The Fiscal Impact of Mass Immigration on US and European Taxpayers
2024.09.30 15:44
Immigration is once again making headlines (has it ever stopped?), and it’s not just the sheer numbers that have people talking. Concerns about mass immigration—both legal and illegal—have dominated political and economic conversations in the U.S. and Europe.
Although the number of migrants crossing into the U.S. has eased significantly in the past 12 months, the underlying challenges remain. The Center for Immigration Studies estimates that the undocumented immigrant population in the U.S. stands at 14 million, a huge increase from just a few years ago. The share of foreign-born residents is now over 14% of the total population, its highest level since the early 1900s, when waves of immigrants came from Italy, Poland and elsewhere.
Springfield’s Skyrocketing Rents
Today, the new arrivals are straining resources in ways that directly impact the American taxpayer and investor alike.
Let’s take Springfield, Ohio, as a microcosm of what’s happening across the country. You’ve probably heard that this town of 58,000 has recently seen a large influx of Haitian asylum seekers, leading to skyrocketing housing costs and a sharp rise in the cost of living. The median rental price in Springfield jumped 43% in just one year, according to Zillow (NASDAQ:). Locals are feeling the pinch at the pump and the grocery store as inflation ripples through their economy.
It’s not just prices that are going up. Health care providers are stretched thin, as more translation services and additional staff are needed to accommodate the growing population. In September, Ohio Governor Mike DeWine announced $2.5 million in state support for Springfield, but the burden on local taxpayers is undeniable.
We’re seeing similar stories play out across the U.S. as towns and cities grapple with the surge of new arrivals. In New York City, Mayor Eric Adams, recently indicted on federal corruption charges, reported last summer that the city expected to spend $12 billion over the next three years on housing, food and health care for recently arrived immigrants. To cover these costs, the city plans to cut services across the board—sanitation, public education, even the police force. The fiscal strain is real, and it’s hitting Americans where it hurts most.
Immigration Is Testing Europe’s Social Welfare Spending
What’s happening in the U.S. is mirrored on a much larger scale across Europe. Over the past decade, 29 million immigrants—both legal and illegal—have poured into the region, overwhelming an already dysfunctional immigration system. Concerns about public safety and inadequate integration policies have led to widespread public unrest. Just look at the riots in the U.K., where immigration has emerged as a defining issue.
Investors should be paying close attention. Western Europe, traditionally known for its social safety nets and generous welfare systems, is struggling to accommodate this massive population influx. Europe’s current situation is a reminder that unchecked migration, without the proper systems in place, can lead to long-term fiscal challenges.
Legal Immigration as a Solution to Shrinking Fertility Rates
Having said all that, it’s important to recognize the value of legal immigration. With fertility rates having fallen well below the replacement level—or 2.1 children per woman—the U.S. and Europe face the prospect of near-zero population growth. Legal immigrants, then, play an essential role in maintaining productivity and supporting programs like Social Security.
The hard truth is that the U.S. and Europe face declining populations and a shrinking tax base. I believe the solution lies in smart, sustainable immigration policies—ones that emphasize legal pathways and prioritize integration.
