Immigration: Fueling U.S. Income Inequality (2013)


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Income inequality in the United States has been rapidly growing over the past four decades. That fact is evident in the growing gap between average (mean) household income and median (mid-point) household income. The gap rose by 22 percentage points between 1970 and 2010, from 14.5 percent to 36.8 percent. The rapidly rising immigrant population — especially illegal immigrants — has contributed to this troubling social trend.

While legal immigration contributes to a shrinking middle class by disproportionately adding both high income and low-income earners, illegal immigration exacerbates income inequality by adding mostly low-wage earners and thereby, depressing wages for those workers. This is especially harmful to minorities — often immigrants themselves — that have larger shares of their populations living in poverty.  

Between 2000 and 2010, both median and mean household income fell, yet the gap between the two continued to grow. However, as the illegal alien population stopped growing and ebbed with the recession, the growth in income inequality also ebbed.

A focus on the income change at the state level compared with the change in the immigrant population — both legal and illegal, reveals that income inequality grew faster in states with high numbers of foreign-born residents, especially where there were high shares of illegal aliens. Even though there is some overlap between high immigrant states and high illegal alien states, they are not identical. The states with high shares of illegal aliens also show markedly lower household incomes than the high immigrant states.

Despite the recent leveling off in growth of the illegal alien population, the number of illegal aliens in the country increased significantly between 2000 and 2010 and their distribution among the states changed as more illegal aliens settled in states that previously had few. The findings in this report demonstrate that this shift in distribution of the illegal alien population was accompanied by a corresponding change in the income inequality data.

Efforts to reverse the increasing income inequality should focus on the role of immigration, and illegal immigration in particular, in fuelling this troubling social phenomenon. The amnesty proposal currently being discussed would, if adopted, perpetuate and likely aggravate the harmful trend. Measures designed to encourage the departure of illegal aliens would, on the other hand, reverse their adverse impact on income inequality.