The surprising answer is: not necessarily. What’s more, some of the countries most concerned about these questions at the moment are the ones most likely to profit from greater immigration.
“Immigrants come in and they work and pay taxes and they contribute,” said George Borjas, an economics professor at Harvard’s Kennedy School of Government. “At the same time, some of them get sick, some of them have children who have to go to school, and all kinds of programs kick in in order to provide them services. And the question at the end is which of these two money streams is greater. There’s been a lot of work on that,” he said, and the studies are generally open to interpretation.
In the case of “congestible public goods”—as in a road or transit system or education system where you might need to expand capabilities to avoid traffic jams—more immigrants means more expenditures, according to Tim Krieger, an economics professor at Freiburg University. “And the immigrants don’t pay that much in taxes” due to lower average incomes, he said. “They do pay value-added taxes and sales taxes, of course, but hardly any income taxes and capital taxes and so on.”
But, Krieger added, one of the big caveats here is the effect that immigrants have on pension or retirement systems, which constitute a huge chunk of the public budget in many countries. Pension systems are typically pay-as-you-go programs, which means everyone currently working gets taxed and that money immediately goes to current retirees. Immigrants tend to have a tremendously positive impact on the pension system, he said. In fact, their arrival triggers what “pension economists usually call an ‘introductory gift.’ If you find a job, you start paying contributions and all these contributions—because it’s a pay-as-you-go system—go directly to the retirees.” That can swiftly shore up government finances in countries with an aging population, which describes most of Europe. Plus, “There’s been research showing that even if the people are net beneficiaries of the pension system [i.e. if, by the time these immigrants grow old, the state has committed to larger pension payouts], even then it would have a positive effect on pay-as-you-go simply because they will have children who become contributors, and immigrants tend to have more children than natives.” In Germany, said Krieger, that kind of effect on the pension system “is a factor of three or four compared to all the other benefits.”
With less predictable benefits like unemployment insurance and health care, a lot depends on the specific country and the demographics of those immigrating.
In the United States, said Borjas, “The most recent credible work dates way back to the 1997 National Academy report, which depending on how you do things finds whatever you want [it to find].” (Borjas sat on the expert panel that put the study together.) “The number that was widely cited is that the typical immigrant arriving in would create over the long haul an $80,000-plus benefit. But the problem with that number was that it looked over the next 300 years,” Borjas continued, and long-term estimates are of little use when you consider how much depends, for example, on fluctuations in the host country’s labor market. “We can barely predict next year,” he pointed out. When the panel tried to predict what would happen in, say, 1998 if the country were to accept 460,000 “new immigrant-headed households,” it found instead a $10 increase in the fiscal burden on native households—in other words, a negative effect from immigration.