10 Ways Illegal Immigration Affects You Financially

illegal immigration

Immigration has been a hot-button issue in politics for decades. Legal immigrants are valuable to an economy for many reasons, and some go on to achieve great things for their adopted countries. But there are pros and cons. The economic impact of illegal immigration in the U.S. is costly and impacts the financial security of the county’s legal residents. This impact plays out in a number of ways.

1. Illegal Immigration Reduces Wages

While the effects of immigration on local economies can be complex and mixed, some economic studies have shown that illegal immigration lowers wages by increasing the supply of available labor in an area. Those unregulated workers are often underpaid, which keeps wages lower in a particular occupation and region. Illegal immigrants might also take jobs that would otherwise go to citizens.

“Because of the low levels of human capital and the fact that they often lack adequate English-speaking skills, the vast majority of illegal immigrant workers are employed in low skilled occupations,” said economist Vernon M. Briggs Jr. of Cornell University.

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Read: Obama Clears Path to Bank Accounts for Undocumented Immigrants 

2. It Strains Medical Providers

Illegal immigration puts a strain on medical services in local communities as the population rises. While U.S. citizens are required to carry health insurance under the Affordable Care Act, illegal immigrants often do not have a health care plan. As a result, the cost of treating illegal immigrants place a burden on the economy.

In Texas, a study by the Federation for American Immigration Reform found that providing education, health care, law enforcement, and social and government services to illegal aliens and their dependents cost state taxpayers $12.1 billion a year, or about $1,200 a year per Texas household headed by a U.S. citizen.

 3. It Requires Law Enforcement Resources

Illegal aliens can put a financial burden on local and federal law enforcement for a variety of reasons. First, there are costs associated with law enforcement, border security and crimes including human smuggling.

Incarceration is another costly matter. According to the National Review, U.S. taxpayers paid about $1.9 billion to house imprisoned illegal immigrants in fiscal year 2014 and almost all of that financial burden was shouldered by the states. It cited a study of state and federal data.

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4. It Contributes to School Crowding

Immigrants on average tend to have larger families than those in the U.S. This difference can strain the resources of local school districts. Moreover, illegal immigrant families are poorer on average than U.S. households, which can burden schools.

According to the Center for Immigration Studies, of all public school students in poverty nationwide, 29 percent are from immigrant households. In California, as much as 60 percent of public school students in poverty are from immigrant households. In Arizona, that figure is nearly 43 percent; in Nevada, it’s almost 42 percent.

5.  It Can Create a Black Market

The arrival of illegal immigrants both in the U.S. and in other countries creates a problem that is often under the radar: a black market for goods and services. Black markets are not regulated or taxed by the federal or state government, which means that the goods and services traded there do not contribute to the tax base.

Illegal immigrants may have to frequent a black market to avoid detection. This, in turn, puts more of a burden on U.S. citizens who pay a larger share in taxes.

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6. It Draws Attention Away From Other Issues

The highly charged debate over the future of the nation’s estimated 11.3 million unauthorized immigrants is once again in the political spotlight. When lawmakers and politicians debate how best to deal with illegal immigration, it means that they are not paying attention to other important economic or social issues.

7. It Can Be Linked to Criminal Activity

There is no evidence that immigrants commit more crimes than U.S. citizens. However, illegally emigrating from one country to another does involve a network of criminal activity. Criminal organizations promising to help immigrants illegally move between countries often engage in human trafficking, drug running and other crimes.

8. Illegal Immigrants Use Public Services

While illegal immigrants are not eligible for state or federal government services or benefits, their U.S.-born children can and do access these services. Immigrants as a group appear to use more social services than U.S. citizens do, according to data from the Center for Immigration Studies.

9. Illegal Immigration Can Divide Communities

When illegal immigrants reach the U.S., they need a place to live and work. In an attempt to avoid being discovered and possibly deported, immigrants often live near one another in sections of a community. This stratification has a divisional effect on the broader community and uses resources like land and housing that could be used by others. Immigrants also tend to have much lower levels of per capita income and spending, which results in lower economic activity from those residents in a community.

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They also can drive up car insurance rates. That’s because some states make it hard for undocumented workers to get driver’s licenses. One study found that drivers in those states pay a higher amount for car insurance because they are surrounded by more uninsured motorists.

Related: Infographic shows Americans’ Biggest Money Fears Today

10. Illegal Immigration Can Destabilize Foreign Markets

Illegal immigrants come from another country, so financial problems can arise when there are excess amounts of emigration. Such a trend can destabilize foreign countries and reduce the ability of U.S. firms to export goods to those nations.

An extreme example of the harmful effects of emigration is Puerto Rico, which is part of the U.S. as a territory. As a result, Puerto Rican natives are allowed to enter the U.S. with very few restrictions or barriers to entry. This is not the same as illegal emigration, but the effects are similar. Puerto Rico’s population has fallen due to an increasing exodus over the last year as the island’s economy worsened.

That shrinking population is increasing the per-capita debt burden on the rest of the territory’s residents and making the recession there worse. The same principle applies to emigration from Mexico and other countries. The remaining residents in those countries are saddled with higher debt levels and thus are less able to buy U.S. goods. It’s a side of the immigration argument that gets much less attention but it is important nonetheless.

As U.S. politicians and presidential candidates debate comprehensive immigration reform, domestic costs of immigration remain in the spotlight. For example, according to ThinkProgress.org, the government currently pays prison operators an average of $160 per day per detainee for a total of $2 billion a year. As the election nears, more issues related to the financial and emotional costs of immigration policies could take center stage.

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About the Author

Michael McDonald

Michael McDonald is an assistant finance professor and consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance and his research has been quoted in the Wall Street Journal and Bloomberg. He provides corporate consulting through Connecticut Expert Witness Consulting and teaches classes in the areas of corporate finance and investments.

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