Nova workboard

a blog from young economists at Nova SBE

Immigration and Welfare

The use or abuse of the welfare system by immigrants is a hot-button issue at the moment.  From Brexit, to anti-immigrant rhetoric in the Dutch election to the signing of executive orders restricting immigration in the United States, politicians and citizens are making it abundantly clear that they believe immigrants are a drain on the system.  But are these voters uninformed? Are politicians misleading the electorate to stoke fear and resentment?  It seems like the answers to these questions are a mixed bag.  While it is true that immigrants utilize the social security apparatus, it is unclear as to whether they are disproportionately reliant on the system when compared to their native-born counterparts.  Additionally, what should the government do about it? Tito Boesi offers some solutions to the problem in Europe.

This disparity of opinion on the issue of immigrant versus native consumption of welfare is especially prominent in the hyper-partisan political atmosphere present in the United States.  There, varying research institutes come to different conclusions according to their political beliefs.  The Center for Immigration Studies (CIS) finds that immigrant households use the benefits of social security programs more than native households and concludes that there needs to either be immigration or welfare reform.  What the study advocates for is what it calls “building a wall around the welfare state”, which entails limiting immigrants from accessing welfare.  This option is also mentioned in Boesi’s paper, where he talks about “closing the welfare door” as an option for the EU that might allay fears of welfare abuse.  In opposition to this theory, the Cato Institute, another think-tank, criticizes the methodology used in the CIS study, claiming that the use of immigrant households (any household where one family member is an immigrant), as opposed to individuals skews the numbers to make it seem as if immigrants consume more social security. When measured on an individual scale, while also taking income into account, the Cato Institute found that immigrants use less social security than natives do.  It is important to note also, that the US already has policies in place that limit immigrants from accessing welfare benefits and “build a wall around welfare”.  In its critique of the CIS study, the Washington Post points to the fact that laws already exist that do not allow immigrants to utilize social security such as Medicaid for five years after they enter the country.  However, this too is disputed in the divisive culture of the US, as conservative outlets like the National Review decry that there are numerous loopholes to these laws or that they are poorly enforced.  It is clear that in the US at least, this policy needs some sort of overhaul and probably should not be adopted when looking at a designing a European plan.

Another option that Boesi describes is the point system.  This system assigns points to potential immigrants as a way of screening them prior to approving them for immigration.  The points take into account a variety of factors including education and experience, as well as what the country’s labour market might need at that given time.  Each applicant is thus given a score and preference is given to higher scoring applicants.  This system encourages a higher-skilled immigrant population and decreases the likelihood that an immigrant would need to rely on welfare programs.  This points system has been successful in Canada, with the Fraser Institute reporting that the points system has reduced the per-capita transfer amount by almost $700 annually.  The report however does advocate for more extreme requirements for admission, including having a job offer already.  This is in response to the growing number of total immigrants being admitted, which the Institute sees as a problem given that while the per-capita expenditure has gone down, the net burden has increased.

Whatever the policy that countries decide to implement, most economists agree that immigrants offer a net benefit to the economy.  They create more jobs than they take and are overall good for a country.  However, not everyone takes math into account and numbers can be manipulated to support almost any position.  Politics is also increasingly becoming more emotional and the general trend seems to be moving away from the acceptance of immigration.  In this climate it is important to address both the needs of the country and its people, as well as react to global situations in a positive way.

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Author: studentnovasbe

Master student in Nova Sbe

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