Immigration - The "Hidden Tax" by Gene Nelson

Jan 18, 2000

It is often said that inflation is a "hidden tax." Those who are on fixed incomes, such as the older voter, note a loss of purchasing power during times of inflation. That is to say, the purchasing power of $1,000 in current 1960 dollars is much greater than the purchasing power of $1,000 in current year 2000 dollars.

However, many are surprised to learn that immigration has become the real "hidden tax" during the 1990s. What is worse, the "hidden tax" of immigration is sharply regressive, meaning that it impacts the middle class and the poor much more strongly. On the other hand, the very wealthy have concentrated unprecedented amounts of wealth during the 1990s. Immigration has been one of their tools.

The "hidden taxation" factor that is most significant is that immigrants tend to permanently displace American citizens from employment positions. The displaced citizens typically find employment with lower wages and fewer (or no) fringe benefits. A group of middle class employees that have been strongly harmed by immigration during the 1990s has been scientists and engineers. Over 1/2 million H-1B visa holders have been admitted into the U.S. since 1990. Most H-1Bs have taken programming, scientist, or engineering positions.

The H-1B visa holder offers the employer the advantage that they are "fresh (inexpensive) young blood," especially since the immigrant is effectively indentured to the employer for 6 years (contrary to the U.S. Constitution.) This advantage gives the employer increased profit margins. All the employer has to do is arrange for a mass termination of American scientists and engineers. The stock market reacts usually by bidding up the stock price of the employer. Then, the desks that were emptied by the employer's callous practices are filled with the overseas programmers, etc. There is no protection in current H-1B visa legislation for the "uncompensated taking" worth $100,000s - the career of the displaced American. The Constitutional rights of the displaced employees are trampled on.

Social Security will not be "rescued" by immigration. All that will transpire is that employers will displace American citizens long before their retirement ages from "good" jobs. The displaced U.S. citizens will tend to see substantially reduced Social Security benefits since they will be earning considerably less during their careers.

Of course, employers, colleges, and universities have lobbied in to Washington, DC for decades and raised a false ruckus about "looming shortages" for their financial benefit. Actually, there is a huge glut of these talented and loyal people. 1995 NSF statistics show at least four people chasing every programming, scientist, or engineer position. At the elite Ph.D. level, it is common to have 100 to 1,000 applicants (each with a Ph.D.!) seeking a "tenure track" position in a college or university. This is a clear example of the basic economic law of supply and demand - the glut has led to stagnant or declining real wages for most people in these occupational categories over the past decade. Since the real scarce commodity is available positions, the salary floor that has been set by H-1B wages (at least 20% below the wage paid to a U.S. citizen for the same work) has become the key determinant of median compensation.

Another "Hidden Tax" is the devaluation of years of experience and training for this group of U.S. employees. They are routinely told that they are "overqualified" - a thinly disguised form of illegal employment age discrimination. These talented people are forced to find work as retail clerks, security guards, and similar service positions in order to earn a living wage. In case you think that you are "safe" because you are not in these occupational categories, think again. The harm to scientist's careers is an early warning system for everyone else. Employers have recently started using H-1Bs for such diverse careers as truck drivers and elementary school teachers. Your employer could be lobbying in Washington, DC right now, claiming that there is a "looming shortage" in your occupational category. Really, the only "shortage" is of people willing to work for low wages and under poor working conditions!

The real wages paid to the working poor have been eroded during the 1990s by the millions of illegal immigrants that have been employed in "underclass" jobs such as in chicken processing plants and as domestic servants. Pushing out U.S. citizens to the unemployment rolls is a particularly cruel form of "Hidden Taxation."

Another dimension of the "Hidden Tax" is the costs of legal and illegal immigration. It costs hundreds of billions of dollars per year to provide social welfare services to immigrants. Since 1990, legal and illegal immigration has added about 15 million people to the U.S. population.Education, health care, and welfare costs for immigrants and their dependents are some of the components of this huge bill. Many of these costs paid for by regressive taxes, such as state sales taxes - or are passed on to the working poor through local property taxes that increase their housing costs.

One of the reasons that many corporations have lobbied so strongly for immigration is that it is a way to expand their U.S. marketplace volume. U.S. citizens have reduced their fertility to a level that is close to "zero population growth." In order to expand their markets, firms see increased immigration as a key strategy. The recent "moderate growth" model for the U.S. population shows that almost all of the population growth (171 million by 2100) will come from immigrants and their offspring. That market growth has many marketers salivating. It is no secret that immigrants tend to have higher fertility than U.S. citizens.

Many immigrants tend to be younger than the U.S. median age. That also means that they will have a greater propensity to consume than the rest of the U.S. population. There is a dark side to this population and consumption growth that has environmentalists alarmed. Those hundreds of millions of new people will also generate unprecedented amounts of pollution. We are already seeing population growth cause an increase in urban air pollutants such as oxides of nitrogen that outstrips the improvements brought about by technology. Solid waste problems and water pollution problems will become progressively more expensive to correct - another part of the "Hidden Tax." Sprawl and congestion are other harmful forms of regressive taxation, since the wealthy elite have typically retreated to walled communities geographically removed from these problems.

Since increased corporate profit margins associated with immigration during the 1990s have benefitted the upper economic class - they have been able to "buy cheap and sell dear" on an unprecedented scale in the U.S., it is clear that immigration has been a driving force for the increasing economic division between the "haves" and "have nots." Increased immigration has been a "back door" means to dismantle liberal social policy programs such as employment equality on the basis of age, gender, race, and disability. Immigration also imperils hard fought environmental gains since the 1960s.

What needs to change? As an important first step, the "jobs magnet" for illegal immigrants needs to be turned off by meaningful internal immigration enforcement. This change will be challenging, since employers have lobbied vigorously for toothless internal employment enforcement. Second, enforcement of "prevailing wage" provisions of immigration law requires strong enforcement, rather than wishing that employers will pay the prevailing wage - the present environment. Third, the unconstitutional H-1B (or any similar proposed) visa program should be abolished. Finally, and most significantly, high legal and illegal immigration should NOT be viewed as a statistical inevitability. Congress sets immigration levels and Congress should roll back the high levels that were introduced with the 1990 Immigration Act. The U.S. economy was working well before 1990. The rollback will require action by voters. It is time to protect your job and your environment.