Consumer demand An employer can gain economic advantages when hiring workers without legal authorization, because these employees may accept lower wages and minimal benefits out of necessity. This can reduce labor costs relative to paying documented workers with
taxpayer identification numbers and full legal protections. While unauthorized immigrants are legally barred from work in the United States, they nonetheless constitute a significant part of the labor force. In 2023, an estimated 9.7 million
unauthorized immigrants were part of the U.S. workforce, accounting for about 5.6 % of all workers — one of the highest shares on record. According to an article by
Council on Foreign Relations ,undocumented households collectively held about $299 billion in
spending power and nearly $389 billion in combined income in 2023, indicating that most earnings were quickly circulated back into the economy through consumption and taxes. This highlights that most immigrant workers with low qualifications spend most of what they earn on consumption needs. By comparison, average wages for U.S. workers generally exceed the federal minimum and have continued to rise in recent years, with private-sector average hourly earnings around $36–$37 per hour in late 2025. Because unauthorized workers are present in construction, agriculture, hospitality, and other labor-intensive sectors, their participation helps support overall economic activity and employment. Estimates from 2023 suggest that undocumented immigrants filled around 8.5 million jobs and are embedded across many industries despite their status.
Budgetary impacts In recent years, the number of people arriving in the United States has risen sharply. Most of this increase is due to a growth in the group the
Congressional Budget Office (CBO) classifies as
other foreign nationals. Some individuals in this category have been authorized to enter or stay in the country, while others have not; additional details about this group’s makeup are discussed later. Based on trends observed before 2020, CBO would have expected net immigration in this category to average about 200,000 people annually. Instead, under CBO’s projections, net immigration exceeds that expected level by a cumulative 8.7 million people between 2021 and 2026. A 2024 report examines how that surge in immigration from 2021 to 2026 affects CBO’s baseline economic and budget projections for the 2024–2034 period. Specifically, it focuses only on the incremental effects of the surge, rather than the overall impact of all immigrants who arrived during those years or earlier and were already living in the United States. The analysis centers on federal revenues,
mandatory spending, and interest on the debt. While the report offers a general discussion of possible implications for
discretionary spending, it does not quantify effects on state and local government budgets. To estimate the impact of the immigration increase, CBO developed a
counterfactual scenario in which the surge does not occur. In that scenario, net immigration of people in the other-foreign-national category remains at 200,000 per year from 2021 through 2034, matching baseline assumptions from 2027 onward. CBO then produced economic and budget projections under that scenario and compared them with its baseline projections. The differences between the two sets of outcomes represent CBO’s estimates of the effects of the immigration surge. CBO emphasizes that these estimates are highly uncertain and will be updated as additional data and information become available.
Impacts on the Budget According to CBO’s baseline projections, the immigration surge increases federal revenues, mandatory spending, and interest costs, but overall it reduces cumulative federal deficits by $0.9 trillion over the 2024–2034 period. Some of these budgetary effects result directly from having more people paying taxes and receiving federal benefits. Others arise indirectly from changes in the economy caused by the surge, including higher interest rates and increased productivity among workers who are not part of the surge population. CBO estimates that federal revenues increase by $1.2 trillion over the 2024–2034 period as a result of the surge. The annual revenue effect grows over time, reaching $167 billion—equal to 2.2 percent of total revenues—in 2034. Most of this increase comes from individual income and payroll taxes paid by immigrants in the surge population. Additional revenue gains stem from higher overall economic activity. Over the same period, the surge raises spending on federal mandatory programs and net interest by a total of $0.3 trillion. Spending on certain mandatory programs rises over time as more immigrants in the surge population, along with their U.S.-born children, become eligible for benefits. By 2034, those benefits increase mandatory spending by $23 billion, or 0.4 percent of the total. Economywide effects of the surge also raise annual spending, reaching $27 billion in 2034. Higher interest rates driven by the surge lead to increased interest costs on federal debt. Altogether, total federal outlays in 2034 are $50 billion higher because of the surge. These estimates exclude discretionary spending, which depends on future congressional appropriations. Nevertheless, CBO expects the surge to place additional demands on discretionary-funded programs, particularly those administered by the
Department of Homeland Security and the
Office of Refugee Resettlement within the
Department of Health and Human Services. In 2024, funding for discretionary activities directly related to immigration totaled $37 billion, which is $1 billion more than in 2019 after adjusting for
inflation, and the Administration has requested further increases for 2024. The surge is also expected to affect other
discretionary programs tied to population size, such as funding for K–12 education, income support, and infrastructure. If funding for these broad categories rose proportionally with the population increase from the surge, CBO estimates those increases would amount to $24 billion in 2034 and $0.2 trillion over the 2024–2034 period. CBO does not include
discretionary spending effects in its budget totals because such spending will depend on future legislative decisions.
Lawmakers could address increased needs either by raising overall appropriations or reallocating funds from other areas. State and local government budgets are also likely to be affected, though the impact will differ across jurisdictions. Existing research generally finds that immigration increases costs for state and local governments more than it increases revenues, and CBO expects a similar outcome for the current surge. However, the surge population differs in some ways from immigrant groups examined in past studies, and CBO has not conducted a comprehensive analysis of its effects on state and local finances.
Impacts on the Economy Many of the projected budgetary impacts of the immigration surge are driven by broader economic changes. In CBO’s projections, the surge increases total nominal gross domestic product by $1.3 trillion, or 3.2 percent, in 2034, and by $8.9 trillion cumulatively over the 2024–2034 period. Total wages paid annually also rise, with the increase reaching about 3 percent in 2034. These higher wages significantly contribute to increased federal revenues because they are subject to
income and
payroll taxes. Additionally, two main consequences of the surge—faster labor force growth and stronger demand for housing investment—raise the return on capital and place upward pressure on interest rates. Those higher interest rates are a key factor behind the increase in federal spending. Within the labor market, workers in the surge population initially earn lower wages than other U.S. residents with similar educational attainment, on average, but their wages converge over time in CBO’s estimates. Through 2026, wage growth for people not in the surge population is slightly lower than it would have been without the surge, largely because wages for workers with 12 or fewer years of education grow more slowly. In later years, this effect reverses: wage growth for non-surge workers increases slightly due to higher
productivity associated with innovation and because the larger number of less-educated workers raises demand for more-educated workers to complement them.
Price levels NPR reported in March 2006 that when the wages of lower-skilled workers go down, the rest of America benefits by paying lower prices for things like restaurant meals, agricultural produce and construction. The economic impact of unauthorized immigration is far smaller than other trends in the economy, such as the increasing use of automation in manufacturing or the growth in global trade. But economists generally believe that when averaged over the whole economy, the effect is a small net positive. Harvard's
George Borjas says the average American's wealth is increased by less than 1 percent because of unauthorized immigration. According to the report presented by Eleanor Chelimsky and the team, hiring an illegal immigrant can have both negative as well as positive effects. For instance, if a restaurant hires a cheap labor of unauthorized workers, it will reduce the employer's cost eventually leading them to reduce the price for the foods served in the restaurant. The illegal workers are hired by the employers in the companies, competing in the same market with similar businesses that are hiring the legal workers. Due to the competition on the products sold in that free market, increase in illegal immigration may decrease the wage rate of the legal workers. In case of the inflow of unauthorized workers reducing the costs of operation leading to the reduction of prices on a product/service provided, the demand for the services of legal workers with low-skill jobs (such as fast-food restaurants, agricultural sectors and construction) will decrease. However, on a positive note, the reduced price on the menu will attract more customers increasing their volume of sales. As a result, this will "increase the demand for the noncompeting category of workers, such as chefs or waiters". While this may seem beneficial for employers, unauthorized immigrants are being paid less than their peers. While the pay difference could be explained by level of education it could also be because they have no leverage in asking for more pay. While there is no concrete date on the pay of illegal workers, based on demographic and socioeconomic data, we can inference that as of July 2019, undocumented workers are paid 42% less than the wages of U.S.-born citizens.
Impact on wages , in 1994 Economists have different conclusions regarding the impact on wages from immigration, both legal and illegal. It is challenging to separate the impact of illegal immigration (generally workers with lower educational attainment) from immigration overall. Studies generally conclude there is a small adverse impact on the wages of lower-skilled workers from immigration and some benefit for higher-skilled workers: • Research by economist David Card (University of California, Berkeley) indicated the effect of immigration on native born workers without high school degrees is limited, perhaps reducing the wages of high school dropouts by 5.1% over 20 years. • In 2007,
Harvard University economist George Borjas wrote that, "Economic theory implies that immigration should lower the wage of competing workers and increase the wage of complementary workers. For example, an influx of foreign-born laborers reduces the economic opportunities for laborers—all laborers now face stiffer competition in the labor market. At the same time, high-skill natives may gain substantially. They pay less for the services that laborers provide, such as painting the house and mowing the lawn, and natives who hire these laborers can now specialize in producing the goods and services that better suit their skills." Borjas' other research also indicated that "high-school dropouts experience a substantial wage loss from immigration of 6.3% in the short run and 3.1% over the long haul as labor markets adjust to the increased number of workers." • A 2015
National Academy of Sciences report concluded that native-born workers who are substitutes for immigrants (e.g., lower-skilled workers in the case of illegal immigrants) "will experience negative wage effects." The report continues: "In summary, the immigration surplus [overall net benefit from immigration] stems from the increase in the return to capital that results from the increased supply of labor and the subsequent fall in wages. Natives who own more capital will receive more income from the immigration surplus than natives who own less capital, who can consequently be adversely affected." In 2008, Gordon H. Hanson at University of California–San Diego and National Bureau of Economic Research performed a study to see if illegal immigration affects native workers employment. From the study was concluded that unauthorized immigrants provide a source of manpower in agriculture, construction, food processing, building cleaning and maintenance, and other low-end jobs. Cities with a high percentage of illegal immigration were examined in this study and data showed that illegal immigrants overall impact on the U.S. economy is small. On the other hand, U.S. employers gain from lower labor costs and the ability to use their land, capital, and technology more productively.
Health care Reuters reported that illegal immigrants, as well as legal immigrants in the country less than five years, generally are not eligible for
Medicaid. However, they can get Medicaid coverage for health emergencies if they are in a category of people otherwise eligible, such as children, pregnant women, families with dependent children, elderly or disabled individuals, and meet other requirements. The cost of this emergency care was less than 1% of Medicaid costs in North Carolina from 2001 to 2004 and the majority was for childbirth and related complications.
USA Today reported that "Illegal immigrants can get emergency care through Medicaid, the federal-state program for the poor and people with disabilities. But they can't get non-emergency care unless they pay. They are ineligible for most other public benefits." Because of the U.S.
Emergency Medical Treatment and Active Labor Act of 1986 (), most hospitals may not refuse anyone treatment for an emergency medical condition because of
citizenship, legal status, or ability to pay. An example of the cost conflict between federal government, state and local government, and private institutions, the
Immigration and Naturalization Service brings injured and ill unauthorized immigrants to hospital emergency rooms but does not pay for their medical care. Almost $190 million, or about 25 percent, of the uncompensated costs Southwest border county hospitals incurred resulted from emergency medical treatment provided to illegal immigrants. • A RAND study concluded that the total federal cost of providing medical expenses for the 78% illegal immigrants without health insurance coverage was $1.1 billion, with immigrants paying $321 million of
health care costs out-of-pocket. The study found that illegal immigrants tend to visit physicians less frequently than U.S. citizens because they are younger and because people with chronic health problems are less likely to migrate. Moreover, studies have also shown that not providing illegal immigrants with a decent healthcare might actually cost the country in the long-run rather than save expenses. In 2000, researchers compared the perinatal outcomes and costs of illegal women with and without prenatal care and inferred the impact of denial of prenatal benefits to illegal immigrants in California. Nearly 10% of illegal women had no prenatal care. These women were nearly 4 times as likely to be delivered of low birth weight infants and more than 7 times as likely to be delivered of premature infants as were illegal women who had prenatal care. For every dollar cut from prenatal care, an increase of $3.33 in the cost of postnatal care and $4.63 in incremental long-term cost were expected. Elimination of publicly funded prenatal care for illegal women could save the state $58 million in direct prenatal care costs but could cost taxpayers as much as $194 million more in postnatal care, resulting in a net cost of $136 million initially and $211 million in long-term costs. Although their parents are illegal immigrants, these children are actually U.S. citizens.
Effect on income inequality Economist
David Card wrote in 2009 that
immigration (legal and illegal) has a minor impact on
income inequality and wages: "Together these results imply that the impacts of recent immigrant inflows on the relative wages of U.S. natives are small. The effects on overall wage inequality (including natives and immigrants) are larger, reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives. Even so, immigration accounts for a small share (5%) of the increase in U.S. wage inequality between 1980 and 2000."
Overall benefits and costs Members of the IGM Economic Experts Panel were asked in December 2013 whether they agreed or disagreed with the following statement: "The average US citizen would be better off if a larger number of low-skilled foreign workers were legally allowed to enter the US each year." Fifty-two percent either agreed or strongly agreed with the statement, with 28% uncertain and 9% disagreeing. Regarding a second statement, that low-skilled American workers would be "substantially worse off" if more low-skilled immigrants were allowed entry, 50% agreed or strongly agreed, with 30% uncertain and 9% disagreeing or strongly disagreeing. In other words, despite an overall benefit for the average American, some low-skilled workers already in the U.S. would probably be adversely impacted by a greater supply of low-skilled labor. ==Cost-benefit analysis==