The New York Times has posted an unfinished report by the Department of Health and Human Services (HHS) that examines the fiscal impact of post-1980 refugees. Its preliminary finding is that refugees who have arrived since 1980 created a net fiscal benefit of $63 billion (taxes paid minus costs created) over the decade from 2005 to 2014.
Of course, the study was never formally released, so we do not know what its conclusion would have been had it been fully vetted and completed. Its methodology seems to indicate that it was conducted by researchers (or a single researcher) who understand the data and the complexities of doing a study of this kind. However, by excluding a large set of government costs, the author(s) make it almost inevitable from the start that refugees will be net fiscal contributors. Moreover, the study does not acknowledge that the refugees currently arriving are much less educated than those who came in prior decades, which has profound fiscal implications.
The first issue is the way the report is constructed. By examining only the period from 2005 to 2014 while including refugees who arrived as early as 1980, the researcher(s) ensured their analysis was done mostly on refugees who are established residents. Refugees who arrived in the 1980s or 1990s, for example, had lived in the United States for five to 25 years by 2005, and 14 to 34 years by 2014. This is critical because, as the study itself acknowledges, it is in the first few years after arrival that refugees create the largest fiscal costs.
To address this problem without changing the basic format of their work, the author(s) could have reported the fiscal impact of refugees in, say, five-year entering cohorts — those who arrived from 1980 to 1984, 1985 to 1989, and so on. This kind of analysis is very common in the study of immigrants, and the Current Population Survey data they used to create their estimates includes year-of-arrival information. By choosing to examine fiscal costs long after arrival for such a large share of refugees, the analysis significantly understates the costs of refugees.
Equally problematic is the study’s exclusion of all public goods, including “congestible” goods such as police protection, from its cost calculations. As a result, it comes to the odd conclusion that almost everyone is a net fiscal contributor, including people with only a high-school diploma, even though the federal government has been running a huge deficit and most states are perpetually cash-strapped. A recent study by the National Academies of Sciences, Engineering, and Medicine, on which the new study is partly based, does include such costs in many of its fiscal estimates and finds that the current fiscal impact for first-, second-, and even third-generation Americans is on average negative. This makes sense, of course, because our ongoing annual federal deficit means that the average person in American is not paying enough in taxes to cover public services. But if you make everyone a net positive, as the HHS analysis does, it is almost inevitable that refugees’ fiscal impact will become positive as well.
One might argue that excluding public goods makes sense if we are talking about the fiscal impact of adding one refugee — but we cannot add 3 million people (the total number of post-1980 refugees according to the report) without incurring new costs for things such as road maintenance and police and fire protection. There are ways of adding these costs into the analysis, such as assuming that marginal costs equal average costs. It is hard to understand why HHS chose not to do so.
A third issue with the study is that it fails to acknowledge that most of the refugees they are looking at arrived in the 1980s and 1990s, when the flow was much more educated, reflecting in part refugees from the former Soviet Union. For example, the Office of Refugee Resettlement (ORR) Annual Report to Congress for 1995 shows (Table 3, page 43) that 15 percent of refugees who arrived between 1990 and 1995 had college degrees. This compares to 8 percent in 2015 (Table 12, p. 28). Census Bureau data show that 20 percent of natives had a college education in 1995 and 29 percent had one in 2015. So what was a five-point gap in college education in 1995 between natives and refugees is now a 21-point gap.
At the bottom end, 35 percent of new refugees had not graduated from high school in 1995, and in 2015 it was 50 percent. Among natives, 20 percent had not completed high school in 1995, and it was 13 percent in 2015. So the gap went from 15 percentage points in 1995 to 37 percent points in 2015. This matters enormously because educational attainment is one the best predictors of how immigrants will do in the United States. (Note: All Census Bureau data reported above is for natives age 16-plus to match published tables from ORR.)
The decline in both the relative and the absolute education levels among refugees means that it is unrealistic to imagine that the current group of refugees, or those who are likely to be admitted in the near future from places such as the Middle East or Africa, will do anywhere near as well as the prior group of refugees. This fact is certainly relevant to the current policy debate. The failure to even mention it is even more puzzling given that HHS has direct access to the raw data from the refugee survey used in ORR reports to calculate education, which the public does not have. This could have allowed them to explore the decline in refugee education in great detail.
There also is a minor issue that should probably have at least been acknowledged by the HHS researchers: The welfare state has become more generous over time. In particular, Medicaid costs are much higher today than they were even five or ten years ago. Providing Medicaid to refugees, which they use at very high rates, will be much more costly in the future than it was in 2005, the starting date for the HHS analysis. In fact, the HHS report says Obamacare subsidies were explicitly excluded from their analysis.
Half of all new adult refugees in 2015 had not graduated from high school.
Half of all new adult refugees in 2015 had not graduated from high school. Given their very low education level, it is almost certain that as a group they will be a significant net fiscal drain in their lifetimes.
The HHS report represents a significant effort on the part of its author(s). But the problems with the report significantly reduce its value and relevance to the current debate over admitting more refugees. Acknowledging the education level of current refugees and fixing some of the other issues noted above could have made it a valuable source of information and helped the country better understand the fiscal impact of refugees. Of course, in fairness to the author(s), it is entirely possible that such changes were intended for the final version, but the report was leaked before it could be corrected and published. Maybe in the future HHS will do just that.