The New Americans: Economic, Demographic, and Fiscal Effects of Immigration

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TABLE 7.7 Increase in Net Present Value (NPV) of Immigrants Under the Welfare Reform Legislation of 1996, by Age of Arrival and Education (1996 dollars)

	Increase in NPV Due to Welfare Reform Legislation of 1996
	Age at Arrival
Education	0	20	21	40	70
< High school	$5,000	$5,000	$5,000	$21,000	$15,000
High school	6,000	6,000	6,000	9,000	24,000
> High school	5,000	4,000	2,000	6,000	31,000

We take these means-tested programs to include SSI, AFDC, food stamps, non-emergency Medicaid, energy assistance, rent subsidies, and public housing. Since legal immigrants can become citizens after five-years of residence, we have implemented the provisions of this act by assuming that immigrants receive no benefits from the programs just listed during their first five-years in the country, and at longer stays receive benefits according to our estimates, as reflected in the baseline scenario. The results of this final scenario are summarized in Table 7.7, which is calculated from data in Tables 7.B1, 7.B2, and 7.B3 in Appendix 7.B. As expected, the NPVs are higher at every age. However, it is striking that, at the most important ages, around 20, the changes are modest.²⁷ Only near or after retirement age is there a substantial effect. The effect generally declines with education at the younger ages, and it rises with education for arrival at age 70.

The 1996 act, by denying means-tested benefits to immigrants until they become citizens (here assumed to occur five-years after arrival), makes the fiscal impact slightly less negative at the state and local level, and makes the impact more positive at the federal level, for an increase of $8,000 per immigrant in the total fiscal impact.

Variations in Interest Rate

The interest rate determines the importance of descendants to NPV relative to the immigrant's own life cycle; the higher the interest rate, the less important are the descendants. We have already seen that, at a 3 percent rate, the NPV

²⁷	Simple calculations confirm, however, that the magnitude of these effects is consistent with the CBO estimates of savings of $23.7 billion over the next six-years, due to reductions in benefits to legal permanent resident immigrants.

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