Educating First-Gen Immigrant Kids Costs Money; Second Gen Pays Us Back

Some legislators wanted to spend the summer studying the fiscal and economic impact of refugees and immigrants in general to South Dakota. The Legislative Executive Board didn’t take up those suggestions, but luckily, the Urban Institute and the National Academies of Sciences, Engineering, and Medicine have already studied the topic nationwide. Liz Farmer of Governing summarizes the unsurprising results: immigrants bring up front costs to state and local government budgets, largely because they have more kids and thus create more demand for education. But (get this through your thick skull, South Dakota) education is an investment, not an expense:

The NAS data also show impressive upward mobility between first- and third-generation immigrants, primarily due to higher educational attainment. In California, for example, the average annual income for first-generation immigrants is nearly $29,000. By the third generation, average income is more than $42,000. State and local governments begin reaping the rewards of their investments with second-generation immigrants. The NAS report concludes that this generation contributes more in taxes on a per capita basis during their working years than their parents or other native-born Americans do [Liz Farmer, “Immigrants Cost Taxpayers, Then pay More Than Most,” Governing, 2017.07.06].

The NAS cautions that the data for the fifteen states with the lowest percentages of new immigrants in their populations, including South Dakota, where immigrants make up only 3% of the population, is not nearly as solid as it is for states like California, New Jersey, New York, Nevada, Florida, Texas, and Hawaii that have the largest immigrant populations, ranging from 16% in Texas to 27% in California. But if you look at the data for state and local revenues and expenses by immigrant generation (NAS, Tables 9-4 and 9-5, pp. 518–521),

South Dakota	Revenue per individual	State/local expenditure per individual	Difference
1st Generation immigrant	12,900	13,450	–550
2nd Gen	10,550	9,050	1,500
3rd Gen	13,500	11,650	1,850
All	13,350	11,600	1,750

Sure, it’s going to cost money for immigrants to come to South Dakota and do exactly what we need them to do—i.e., have big families to produce lots of little workers to slaughter our turkeys and cows, pave our roads, tend our hospitals and nursing homes, etc. But the moment their kids hit the workforce, we get a positive return on that investment.

So if we want economic growth, we’d better make that investment:

Douglas Holtz-Eakin, president of the right-leaning American Action Forum and former director of the Congressional Budget Office, said choosing the right immigration policy would dictate America’s economic future. “Without immigration reform — without getting new workers — our working population would shrink,” he warned. “We would be like Japan” [Farmer, 2017.07.06].

Japan, where 1.7% GDP growth in the first quarter is considered good news.

There, one rejected interim study taken care of in one morning blog post. You’re welcome.