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In my household, we’ve faced the budget-busting, savings-emptying need to reroof. Twice. Each time there was a lot of Spanish spoken up on the roof and Mexican pop tunes wafting into the neighborhood.
Did we inquire whether those workers were legal? Nope. Are you kidding? For American roofers, the costs would have been even higher. If you’ve stayed in a hotel, bought a house or eaten in a restaurant, you too have benefited from cheap — and probably illegal — labor.
So, yes, we need to get a grip on illegal immigration, but we also have to face up to certain economic realities. Otherwise, we’ll be clobbered by unintended consequences.
Arizona’s new law turned up the heat on immigration reform. We’ve heard about law and potential abuses, but what are the economic implications?
Typically, one side argues that undocumented workers pay taxes and work in jobs nobody else wants; the other side counters that the cost of services eclipses tax revenues from mostly uneducated, low earners who depress wages and take jobs from uneducated Americans.
Results of cost-benefit studies are all over the board. Studies showing a loss to taxpayers tend to be a snapshot of one point in time. Late last year, the Center for American Progress and Immigration Policy Center studied the impact of the 1986 immigration reform. During another severe recession, 3 million illegal immigrants became citizens. Ten years later, there was a net gain of at least $1.5 trillion in the U.S. gross domestic product because these workers in time earned higher wages and invested in training to get better jobs.
The Cato Institute, a free-enterprise think tank, argues that studies must also consider the children of immigrants. After we pay to educate them, they usually hold better jobs than their parents. As for the costs of emergency health care and education, Cato suggests the federal government reimburse local governments for these up-front costs and “wall off the welfare state, not our country.”
What about the cheap labor pool argument? The Center for Immigration Studies, an anti-immigration group, has said illegal workers don’t significantly reduce prices for consumers and amount to a subsidy to business as taxpayers pick up the costs of providing services.
Cato counters that “low-skilled immigrants allow important sectors of the U.S. economy, such as retail, cleaning, food preparation, construction and other services, to expand to meet the needs of their customers.” They help the economy produce a wider array of more affordably priced goods and services and fill gaps in the labor market. And they’re consumers.
One very credible study, by the Texas Comptroller’s Office in 2006, concluded that tax revenues and economic output from illegal immigrants in Texas outstripped the cost of services by $424.7 million in a single year. Closing the border and deporting all illegal immigrants would cost the Lone Star State $18.5 billion in personal incomes and $66.5 billion in exports.
“The Texas economy cannot adjust completely to the loss of this labor and retain its competitiveness,” the Comptroller’s Office said.
Texas doesn’t have a personal or corporate income tax — it relies on sales taxes plus fees on cigarettes and alcohol. New Mexico leans on its gross receipts tax, which nails everybody — residents, tourists and illegal immigrants. You don’t have to be an economist to see that we too are probably gaining by the presence of illegal immigrants.
And even in a recession, no Americans are lining up to pick lettuce in Arizona or chiles in New Mexico. Some Arizona farmers are now talking about moving their operations to Mexico.
Arizona has made itself the test case for unintended consequences.