During the 2016 US presidential campaign, Democratic nominee Hillary Clinton called for increasing the number of Syrian refugees taken into the US by 65,000. Donald Trump, Clinton’s Republican opponent, thought this was a terrible idea, in large part, because of its financial costs.
“Hillary also wants to spend hundreds of billions to resettle Middle Eastern refugees in the United States, on top of the current record level of immigration,” Trump said in a campaign speech. “For the amount of money Hillary Clinton would like to spend on refugees, we could rebuild every inner city in America.”
In his statement, Trump presumes that refugees are expensive for United States. But is that really so?
A recently released working paper (paywall) by the economists William Evans and Daniel Fitzgerald of the University of Notre Dame examines the financial costs of refugees to the federal government. They find that though refugees are initially quite expensive for the government, the average refugee who entered between the ages of 18-45 actually pays $21,000 more in taxes than they receive in benefits over their first 20 years in the US—including resettlement costs.
The major innovation of Evans and Fitzgerald’s research was in figuring out how to identify refugees in government data. The US Census does not include a question about refugee status in its nationwide household surveys that ask a variety of economic and demographic questions. But immigrants are asked their year of arrival and the country they arrived from. Using this information, researchers were able to identify individuals who were highly likely to be refugees and track their progress over time.
The researchers used the data from the census and a tax-payment simulation program to estimate how much refugees pay in tax and receive in government benefits. Their data show that though the average refugee is a financial drain on the government for their first eight years in the US, by the ninth year they become net positive, and continue to be so for the next 11 years (the available data only allow the researchers to track their first 20 years).
The chart below shows the researchers’ estimates of average tax paid minus the government benefits received for the average refugee that entered the US between the ages of 18-45. The net annual costs are unusually negative in the first year due to the more than $10,000 the government spends on resettlement.
The researchers find that, initially, refugees use welfare programs, such as the Supplemental Nutrition Assistance Program (the program that provides “food stamps”), at high rates. Then rates steadily fall over their first 10 years in the US to the country’s average. The main reason is refugees’ high levels of employment. They outperform the average American in employment rates after seven years.
The main issue with Evans and Fitzgerald’s study is that it does not include estimates of lifetime costs, which would include retirement benefits. Social Security and Medicare, two of the most expensive US government programs, are typically only received in old age.
We asked the researchers how including the costs of these programs might impact their findings. They said it was unclear, and would depend on the age of refugees accepted into the US. “Those that arrive earlier have a much greater chance of being net-positive taxpayers,” Evans told Quartz by email. “Those that arrive later are likely not paying their way through taxes since they have fewer working years.”