National Data, By Edwin S. Rubenstein

Soaring Poverty—The Unreported Immigration Dimension

The U.S. poverty rate climbed to 13.2 percent last year, up from 12.5 percent in 2007, according to the Census Bureau's annual report released last week. The report also documented a decline in employer-provided health insurance and in coverage for adults.

 

The poverty rate is now at the highest level since 1997. It portends even larger increases this year, which has registered far higher unemployment than in 2008.

The poverty story was front-page news at the both Washington Post and the New York Times. But as usual the word "immigration" was conspicuous by its absence.

Yet there can be no question that, in the worst downturn since the 1930s, continued mass immigration, both legal and illegal, is exacerbating America's poverty problem:

• Directly—many immigrants are themselves poor, adding to the poverty population.
• Indirectly—immigrants compete with and displace native-born Americans, driving them into poverty by bidding down their wages and taking their jobs.

How large a direct role did immigration play last year? Here are the Census Bureau's figures for 2007 and 2008:

First the good news (sort of.) For the first time in many years the growth rate of foreign-born poor lagged that of U.S.-born poor. As a result, the immigrant share of America's poverty population declined. slightly—from 16.5 percent in 2007 to 16.4 percent in 2008.

But this good news comes with caveats. It ignores the American-born minor children of poor immigrant mothers—nearly 3.0 million by some estimates—counted as "U.S. natives" by the Census. This is huge. For example, the number of Hispanics living in poverty grew by 1.1 million last year, or nearly 8 times the 142,000 blacks added to the rolls. About half of Hispanics are foreign-born, but in recent years more than half Hispanic population growth has been via U.S.-born children rather than immigration.

The bad news: the share of immigrants living in poverty reached a record 17.8 percent last year, up a whopping 7.9 percent from 2007. The past two years have seen a significant widening of the poverty gap between natives and immigrants:

In 2006 the poverty rate for immigrants—15.2 percent—exceeded that of natives by 3.3 percentage points. By 2008 the gap nearly doubled, to 5.2 percentage points.

It would have been worse except for one little noticed fact: the foreign-born population is falling. (Immigration can be reversed!) By dividing the number of poor in each category by their poverty rates we can deduce the following population shifts:

U.S. Population: Native v. Foreign-born (Millions)
	2007	2008	% change
Natives	261.6	264.2	1.0%
Foreign-born	37.3	36.7	-1.5%
Naturalized citizens	15.0	15.5	3.0%
non-citizens	22.2	21.3	-4.0%

The number of foreign-born residents fell by about 600,000 last year—a 1.5 percent drop. The decline was paced by non-citizens, a category that includes illegal aliens.

While many non-citizens lack health insurance, their numbers did not fall due to poor health. Most simply went home because their jobs vanished. In other words, the U.S. is now exporting poverty to Mexico and other immigrant homelands.

This emigration constitutes a significant, albeit clandestine, economic stimulus to the U.S. Without it, the poverty rate would be higher. (Think of it as a retroactive moratorium). But how long will this happy trend continue?

In a future National Data, I will look at immigration's indirect contribution to the American poverty rate, by bidding down wages and taking jobs.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.