Home Immigration Law Undocumented Immigrants and their Impact on the US Economy

Undocumented Immigrants and their Impact on the US Economy


Note: The opinions and comments stated in the following article, and views expressed by any contributor to In Homeland Security, do not represent the views of American Military University, American Public University System, its management or employees.

By Natasha Snow
Faculty Member, Accounting & Finance at American Public University

The benefits of undocumented immigrants have been lost in the political rhetoric of this year’s presidential debates. We often hear about the problems created by undocumented immigrants; these problems include felonies, a decreased demand for unskilled labor, lower pay for entry level jobs and the high cost to local, state and federal governments. However, undocumented immigrants in the U.S. affect the economy in different ways.

Undocumented Immigrants Are a Common and Cheap Labor Source for Businesses

It is difficult for anyone in the United States to say they have not benefited from cheap, illegal labor. The most common area where we benefit from undocumented workers is the supply of construction employees and yard maintenance staff. Unskilled, undocumented workers flood the labor market and drive out unskilled American workers in some areas.

Another area impacted by undocumented immigrants is the restaurant industry. The staff working in restaurant kitchens is often comprised of undocumented immigrants paid with low wages.

Big business also prefers undocumented workers, so they can avoid paying for insurance and the Federal Insurance Contributions Act (FICA).

The Financial Contributions of Undocumented Immigrants to the US Economy

Undocumented immigrants pay taxes to our government. Of the 11 million undocumented immigrants working in the U.S., half of them pay $11.6 billion in taxes. For an undocumented immigrant to earn citizenship, he or she must meet residency requirements and demonstrate they paid income taxes while in the United States.

All people living in the U.S. are required to obtain an Individual Tax Identification Number (ITIN) to pay taxes. With an ITIN, an undocumented immigrant can work as an independent contractor. Residency requirements are relatively easy to fulfill by renting an apartment (lease/contract) or paying a monthly bill in the United States. Immigration authorities prefer monthly bills to come from local or state government offices like utilities or property tax.

According to the Social Security Administration, undocumented immigrants have also paid $100 billion to the Social Security fund in the last 10 years with no intention of recovering their contributions. Even state and local governments benefit from taxes paid by undocumented immigrants. In 2010, for example, undocumented immigrants paid $10 billion to states and local governments.

Financial Disadvantages of Undocumented Immigrants in the United States

Of course, there are a number of financial disadvantages to undocumented immigrants who reside in the United States. First, undocumented immigrants commit substantial numbers of crime in each state. The exact percentage is debatable, but the cost of the judicial system for prosecuting and incarcerating undocumented immigrants is in the billions.

Second, the IRS accepts tax returns from undocumented immigrants. In essence, the federal government is turning a blind eye to undocumented immigration in order to receive their taxes.

Third, undocumented immigrants receive tax deductions and exemptions to which they are not entitled. In some cases, they receive tax refunds created from those credits.

No matter what side of the fence you sit, you need to ask the following question, “Does the benefit of low wages outweigh the disadvantage of the cost of undocumented immigrants to our education, judicial and socio-economic systems?” Your answer may follow your political opinions or even your religious beliefs.

In summary, most undocumented immigrants come to the U.S. to make a living for their families. It is the criminals crossing the border that have cost the American tax payers billions each year. One of the major advantages of their addition to the labor market is businesses are able to lower labor costs, which is passed to the consumer. However, the lower labor costs have priced American workers out of the labor market by decreasing the wages that they can demand. This has caused more Americans to receive unemployment benefits thus increasing the burden on tax payers.

About the Author
Professor Snow was born in Siberia, Russia and moved to the United States after graduating with a degree in English (Russian diploma).  Mrs. Snow also has a graduate degree from Samford University and a law degree from the University of Alabama. She currently teaches accounting at APUS and occasionally takes an immigration case.



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