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February 05, 2004
Illegals and the Economy
Everyone
knows the economy needs illegal alien labor, except
economists. They think its contribution is fairly
trivial.
Linda
Chavez, for example,
writes: “The American economy depends on these
workers, who, along with legal immigrants, contributed
significantly to the economic boom of the 1990s.”
Harry P. Pachon, President of the
Tomás Rivera Policy Institute, a Latino think-tank,
claims in a New York Times article headed
“Imagining Life Without Illegal Immigrants” [January
11, 2004, By Dean E. Murphy] that if illegal aliens were
removed “There would be a ripple effect across the
economy.”[Email
Pachon.]
Bunk. The
American economy is extremely large and complex, running
at $11 trillion per year. Thousands of factors influence
U.S. economic growth - most of them far more critical
than illegal immigration.
Consider
these facts:
 | Illegal immigrants are a significant
but still small proportion of U.S. workers.
There are about 5.3 million illegal aliens in the U.S.
labor force, according to the Pew Hispanic Center (see
table below). The total U.S. labor force is about 144
million i.e. illegal immigrants comprise about
3.7%. (There may be as many as twelve million illegals in
the country—but that number includes dependents like
children etc.) |
| Illegals’ economic impact must be
even smaller than their proportion of the workforce.
On average, immigrants earn considerably below
natives. Mexican male workers (legal and illegal) in
the U.S. less than 10 years make just 38% of the
annual average income of U.S. natives (see table
below). Illegals certainly make less. If the average
illegal immigrant earns, say, 30% of what natives
make, the share of GDP attributable to these
workers would be a mere 1.1% (3.7% times 30%). |
| Immigrants are also more likely to
be out of work. Unemployment rates for
foreign-born workers averaged 6.3% versus 5.7% for
natives in 2002. Put differently, 94.3 of every 100
natives in the labor force actually work, compared to
93.7 of every 100
foreign-born individuals. |
So illegals
may produce about one per cent of GDP. But even this
estimate has to be qualified. It doesn’t account for the
wages lost by undercut and
displaced native-born workers. And it doesn’t
account for the substantial transfer payments from
America taxpayers to illegals—education
for their children (and welfare for their
native-born children),
emergency room care etc.
If the
supply of illegal immigrants were to dry up, there would
certainly be labor shortages in some sectors—fast food,
cleaning services, seasonal agriculture, and
lawn care. Employers in these sectors would scream.
They lobby their Congressperson and gullible
journalists. But ultimately, they would have to respond
by offering higher wages and benefits to the
remaining pool of unskilled workers. At the same
time, they would look for ways to
substitute new technology for labor.
The end
result: maybe an imperceptible hiccup in aggregate
GDP—coupled with a rise in GDP per
U.S. worker. Most Americans would be better off.
[Number fans click
here for tables.]
Edwin S. Rubenstein (email
him) is President of
ESR Research
Economic Consultants in Indianapolis. |
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