Dollars without Sense: Underestimating the Value of Less-Educated Workers

May 2007
Walter A. Ewing, Ph.D. and Benjamin Johnson

Read the complete report in pdf.

A recent report from the Heritage Foundation is one in a long line of deeply flawed economic analyses which claim to estimate the contributions and "costs" of workers based solely on the amount of taxes they pay and the value of the public services they utilize. According to this line of thinking, if the taxes paid by workers do not cover the cost of the public services and benefits they receive, then these workers are draining the public treasury and, ostensibly, the economy as a whole. However, this kind of simplistic fiscal arithmetic does not accurately gauge the impact that workers of any skill level, foreign-born or native-born, have on the economy. It also is a dehumanizing portrayal of all workers who labor for low wages in physically demanding jobs that are essential to the economic health of the nation.

Among the findings of this report:

• The Heritage report calculates the cost of means-tested public benefits which are utilized by some low-income households, such as Medicaid and SCHIP, without mentioning that most immigrants are not eligible for these benefits for many years after their arrival in the United States, if ever.
  
  
• The Heritage report dismisses the fact that investments in public infrastructure, public health, and public education are necessary to maintain the strength and competitiveness of the U.S. economy and U.S. workforce as a whole, to the benefit of all.
  
  
• Children whose educations are counted in the Heritage report as "costs" attributable to their parents grow up to become tax-paying adults who often earn higher incomes than their parents. This is especially true among the children of immigrants.
  
  
• The Heritage report does not account for the economic impact that all workers have through their consumer purchasing power and entrepreneurship, both of which create new jobs. For instance, the buying power of Hispanics in the United States, many of whom lack a high-school diploma and are immigrants, totaled $798 billion in 2006 and is expected to increase to $1.2 trillion by 2011.
  
  
• The Heritage report fails to mention that the U.S. economy continues to produce less-skilled jobs at the same time the native-born labor force is growing older and better educated.
  
  
• The Heritage report overlooks the value that is added to the U.S. economy by industries in which less-skilled workers tend to be employed. For example, the Commerce Department estimates that nondurable-goods manufacturing (textiles, apparel, etc.) added $685.5 billion to the U.S. GDP in 2006, while construction added $647.9 billion and accommodation and food services contributed $349.9 billion.
  
  
• A person's value, economic or otherwise, cannot be measured or predicted by his or her level of formal education. Prominent examples of high-school dropouts who defied expectations and contributed enormously to our economy and society include self-made billionaires David Murdoch and Kirk Kerkorian, businessmen Ray Kroc and Dave Thomas (the founders of McDonald's and Wendy's, respectively), and newscaster Peter Jennings.