By Arnold Kling
Overall, households headed by persons without a high school diploma (or low-skill households) received an average of $32,138 per household in direct benefits, means-tested benefits, education, and population-based services in FY 2004. If expenditures for interest and other financial obligations relating to past government activities are added to the count, expenditures rise to $36,989 per household. If the cost of public goods is added, annual total expenditures on benefits and services come to $43,084 per low-skill household.
…By contrast, low-skill households paid only $9,689 in taxes.
The rest of households pay an average of $34,629 in taxes and receive $30,819 in benefits.
It is difficult to trace through their methodology, so I do not know whether the following quibbles are relevant:
1. It is possible that the authors over-estimate expenditures for schooling for low-skill households. The expenditures on schools for low-skill households are probably low, because they probably tend to live in school districts with low expenditures levels.
2. It is possible that the authors over-estimate Social Security and Medicare benefits for low-skill households, in the sense that the cohort of 70-year-olds today includes more people without a high-school diploma than the cohort of young workers today. If low-skill and high-age are correlated, then part of what the analysis is picking up is the fact that old folks are tax-eaters. In fact, what this whole exercise cries out for is a lifetime analysis, not an annual snapshot analysis.
Having raised the quibbles, my guess is that the main thrust of the analysis is almost surely correct. The distribution of benefits and taxes is such that low-skilled people are net winners and high-skill people are net losers. That’s a progressive system for you–what would be shocking would be to find the opposite. What is more interesting is looking underneath the totals to see where the progressivity comes from. On the benefit side-means-tested aid is important (low-skilled workers get a lot of Social Security and Medicare, but presumably highly-skilled workers do as well). On the tax side, it would seem that income and property taxes are most important.
The pointer is from Byron York, who says that the data support taking a dim view of unskilled immigrants. However, that is where the annual snapshot is inadequate as a tool of analysis. The fact that 70-year-olds without high school diplomas are receiving Social Security benefits does not tell me to keep 35-year-olds without high school diplomas out of the country.