Removing Financial Barriers for Immigrants Is a Boon to America’s Overall Prosperity
Hardly a week goes by without a major news story related to immigration: family separation, a new Department of Justice task force on denaturalization, ICE raids. These stories mostly cover legal and social issues faced by immigrants, but we rarely hear about the financial barriers they face. Given the major role immigrants play in our country’s economy, this is too serious an issue to ignore.
The 2016 Current Population Survey shows that foreign-born immigrants and their U.S.-born children total 84 million, or 27% of the overall U.S. population. In 2014, immigrants comprised 17% of the total civilian labor force. Economists generally agree that the long-term economic effects of immigration are positive for the United States—but the return could be even better if we address the financial barriers holding immigrants back from achieving their potential.
According to the Survey of Income and Program Participation, the overall median wealth of U.S.-born couples is 2.5 times the median wealth of foreign-born couples. The gap is even bigger for migrant singles compared to U.S.-born singles, who hold three times more median wealth. Only 13% of immigrants own stocks outside of retirement accounts, compared to 27% of U.S.-born population. Immigrants are also behind the U.S.-born population in homeownership, as well as utilization of checking and savings accounts products.
It is important to note the diversity of wealth distribution within the immigrant population (for example, immigrants from Mexico and Central America have far less wealth than Asian immigrants). However, a near-universal financial barrier for newcomers is “financial access”—the awareness and availability of financial options.
Prosperity Now’s own Adnan Bokhari—our CFO and one of the authors of this piece—recalls, “years before I opened a checking account, I was a regular patron of check cashing facilities—easily paying three percent of my paycheck in fees. To some, three percent on a paycheck of a few hundred dollars may seem small. But it would have been enough to fill my gas tank, which back then I almost never had enough money to do. If only I could navigate the financial system at the time, an expense could have been an asset (i.e. savings).”
The financial access challenge is not limited to opening a checking account. Poor credit, high fees for international remittances and a lack of understanding of the U.S. financial system are inhibitors of stability, wealth and prosperity. Immigrants are further burdened by the costs to migrate, including work permit fees, expenses associated with applying for a green card and citizenship—which can total hundreds or even thousands of dollars in attorney fees for each filing.
How can we help address these challenges? Prosperity Now’s tip sheet, Tips for Providing Financial Capability Services to Immigrant Communities, offers helpful guidance, highlighting seven key tips:
- Employ culturally competent staff.
- Know the documentation requirements for local banks
- Build trust between your organization and immigrant communities.
- Build trust between mainstream financial institutions and immigrant communities.
- Integrate financial capability services into other services
- Clarify tax filing requirements and benefits for undocumented workers.
- Educate about credit.
Using these tips, programs can translate the mainstream financial system to immigrants, expose their clients to local institutions that offer favorable terms, and offer client-centered services to help support their acclimation to a new environment. They can also provide alternatives to costly services to help immigrants save toward their financial goals.
Structural change is also necessary. The new tax law passed late last year created exclusions to tax credits for classes of working immigrants, inhibiting their ability to get by. The Administration is also expected to advance regulations that threaten immigrant families’ ability to apply for social services for which they are legally eligible. The proposed change would deny permanent residence to immigrants who accept any form of public benefit. At the same time, the U.S. Citizenship and Immigration Services finds that that immigrants use public benefits at almost the same rate as native-born Americans.
If you’d like to engage more in this discussion, please join us at the Prosperity Summit for our session, “What it Takes: Addressing Systems and Programs’ Role in Supporting the Financial Well-Being of Immigrants and Refugees.” The 75-minute session will feature an expert panel, interactive activities and a discussion to explore the unique challenges faced by immigrants and move towards solutions to improve financial well-being.