Welfare and Immigration--the Other Half of the Argument

Many libertarians who favor free immigration in principle have serious reservations about its implications in practice. A Mexican who leaves Mexico to accept a better paying job in the U.S. makes both himself and the rest of us better off, but one who leaves a job in Mexico to go on welfare in the U.S. makes himself better off at our expense. Thus it is sometimes argued that the elimination of barriers to migration only makes sense if we first eliminate government redistribution. Back in Chapter 14, I suggested as one possible solution to the problem making immigrants ineligible for welfare (and exempt from the taxes that pay for it) for their first fifteen years of residence.

One possible reply is that present immigrants do not in fact come for welfare and that, on average, they pay more in taxes than they receive. Julian Simon has made this argument and provided a good deal of evidence for it. Its principle weakness is that it describes the people who immigrate under our present immigration laws, laws which make it hard for the sort of people who would go on welfare to immigrate legally and risky for illegal immigrants to apply for welfare. The situation might be different in a regime of free immigration.

A second answer is that the argument, although correct so far as it goes, tells only half the story. The redistributionist tendencies of modern states are an argument against free immigration, but also an argument for it. The argument against takes the level of redistribution as given and points out its effect on who migrates where and why. The other half of the argument reverses the causation by considering the effect of migration on levels of redistribution. The harder it is for people to move from one country to another, the more attractive redistributional policies are. The possibility of redistribution tends to increase inefficient migration, but the possibility of migration tends to decrease inefficient redistribution.

Consider a government in a world of free migration, trying to decide whether to increase or decrease the level of welfare. Giving people money may be politically attractive, but collecting the taxes to pay for it is not. A ten percent increase in levels will attract indigents from abroad, swell the welfare rolls, and increase costs by much more than ten percent. A ten percent decrease will cause some indigents presently on welfare to migrate to countries with more generous policies, reducing costs by much more than ten percent. The existence of easy migration makes welfare state policies less attractive, with the result that levels of redistribution are likely to be lower.

While I have not seen this argument used in discussions of international migration, it is a commonplace in discussions of interstate migration. American supporters of the welfare state routinely argue that welfare ought to be Federal rather than state, precisely because state welfare is held down by the threat of interstate migration. Indeed, one possible explanation for why the U.S. moved more slowly than Europe countries towards a welfare state is that European redistribution was by national governments with control over immigration, whereas American redistribution was largely by state governments without such control.

The argument is also relevant to future trends in Europe. The EEC is currently moving towards complete freedom of internal migration. If the argument I have given is correct, one result will be to put pressure on national governments to reduce their level of transfer payments. The result will be either a reduction in the european welfare states or a transfer of authority for redistribution from the national to the supra-national level.