Point of View

In North Carolina, immigrant contributions outweigh costs

May 17, 2014 

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    “Demographic and

    Economic Impacts of

    International Migration

    to North Carolina” can

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Immigration is a complex topic that generates outsized emotions in North Carolina and nationally. Our research on the effect of immigrants on the North Carolina economy reveals that the state benefits in many ways from their presence, so we caution those who want to make entering and remaining in our state more difficult for immigrants.

North Carolina is home to an estimated 754,000 immigrants. The majority are Hispanic (58 percent). Asians (19 percent), non-Hispanic whites (15 percent) and non-Hispanic blacks (6 percent) make up the rest. Roughly half might lack legal status, but over 400,000 native-born spouses and children live in N.C. immigrant households, illuminating the diversity that exists in immigrant living arrangements and family life.

Moreover, owing to their diverse educational backgrounds and skills, immigrants are concentrated in most of the major industries and occupations that propelled North Carolina’s impressive economic growth during the 1990s and well into the 2000s.

Immigrants from abroad accounted for nearly 3 in every 10 people who moved to the state during the 2000s. Since 2010, immigrants have continued to arrive in North Carolina, but at a slower rate (25,000 annually) than the peak influx during the 1990s (35,000 annually).

A shift in immigrants’ origins has accompanied the slowdown in immigration. During the 1990s and throughout the 2000s, a majority of the immigrants arrived from Latin America. Since 2010, more people have arrived from Asia than Latin America. The period of rapid inflow of Hispanic immigrants is likely over.

In debates about fiscal effects, it is often asserted that immigrant costs far outweigh their contributions. In fact, immigrants do not rely heavily on public support programs, largely because eligibility requirements bar noncitizens from participating. Less than 1 percent of the population in N.C.’s immigrant households received Supplemental Social Security Income and public assistance income in 2010. And only 8 percent of immigrant households received support from the Supplemental Nutrition Assistance Program (the successor to food stamps) – mainly for native-born children.

The main population-driven costs for state and local governments are education, health care and law enforcement. The cost of educating immigrants’ children is significant – an estimated $1.7 billion in 2010. Public health care costs, however, are not that high (about $238 million) because most immigrants are either barred from support or relatively young and healthy. Public safety costs are also comparatively low at an estimated $372 million.

In 2010, North Carolina’s immigrants covered the provisional costs of these government services by paying income, property, sales and usage taxes – an estimated $2.39 billion total. For immigrants, the difference between the cost of essential services ($2.36 billion) and their tax contributions ($2.39 billion) resulted in a net balance of $48 million in state revenue – $42 for every person in an immigrant household.

Some subsets of immigrants might not cover the full costs of the services they consume. Even so, their contributions might still outweigh their costs to state and local governments – largely as a function of their consumer purchasing power.

As consumers, N.C. immigrants directly and indirectly created an estimated 171,000 jobs and $20 billion in business activity, which generated in turn $890 million in additional state and local tax payments in 2010. Without these immigrants, this generated economic activity – which made up for apparent fiscal deficits – would not have existed.

Not all immigrant effects in the labor market are positive, but the degree of labor market competition with native workers is surprisingly low. Immigrants tend to fill jobs that natives seemingly are either unwilling to take near the bottom or ill-prepared to take near the top of the occupational hierarchy.

Moreover, the influx of low-education immigrants sometimes allows native workers to specialize in the higher skill portions of their occupations.

All told, North Carolina’s immigrants have boosted economic growth and prosperity, fueled knowledge creation, contributed to innovation and technological progress, raised human capital levels, diversified business leadership, filled 3-D – difficult, dirty and dangerous – jobs and increased tax revenues.

Given these value-added attributes, embracing immigrants would be a form of enlightened self-interest for our state. Any policy to the contrary, especially in view of demographic aging and related fertility declines among the native-born population, will adversely affect North Carolina’s future vitality in the hyper-competitive global marketplace.

James H. Johnson is the William R. Kenan Jr. Distinguished Professor of Strategy and Entrepreneurship at the University of North Carolina Kenan-Flagler Business School. Stephen Appold is a senior research analyst at the Kenan Institute of Private Enterprise at UNC Kenan-Flagler.

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