What Liberals Ignore: America’s Immigration System Contributes to Income Inequality

New Census Bureau data point to a link that those on the Left have rarely acknowledged about one of their top concerns

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When the Census Bureau last week released the latest estimates on household earnings, progressives didn’t waste time in complaining about one of their favorite boogeymen: income inequality.

Economic Policy Institute (EPI) senior economist Elise Gould and research assistant Julia Wolfe noted on the left-leaning organization’s website that households at the bottom of the income scale got hammered during the Great Recession and had not seen improvement even by 2014.

“The lower a household’s income, the greater the income losses were — exacerbating inequality,” they wrote. “With the income gains of the last three years we see that those in the top 10 percent are the only part of the income distribution to have significantly passed their pre-Great Recession income levels.”

Left unsaid in most quarters is one potential driver of that inequality, however: mass immigration.

The Census Bureau measures inequality by a statistic known as the Gini index, which plots all incomes on a scale of 0 to 1. Zero means total equality — every household has the exact same income — while 1 would mean one household has all of the income.

For the country in 2017, the bureau’s Current Population Survey calculated a Gini index of .482. That number has been creeping upward — increasing inequality — over the past few decades. It was .397 in 1967, for instance.

“I think it’s something that progressives don’t pay enough attention to or maybe deliberately turn a blind eye to … California is probably the greatest example of that.”

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A different Census program, the American Community Survey, determined that inequality grew by a statistically significant amount from 2016 to 2017 in five states — California, Connecticut, Florida, Louisiana, and New York. All of those states except for Louisiana had foreign-born populations greater than the national average of 13.7 percent.

New York’s 22.9 percent immigrant share ranks second in the country. It also has the second-highest Gini rating, .5157 — just below the District of Columbia in inequality.

California ranks fifth in inequality (.4866 Gini) and first in foreign-born population (27 percent).

Half of the 14 states where the foreign-born share of the population exceeds the national average also rank among the 10 worst places for income inequality.

The relationship is not perfect. Southern states tend to have high levels of income inequality even though most have relatively small immigrant populations. And a handful of states have relatively less inequality, even though they have high immigrant populations; Hawaii, for example, has the sixth-highest share of immigrants but ranks near the bottom in the Gini index.

But a linear regression analysis of the data by LifeZette shows a statistically significant relationship between immigration and income inequality.

The same holds true for the 819 largest counties.

Of course, as the old social science saying goes, correlation does not prove causation. But a number of experts who have studied immigration and inequality contend there are strong reasons to believe that America’s immigration system does, in fact, contribute to income inequality.

“You definitely see a correlation there,” Eric Ruark, director of research at the low-immigration advocacy group NumbersUSA, told LifeZette. “It’s something that progressives don’t pay enough attention to or maybe deliberately turn a blind eye to … California is probably the greatest example of that.”

James Garand, a Louisiana State University public policy professor who co-authored a 2015 paper on income inequality, told LifeZette that he and his colleagues found a connection between immigration and inequality.

What’s more, he said, there was a stronger correlation between low-skill immigration and inequality. States with immigrant populations skewed toward people without high school diplomas had more overall inequality than states with better-educated immigrants.

“That actually accentuates income inequality,” he said.

Garand said more research is needed to determine whether immigrants add to inequality by their presence or if they actually exacerbate inequality by driving down the wages of native-born workers. “Frankly, it’s a bone of contention in the scholarly literature,” he said.

Steven Camarota, director of research at the Washington-based Center for Immigration Studies, said immigration — both legal and especially illegal — skews wage distribution. “They add a lot to the bottom of scale,” he said.

Camarota said that not only do immigrants push down wages at the bottom, but the lower labor costs also lead to higher profits for business owners and dividends of stockholders — which makes the rich richer.

“It favors employers over employees,” he told LifeZette.

Even though wealthier people may see higher incomes from low-skill immigration, Camarota said, they also face higher taxes to pay for increased strain on schools and other public services, along with anti-poverty programs.

“It’s not clear that that’s a good trade,” he said.

Said Ruark, “It’s not as if no one’s working [in immigrant families] and getting welfare. It’s that they’re not earning enough to provide for themselves.”

Related: Household Income Finally Back to Prerecession Level

Experts acknowledge that many factors affect inequality. Camarota noted that the engine of New York City’s economy — Wall Street — creates enormous wealth concentrated in a relatively small number of households.

Likewise, he added, Hollywood and Silicon Valley make California a special case.

Still, the linear regression analysis shows a statistically significant relationship between inequality and immigration even after removing New York and California from the equation.

Garand, the LSU professor, said union density, unemployment, and structural factors in the economy also determine the intensity of income inequality. But he added that the role of immigration cannot be ignored.

“It’s an important part of the story, but I do not think it’s the major factor,” he said.

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