Alabama’s Extreme Immigration Law Could Cost State Billions, Report Finds

Implementing Alabama’s extreme immigration law (HB 56) would be incredibly expensive. That is the bottom line of a new report by University of Alabama economist Samuel Addy entitled A Cost-Benefit Analysis of the New Alabama Immigration Law. According to the report, the law could cost Alabama up to $11 billion in GDP and nearly $265 million in state income and sales tax. The loss includes 1) implementation, enforcement, and litigation expenditures; 2) increased costs and inconveniences for citizens and legal residents and businesses; 3) reduced economic development opportunities because it creates a poor business climate; and 4) the economic impact of reduced aggregate demand due to some unauthorized immigrants leaving and therefore not earning and spending income in the state.

Addy creates an estimate of the costs of HB 56 by using a model that assumes that unauthorized workers vacate jobs in agriculture, construction, accommodation, and food service and that between 40,000 and 80,000 workers earning between $15,000 and $35,000 leave the state. Different estimates are provided for losses of 40,000; 60,000; and 80,000 workers. He concludes that the law would result in:

  • A reduction of 70,000 to 140,000 jobs;
  • A reduction of $2.3-$10.8 billion in Alabama’s Gross Domestic Product (GDP) or 1.3-6.2 percent of the stat’s 2010 GDP;
  • A reduction of between $56.7 and $264.5 million in state income and sales tax collections;
  • A reduction of $20 to $93.1 million in local sales tax collections.

Although HB56’s proponents often claim the bill will bring potential benefits to the state, Addy does not find significant state savings from decreased benefits for unauthorized immigrants. He concludes that unauthorized immigrants pay taxes and are not a drain on the economy. Furthermore, he does not see increased public safety as a likely outcome because unauthorized immigrants are not responsible for disproportionately high crime rates.

Addy also responds to arguments that the new immigration law is responsible for decreased unemployment in the state. Contrary to what proponents of the law are claiming, it does not appear that legal residents and citizens are filling jobs previously held by unauthorized immigrants. Also, in the four sectors that most often employ unauthorized workers (agriculture, construction, lodging and eating establishments), unemployment is not falling.

The report concludes that the costs of the new law are large and certain, while any potential benefits are unclear. “From an economist’s perspective, the question Alabama and its legislature have to ponder is this: Are the benefits of the new immigration law worth the costs.” Based on the work of Addy and others, the answer has to be a resounding “no.”

Photo by Willamor Media.

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  1. JETEXAS says:

    They decided to jump on AZ train of racist behavior and target the immigrants for political points and public attention. Without thought of what it would do to the state or people. They should pay closer attention to what is going on there. It would be cheaper to buy all the immigrants a green card! But hate begets hate and nothing good will come from it .When something is started with bad intentions and this law was designed to attack Latinos, especially undocumented immigrants, by forcing them out of the state by harassing and terrorizing them. The south can not turn back time to where we can control and abuse a certain race of people because they are less fortunate. This is 2012 its time to start sharing this world with others and trying to come up with a solution not just for the Americans but the Hispanics as well. But as you know so many businesses depend on having undocumented immigrants they supply jails, ICE, border patrol, lawyers, judges and more with jobs. The US makes Billions off them. I hope they can come up with a more humane and fair solution to their now growing problem.

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