Does Pushing Undocumented Immigrants out of a State Help or Hurt the Local Economy?

Written by on February 12, 2016 in Economics, State and Local, State by State with 0 Comments

9677860897_f505b6254c_bAs a recent Wall Street Journal article describes, Moody’s Analytics has concluded that the mass departures of unauthorized immigrants from Arizona “reduced competition for low-skilled jobs” and “was a boon for some native-born construction and agricultural workers who got jobs or raises.” However they also report it shaved roughly 2 percent per year off of the state’s gross domestic product. Moreover, total employment in the state declined by 2.5 percent. Moody’s also found that less-skilled native-born workers, and lawfully present Latino immigrants, got less than 10 percent of the jobs once held by unauthorized immigrants. (The analysis from Moody’s is contained in an as-yet-unpublished report, so its methodology cannot be reviewed.)

This highlights a key policy choice states must make: is it better to have a growing economy with lower unemployment overall or marginally higher wages among a small group of workers?

To fully understand the economic impact of driving undocumented immigrants out of a state, you have to look at the ways in which they affect an economy in its totality. Focusing solely on, say, the supply of one kind of worker, or the wages of workers in one particular industry, will not give you an accurate understanding of how the economy as a whole responds to the arrival (or departure) of immigrants. That is because immigrants of different skill levels and educational backgrounds cannot simply be swapped for one another, or for native-born workers who also vary greatly in terms of education and skill set.

Immigrants have other positive effects on the economy as consumers, taxpayers, and entrepreneurs. In buying goods and services, immigrants support U.S. businesses and the jobs those businesses provide. As taxpayers, they provide revenue for state and local governments, and the public services those governments provide. And, as entrepreneurs, they create jobs directly through their own businesses. It is well worth noting that, from 2006 to 2010, there were 50,706 new immigrant business owners in Arizona who had total net business income of $2.2 billion (14.2% of all net business income in the state), according to Robert Fairlie of the University of California, Santa Cruz.

For all of these reasons, economist Giovanni Peri of the University of California, Davis, concludes that “immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity,” and “there is no evidence that these effects take place at the expense of jobs for workers born in the United States.” On balance, immigrants are clearly an economic resource—not a liability.

Photo Courtesy of OTA Photos.

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