to welfare benefits upon arrival impose costs on native-born American taxpayers that could swamp their economic contributions. The lower immigrant consumption of welfare benefits is evidence immigrants do not impose so large of a cost. However, it could and should be lower. Evaluating the net-fiscal effects of immigration? Whether the taxes paid due to them being here is greater than their consumption of benefits, requires more calculations and estimates.

The results of this study (above) are only present in 2020, a single point in time, and some other years that other authors and I have studied. Although immigrants consistently consume less welfare and entitlement benefits than native-born Americans, the total size of the welfare state could be larger because of immigrant voting or their indirect effects on political outcomes. Thus, total spending on welfare for natives and immigrants could be much larger because immigrants are present in the United States. 

“Immigrants Use Less Welfare Than Native-Born Americans,” Cato at Liberty Blog, Alex Nowrasteh