As Immigrants Move In, Americans Move Up (Free Trade Bulletin)

Congress and President Obama may tackle the controversial issue
of immigration reform as soon as the fall of 2009. If past
congressional debates are any guide, one point of contention will
be the impact of reform on the American underclass.

In 2006, and again in 2007, the U.S. Senate debated
“comprehensive immigration reform” designed to curb illegal
immigration by ramping up enforcement while providing expanded
opportunities for legal immigration. Both bills would have
legalized several million immigrants currently in the United States
illegally and created a temporary visa program to allow more
low-skilled workers to enter the country legally in future
years.

One argument raised against expanded legal immigration has been
that allowing more low-skilled foreign-born workers to enter the
United States will swell the ranks of the underclass. The critics
warn that by “importing poverty,” immigration reform would bring in
its wake rising rates of poverty, higher government welfare
expenditures, and a rise in crime. The argument resonates with many
Americans concerned about the expanding size of government and a
perceived breakdown in social order.

As plausible as the argument sounds, it is not supported by the
social and economic trends of the past 15 years. Even though the
number of legal and illegal immigrants in the United States has
risen strongly since the early 1990s, the size of the economic
underclass has not. In fact, by several measures the number of
Americans living on the bottom rungs of the economic ladder has
been in a long-term decline, even as the number of immigrants
continues to climb. Other indicators associated with the
underclass, such as the crime rate, have also shown improvement.
The inflow of low-skilled immigrants may even be playing a positive
role in pushing nativeborn Americans up the skills and income
ladder.

Measuring the Size and Composition of the
Underclass

“Underclass” is not a precise term, but it is generally
understood to mean those who live below or near the poverty line
and who lack the education or jobs skills to join the middle class.
If we define the underclass to be the number of people in the
United States living below the poverty line, in households earning
less than $25,000 a year or without a high school diploma, and then
examine the changing size and composition of each of those
categories by either race or citizenship status, a consistent
pattern emerges.

By all three measures, the size of the underclass has been
shrinking since the early 1990s-during a period of large-scale
legal and illegal immigration. The composition of the underclass
has also been changing, with the number of immigrants and Hispanics
growing, while the number of native-born and non-Hispanics has
declined at an even more rapid rate.

Families and individuals below the poverty level. If we
define the underclass as families living below the official poverty
level, the recent trend has been downward. Between 1995 and 2004,
the number of family households living below the poverty level fell
by half a million, from 8.1 million to 7.6 million. The number of
immigrant households in poverty did indeed rise-by 194,000-but that
increase was more than offset by a drop of 675,000 in native-born
households living in poverty. In other words, for every poor
immigrant family we “imported” during that time, more than three
native-born families were “exported” from poverty.

Poverty figures by race span a longer period, 1993 though 2007,
but they tell the same story. The total number of family households
living in poverty fell by 770,000 during that period, from 8.4
million to 7.6 million. The number of Hispanic families living in
poverty increased by 420,000-providing evidence of a growing
Hispanic/immigrant underclass-but over those same years, the number
of non-Hispanic families in poverty dropped by 1.1 million,
including a decline of 408,000 in the number of poor black
families.

The trend is no different when we look at individuals in
poverty. From 1993 through 2007, the number of individuals in our
society subsisting below the poverty line declined by 2 million,
from 39.3 million to 37.3 million. A 1.8 million increase in the
number of Hispanics living in poverty was swamped by a 3.8 million
decline in non-Hispanics, including a 1.6 million decline in black
poverty. Similarly, a 1 million increase in immigrants living in
poverty was more than matched by a 3 million drop in native-born
Americans under the poverty line. Measured by the official poverty numbers, the
American underclass has been shrinking as it has become composed of
more immigrants and more Hispanics.

Households with income less than $25,000. Measuring the
underclass by household income reveals the same underlying trend.
The number of households earning less than $25,000 in a given year
dropped by 5.6 million from 1995 to 2004, according to the most
recent numbers that disaggregate the underclass by citizenship
status. Almost all the drop was accounted for by a decline in
non-immigrant households earning less than $25,000, which dropped
from 20.6 million in 1995 to 15.0 million in 2004. (All incomes
were measured in inflation-adjusted dollars.) The number of
immigrant families under that income threshold also dropped, but
only by 80,000. As a result, the immigrant share of the underclass
grew from 15 percent to 20 percent, even as the size of the
underclass was shrinking.

The same picture emerges when we examine the number of
low-income households by race and ethnicity. From 1994 through
2007, the number of households in America getting by on less than
$25,000 fell by almost 10 million (with incomes measured across the
years in real dollars). The share of total households living under
that threshold dropped from 40 percent to 25 percent. Again, the
entire decline was accounted for by non-Hispanic households,
including a drop of 900,000 in black households, while the number
of Hispanic households surviving on less than $25,000 was virtually
unchanged.

Although the underclass became increasingly more Hispanic during
the period, the share of all households living on less than $25,000
fell for every ethnic group. In fact, the steepest decline in
percentage terms was among Hispanic households, with the share of
households living below $25,000 dropping from 53 percent to 31
percent.

Householders and Individuals without a High-School
Diploma. A third way of measuring the underclass is by
householders or individuals without a high-school diploma. In
America today, a worker or head of household without a high-school
education is almost invariably confined to lowerproductivity, and
thus, lower-wage occupations, with limited prospects for
advancement.

As with the poverty and income measures, here, too, the story is
basically positive. Between 1993 and 2006, the number of households
headed by someone 18 and older without a high-school diploma
dropped by 3.7 million, from 19.9 million to 16.2 million. The
number of such “low-skilled households” headed by a Hispanic did
indeed increase by 1.8 million during that period, undoubtedly
driven in significant part by large inflows of low-skilled
immigrants from Mexico and Central America. The rest of the story,
however, is that during those same years, the number of
non-Hispanic households headed by a high-school dropout fell by a
hefty 5.5 million. That means that for every net addition of one
Hispanic-headed, low-skilled household to the ranks of the
underclass, the number of such non-Hispanic households dropped by
three. Meanwhile, the share of total U.S. households headed by a
high-school dropout declined steadily, from one in five to one in
seven.

The number of individuals 25 years and older without a
high-school diploma has also been in steady decline. From 1993
through 2006, the number of adults who were highschool dropouts
declined from 32.1 million to 27.9 million, a fall of 4.2 million
(see Figure 1). The number of adult Hispanics in the United States
without a high-school education swelled by 3.9 million, much of
that growth driven by the influx of low-skilled illegal immigrants.
But during that same period, the number of non-Hispanic adults
toiling in life without a high-school diploma plunged by 8.1
million, including a drop of 1 million in the number of adult black
dropouts. For every additional Hispanic dropout added to the pool,
the number of non-Hispanic dropouts fell by two. The share of
adults without a diploma dropped in every racial and ethnic group,
although the decline was less rapid among Hispanics.

Educational attainment by citizenship status covers a slightly
different period but also confirms the trend. From 1995 to 2004,
the number of adults without a high school diploma declined by 2.9
million. An increase of 2.4 million in the number of immigrant
dropouts was overwhelmed by a decline of 5.3 million in native-born
dropouts. As that measure of the underclass shrank, the share
represented by immigrants grew from 22 percent to 32 percent. By
this and the other measures above, “the underclass” in our society
has been shrinking as its face has become more Hispanic and
foreign-born.

Immigrants Move In, Americans Move Up

Multiple causes lie behind the shrinking of the underclass in
the past 15 years. The single biggest factor is probably economic
growth. Despite the current recession, the U.S. economy enjoyed
healthy growth during most of the period, lifting median household
incomes and real compensation earned by U.S. workers, which ushered
millions of families into the middle class and beyond. Welfare
reform in the 1990s, and rising levels of education, may also be
contributing factors.

Another factor may be immigration itself. The arrival of
low-skilled, foreign-born workers in the labor force increases the
incentives for younger native-born Americans to stay in school and
for older workers to upgrade their skills. Because they compete
directly with the lowest-skilled Americans, low-skilled immigrants
do exert mild downward pressure on the wages of the lowest-paid
American workers. But the addition of low-skilled immigrants also
expands the size of the overall economy, creating openings in
higher-paid occupations such as managers, skilled craftsmen, and
accountants. The result is a greater financial reward for finishing
high school and for acquiring additional job skills. Immigration of
low-skilled workers motivates Americans, who might otherwise
languish in the underclass, to acquire the education and skills
necessary so they are not competing directly with foreign-born
workers.

The shrinking of the native-born underclass contradicts the
argument that low-skilled immigration is particularly harmful to
African-Americans, who are disproportionately represented in the
underclass. By each of the three measures above-poverty, income,
and educational attainment-the number of black American households
and individuals in the underclass has been declining. Native-born
blacks have been moving up along with other native-born Americans
as immigrants have been moving in.

That same win-win dynamic may have been at work a century ago
during the “great migration” of immigrants from eastern and
southern Europe. Most of those immigrants were lower-skilled
compared with Americans, and their influx also exerted downward
pressure on the wages of lower-skilled Americans. It was probably
not a coincidence that during that same period the number of
Americans staying in school to earn a high-school diploma increased
dramatically in what is called “the high-school movement.” From
1910 to 1940, the share of American 18-year-olds graduating from
high school rose from less than 10 percent to 50 percent in a
generation.
Today’s immigrants are arguably contributing to the same positive
dynamic.

America’s experience with immigration contradicts the simplistic
argument that the arrival of a certain number of low-skilled
immigrants increases the underclass by that very same amount. That
approach ignores the dynamic and positive effects of immigration on
native-born American workers. The common calculation that every
low-skilled immigrant simply adds to the underclass betrays a
static and inaccurate view of American society.

A Less Dysfunctional Underclass

Another contribution of immigration has been that it has changed
the character of the American underclass for the better. Years of
low-skilled immigration have created an underclass that is not only
smaller than it was 15 years ago, but also more functional. Members
of today’s more immigrant and Hispanic underclass are more likely
to work and less likely to live in poverty or commit crimes than
members of the more native-born underclass of past decades.

One striking fact about low-skilled immigrants in America, both
legal and illegal, is their propensity to work. In 2008, the
labor-force participation rate of foreign-born Hispanics was 70.7
percent-compared to an overall rate of 65.6 percent for native-born
Americans. Immigrants 25 years of age or older, without a
high-school diploma, were half again more likely to be
participating in the labor force than native-born dropouts (61.1
percent vs. 38.4 percent). According to estimates by the Pew Hispanic
Center, male illegal immigrants, ages 18-64, had a labor force
participation rate in 2004 of an incredible 92 percent. Illegal immigrants
are typically poor, but they are almost all working poor.

Nowhere is the contrast between the immigrant and native-born
underclass more striking than in their propensity to commit crimes.
Across all ethnicities and educational levels, immigrants are less
prone to commit crimes and land in prison than their native-born
counterparts.

The reasons behind this phenomenon are several. Legal immigrants
can be screened for criminal records, reducing the odds that they
will engage in criminal behavior once in the United States. Illegal
immigrants have the incentive to avoid committing crimes to
minimize their chances of being caught and deported. Legal or
illegal, immigrants come to America to realize the opportunities of
working in a more free-market, open, and prosperous economy;
committing a crime puts that opportunity in jeopardy.

Strong empirical evidence points to the fact that immigrants are
less likely to commit crimes than native-born Americans. In
testimony before Congress in 2007, Anne Morrison Piehl, a professor
of criminal justice at Rutgers University, addressed the question
of “The Connection between Immigration and Crime.” Using census
data from 1980, 1990, and 2000, she told the House Judiciary
Committee that “immigrants have much lower institutionalization
rates than the native born-on the order of one-fifth the rate of
natives. More-recently arrived immigrants had the lowest relative
institutionalization rates, and the gap with natives increased from
1980 to 2000.” Piehl found no evidence that the immigrant crime
rate was lower because of the deportation of illegal immigrants who
might otherwise be held behind bars in the United States.

Crime rates are even lower than average among the poorly
educated and Hispanic immigrants that arouse the most concern from
skeptics of immigration reform. RubÃ©n Rumbaut of the
University of California at Irvine, after examining the 2000 census
data, found that incarceration rates among both legal and illegal
immigrants from Mexico, El Salvador, and Guatemala were all less
than half the rate of U.S.-born whites. Immigrants without a high-school
diploma had an incarceration rate that was one-fourth that of
native-born high-school graduates, and one-seventh that of
native-born dropouts.

The reluctance of low-skilled immigrants to commit crimes helps
to explain the lack of any noticeable connection between rising
levels of illegal immigration and the overall national crime rate.
As Professor Rumbaut explained in a recent essay:

Since the early 1990s, over the same time period as legal and
especially illegal immigration was reaching and surpassing historic
highs, crime rates have declined, both nationally and most
notably in cities and regions of high immigrant concentrations
(including cities with large numbers of undocumented immigrants,
such as Los Angeles, and border cities like San Diego and El Paso,
as well as New York, Chicago, and Miami).

Ironically, illegal immigrants who break U.S. immigration laws
to enter the United States appear much more likely than native-born
Americans to respect our domestic criminal code once they are
inside the country. Once here, low-skilled immigrants, as a rule,
get down to the business of earning money, sending home
remittances, and staying out of trouble. The wider benefit to our
society is that, in comparison to 15 years ago, a member of today’s
underclass, standing on a street corner, is more likely to be
waiting for a job than a drug deal.

Contrary to popular notions, low-skilled immigration has not
contributed to a swelling of the underclass, or any increase at
all, nor has it contributed to a rise in crime or other antisocial
behaviors. In fact, it would be more plausible to argue that
low-skilled immigration has actually accelerated the upward
mobility of Americans on the lower end of the socioeconomic ladder.
At the same time, the influx of lowskilled immigrants has helped to
transform the American underclass into a demographic group that is
still poor-but more inclined to work and less prone to crime.

Conclusion

Members of Congress should not reject market-oriented
immigration reform because of misguided fears about “importing
poverty.” Based on recent experience, a policy that allows more
low-skilled workers to enter the United States legally would not
necessarily expand the number of people living in poverty or the
number of low-skilled households demanding government services. It
would not impose significant costs on American society in the form
of welfare spending or crime abatement.

As Cato research has shown elsewhere, strong, positive arguments
remain for pursuing a policy of expanding legal immigration for
low-skilled workers. Comprehensive immigration reform that included
a robust temporary worker program would boost economic output and
create new middleclass job opportunities for native-born Americans.
It would reduce the inflow of illegal workers across the border,
allowing enforcement resources to be redeployed more effectively to
interdict terrorists and real criminals. It would restore the rule
of law to U.S. immigration policy, while reducing calls for
enforcement measures such as a national ID card or a centralized
employment verification system, which compromise the freedom and
civil liberties of American citizens.

Along with those major benefits, immigration reform would
enhance the incentives for native-born Americans up and down the
income ladder to acquire the education and skills they need to
prosper in a dynamic economy.

Notes

See, for
example, Robert Rector, “Importing Poverty: Immigration and Poverty
in the United States: A Book of Charts,” Heritage Foundation,
Special Report #9, October 25, 2006; Heather Mac Donald, “Surge in
Birth Rate Among Unwed Hispanics Creating New U.S. Underclass,”
Dallas Morning News, Jan. 21, 2007; and Robert J.
Samuelson, “Importing Poverty,” The Washington Post,
September 5, 2007.

U.S. Bureau of
the Census, Current Population Survey, Foreign Born Population,
1995-2004, Survey Table 1.12, http://www. census.gov/cps/.

U.S. Bureau of
the Census, Current Population Survey, Poverty Status of Families,
Table 4, http://www.census.gov/cps/.

For poverty
numbers by citizenships status, see U.S. Bureau of the Census,
Current Population Survey, Historical Poverty Tables, People, Table
23; by race, see ibid., Table 2, http://www.census. gov/cps/.

U.S. Bureau of
the Census, Current Population Survey, Foreign Born Population,
1995-2004, Survey Table 1.9, http://www.census. gov/cps/.

U.S. Bureau of
the Census, Current Population Survey, Detailed Household Income,
Table H-1, http://www.census.gov/cps/.

U.S. Bureau of
the Census, Current Population Survey, Educational Attainment,
Table 4, http://www.census.gov/cps/. Data is not available for
householder’s education level by citizenship status.

Ibid.

U.S. Bureau of
the Census, Current Population Survey, Foreign Born Population,
1995-1999, Survey Table 1.4, and 2000-2004, Survey Table 1.5,
http://www.census.gov/cps/.

See, for
example, Claudia Goldin and Lawrence F. Katz, “Human Capital and
Social Capital: The Rise of Secondary Schooling in America,”
National Bureau of Economic Research, Working Paper no. 6439, March
1998.

U.S.
Bureau of Labor Statistics, “Foreign-born Workers: Labor Force
Characteristics in 2008,” Bureau of Labor Statitstics (news
release, March 26, 2009), Table 1.

Jeffrey S.
Passel, “Unauthorized Migrants: Numbers and Characteristics,” Pew
Hispanic Center, June 14, 2005, p. 25.

Anne
Morrison Piehl, “The Connection between Immigration and Crime”
(testimony before the House Judiciary Subcommittee on Immigration,
Citizenship, Refugees, Border Security, and International Law,
hearing on “Comprehensive Immigration Reform: Impact of Immigration
on States and Localities,” May 17, 2007).

RubÃ©n Rumbaut, “Undocumented Immigration and Rates of Crime
and Imprisonment: Popular Myths and Empirical Realities,” Appendix
D, in The Role of Local Police: Striking a Balance Between
Immigration Enforcement and Civil Liberties, ed. Anita Khashu
(Washington: The Police Foundation, April 2009), p. 127.

Ibid., p.
129.

Ibid., p.
124.

See Jim
Harper, “Electronic Employment Eligibility Verification: Franz
Kafka’s Solution to Illegal Immigration,” Cato Policy Analysis no.
612, March 6, 2008; Daniel Griswold, “The Fiscal Impact of
Immigration Reform: The Real Story,” Cato Free Trade Bulletin no.
30, May 21, 2007; Daniel Griswold, “Comprehensive Immigration
Reform: Finally Getting It Right,” Cato Free Trade Bulletin no. 29,
May 16, 2007; and Daniel Griswold, “Willing Workers: Fixing the
Problem of Illegal Mexican Migration to the United States,” Cato
Trade Policy Analysis no. 19, October 15, 2002.