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Study: Hispanics add billions to N.C. economy
Cost to state budget is more than tax contribution
By David Rice
JOURNAL RALEIGH BUREAU
Wednesday, January 4, 2006


RESEARCH TRIANGLE PARK

In the first study of its kind, researchers found that Hispanics added $9.2 billion to North Carolina's economy in 2004, and it cost the state $61 million for schools, health care and prisons to accommodate the rapidly growing immigrant population.

"That's adult money. That's a really significant impact that this population is having," said John Kasarda, the director of the Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill, which conducted the 13-month study. "They have a major, major impact on this state and its businesses and its revenues."

The study, conducted for the N.C. Bankers Association and the Mexican Consulate in Raleigh, was released yesterday and estimated that Hispanics' economic impact on the state could grow to $18 billion by 2009.

Among other highlights:

• The state's Hispanic population was estimated at 600,913, or 7 percent of the total state population, in 2004. Hispanics accounted for 27.5 percent of the state's population growth from 1990 to 2004.

• Not all Hispanic residents come from abroad. Between 1995 and 2004, 38.2 percent of Hispanic immigrants to the state came from other countries (73 percent of them from Mexico). And 40.2 percent came from other U.S. states or jurisdictions, and 21.6 percent were born here.

• Fifty-five percent of Hispanic residents of the state in 2004 were legal, and 45 percent were illegal. From 1995 to 2004, 76 percent who came here from other countries were illegal.

• Hispanics filled one in three new jobs created in the state between 1995 and 2005. They account for 29 percent of all construction workers in the state. Male workers are concentrated in construction, and females are concentrated in maid and janitorial services, food processing and dry cleaning.

• Largely because of lower education levels (a median of 7.5 years of school, vs. 12 years for non-Hispanics), Hispanic households earn about $32,000 a year, vs. $45,700 for non-Hispanic households.

• The average Hispanic household has 3.7 people, compared with 2.4 in the average non-Hispanic household.

• From 2000-01 to 2004-05, Hispanic students accounted for 57 percent of the growth in the state's public-school population.

• Hispanics in North Carolina had after-tax income of $8.3 billion in 2004. The study estimated that 20 percent of that was returned to family in other countries, saved or used to pay interest. The remainder rippled through the economy to create a total impact of $9.2 billion.

• Most Hispanics and their spending are concentrated along the Interstate 40/85 corridor. The study estimated that Hispanics' economic impact amounted to $504 million in Forsyth County, $382 million in Guilford, $89 million in Davidson, $74 million in Iredell, $72 million in Surry and $37 million in Wilkes in 2004.

• Hispanics contribute $756 million a year in state and local taxes, while costing $817 million a year in services ($467 million for K-12 education, $299 million for health care and $51 million for corrections), for a net cost to the state of $61 million. The average cost per Hispanic immigrant was $102.

• Without Hispanic workers, the state would have lost as much as $10 billion in construction in 2004. The study estimates that businesses save $1.9 billion (1.4 percent of total wages) on the wages paid to Hispanic workers.

"A state needs low-wage labor to compete. I don't care where you are, it's a must," Kasarda told a crowd of businesspeople at the study's release.

"The downside? We found that yes, there is some displacement," he said, saying that immigrants put downward pressure on wages. "This makes our construction industry that much more competitive," he said, adding that the savings are either passed along to consumers in lower prices or to business owners in higher profits.

Demographer James H. Johnson Jr., a co-author of the study, said that although Hispanic residents do rely on public health care, they are part of a relatively young, healthy population. And Hispanics have a cultural tradition of paying at least part of their health-care bills, he said.

As for the costs of educating Hispanic children, "It's a matter of enlightened self-interest for us," Johnson said. "In a creative economy ... why do you want to have a bunch of uneducated people around? They're not going home.... You can't go on a trade mission to Mexico and Latin America and come back and tell these people to go home."

The study also finds opportunities for business in the growing Hispanic population:

• Hispanic-owned businesses need help as they grow.

Kasarda said: "They start out small, with family and friend financing. But then to make their businesses grow, they need institutional financing and insurance."

• Especially in rural counties, some Hispanic shoppers can't find everything they want, so they shop in urban counties. The study calculates this "leakage" county by county, estimating that more than 19 percent of Hispanic buying power in Davidson, Davie, Stokes, Surry and Wilkes counties goes outside those counties. Conversely, just 7.8 percent of Hispanic spending in Forsyth and 2.4 percent in Guilford leaves the county.

• More Latin-American companies could set up shop in North Carolina to take advantage of its Hispanic work force. The state has more than 1,000 employers with foreign headquarters - many in Britain, Germany, the Netherlands, Japan and Switzerland - but just 18 are based in Latin America and five in Mexico.

The report comes amid debate over the effect of a growing Hispanic population and how to deal with illegal immigration.

"We can't run away from the mathematical problems of illegal immigration," said state Rep. Dale Folwell, R-Forsyth, who was on hand for the release of the report.

"Illegal immigration is one of the main reasons that the tax burden on North Carolinians is looking more like California and Massachusetts and less like South Carolina and Tennessee - because of its impact on public education, public safety and public health," he said.

The Center for Immigration Studies reported last month that there are 35.2 million foreign-born people living in the United States, making up about 12 percent of the population. The report estimated that there are about 9.7 million illegal immigrants in the United States.

• David Rice can be reached in Raleigh at (919) 833-9056 or at drice@wsjournal.com