Here’s a perplexing pair of statistics: Compared with native-born Americans, immigrants are more likely to start a business — and they’re also more likely to depend on welfare.
These dissonant data are even more irksome considering the state of the U.S. economy. Government social-aid programs consume an ever-growing portion of the federal budget, surpassing a trillion dollars even before Medicare and Social Security are factored in. And entrepreneurial activity is slowing. Census Bureau statistics show that start-ups accounted for 12 percent of American businesses in 1980 but less than 8 percent today. And earlier this fall, the Hudson Institute found that under the Obama administration, we’ve averaged 7.8 start-up jobs per 1,000 people. During the Bush years, it was 10.8, and during Clinton’s years in office, it was 11.2.
The question then becomes how to devise an immigration policy that encourages entrepreneurship and discourages government dependency.
First, the facts. Already, immigrants make a significant contribution to the American economy. Earlier this year, a study by the Fiscal Policy Institute found that immigrants account for 18 percent of all small-business owners, even though they make up only 13 percent of the overall population. These immigrant-owned businesses provide around 4.7 million jobs. And the Department of Labor reported that, last year, foreign-born workers (including both legal and illegal immigrants) had higher labor-force participation than native-born Americans, especially among men.
Two policy trends are driving the problem. First, the United States has promoted broader welfare use in recent years, also leading campaigns that market social aid specifically to immigrants. And second, our immigration rules are not crafted to weed out would-be freeloaders and give preference to highly skilled, highly educated applicants.
Welfare use is becoming more common among all American households, immigrant or not. Census Bureau data revealed that in the early months of 2011, 49.1 percent of Americans lived in a household where at least one person drew a government benefit. Last year, 54 million people were on Medicaid, according to the Senate Budget Committee. And 46.7 million people — more than one in seven Americans — received food stamps in 2011, according to the Department of Agriculture.
But the deliberate expansion of welfare has been particularly targeted at immigrants, and that represents a major cultural shift. The United States has long preached that opportunity and liberty together constitute a sufficient guarantor of success, for immigrants and non-immigrants alike. That’s been one of America’s big selling points. But government marketing has shifted, and any number of “outreach” programs, both public and private, now seek to persuade immigrants to utilize the benefits newly available to them. Legal immigrants are potentially eligible for dozens of welfare programs, and even illegal immigrants can benefit indirectly, provided at least one member of their household is here legally.
WelcometoUSA.gov prominently features information on how new immigrants can obtain benefits, including cash assistance, food stamps, and Medicaid. Furthermore, a program established in 2004 ensures that Mexican consulates on U.S. soil promote food-stamp benefits to immigrants. And earlier this year, the Department of Agriculture created a Spanish-language “novela” ad promoting the Supplemental Nutritional Assistance Program. It featured a character who is initially reluctant to go on food stamps because her husband brought home a sufficient income. Finally, bending to pressure from her peers, she enters the program and learns to love it.
The United States’ increasingly prolific provision of welfare is egregious regardless of the national origin of the beneficiaries — but when it comes to immigrants, it’s also potentially unlawful. Federal law states that the U.S. should not admit immigrants who are likely to become a “public charge.” Yet the Department of Homeland Security and the Department of State examine only the Supplemental Security Income and Temporary Assistance for Needy Families programs when making this assessment. That ignores more than 75 other federal-assistance programs. Even so, State Department data show that only 0.068 percent of visa applications were denied in fiscal year 2011 because a prospective immigrant was at risk for becoming welfare-dependent.
The federal government also largely ignores educational attainment, which is probably the biggest indication of whether an immigrant will become a lifelong welfare recipient. While 58.8 percent of immigrants without a high school-education rely on welfare, only 16.3 percent of those with a bachelor’s degree or higher do. The National Research Council once found that on average, college-educated immigrants contribute $198,000 more in taxes than they receive in benefits. However, immigrants without a high school-education draw $3 in benefits for every $1 they add to the public purse, and those who hold a diploma but not a college degree aren’t much better, says Robert Rector, an expert on the U.S. welfare system and immigration at the Heritage Foundation.
Such uneducated, unskilled immigrants “are just a huge drain on society, basically from the moment they cross the border,” Rector said. “The real factor is the education level. An immigrant with a college degree is not going to be dependent on welfare. An immigrant with a high school education or less is going to be highly dependent on welfare throughout his life.”
Yet a college education — or even a high-school education, for that matter — is almost never a criterion when the federal government considers whether to allow prospective immigrants to enter the country. Different immigration routes have different admissions criteria, but only about one in ten immigrants are required to have educational attainment beyond high school. And the Pew Research Center has reported that two-thirds of recently arrived immigrants lack a college degree.
When we keep this in mind, immigrant reliance on welfare suddenly looks less a function of national origin or work ethic, says Steven Camarota, director of research for the Center for Immigration Studies. “If you’re unskilled — native-born or immigrant — you’re going to have a hell of the time in the U.S.,” he explained. “[But] our system is certainly not designed to bring in highly skilled people. That’s for sure.”
This problem becomes especially acute as elected officials grapple with the growing debt. The Senate Budget Committee reported that in 2011, state and federal government spending on 83 means-tested welfare programs, not including Social Security or Medicare, cost $1.03 trillion. And these expenditures are burgeoning. The Congressional Research Service found that between 2008 and 2011, federal spending on welfare programs increased by 32 percent. The Heritage Foundation has reported that over the next ten years, the U.S. will spend twice as much on welfare as national defense.
That comes at a high economic cost. More social spending inevitably means more taxes. Those taxes are often levied on small businesses and successful entrepreneurs, a fact that hasn’t escaped ambitious prospective immigrants. Hong Kong is brimming with foreign-born entrepreneurs who won’t consider starting businesses in the U.S. because of the growing tax burden. Some even say they’d prefer the economic freedom of Hong Kong to the political freedom of the United States. Yet those are precisely the sort of immigrants the United States should be welcoming.
Instead, we’re expanding welfare among native-born and immigrant Americans alike, and we’re pursuing an immigration policy that doesn’t draw the best and brightest. It would be tragic indeed if the United States went from being the land of opportunity to the land of alms.
— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.