In a recent substack post, David Friedman points out a problem with judging immigrants solely by their fiscal impact. His analysis is so clear that it’s worth reposting part of it. Here it is:
What is bizarre about [Emil] Kierkegaard’s argument is that he identifies fiscal impact with contribution to society, writing, on the basis of calculations of fiscal impact:
There is no age at which this group contributes more to society than it receives.
What he means is “contributes more to the state than it receives.” That is not the same thing.
Suppose the Danish government is running a mild deficit. A plague kills everyone in Denmark. Since nobody is either paying taxes or receiving government services, net government revenue has increased from a negative value to zero. By Kierkegaard’s definition, Danish society is now better off.
For a more realistic example of the point imagine that the US lets in lots of Mexican immigrants. Their net fiscal impact is negative; my taxes go up by a thousand dollars a year to cover the fiscal loss. My ability to hire immigrants to clean my house, mow my lawn, trim my trees, repair my house, none of which was worth the cost of doing before they arrived, makes me better off by two thousand dollars a year, and similarly for other Americans. The immigrants’ net contribution to society is positive even though their contribution to government revenue is negative.
There may be effects in the other direction as well. If the immigrants commit lots of violent crime that decreases their contribution to society whether or not it decreases government revenue. Figuring out the net contribution of immigrants, or anyone else, to a society is a hard problem. That is no excuse for calculating the contribution to net government revenue and using that instead.
Well said.
The article “Immigration” in David R. Henderson, ed., The Concise Encyclopedia of Economics is by immigration skeptic George J. Borjas. He estimates both the gains to “natives” from interaction with immigrants in the labor market and the losses to “natives” from higher welfare costs.
The pic above is of David Friedman.
