Tired of all these supposedly freeloading illegal aliens? Think the economy would be better off without them?
A brand new working paper shows the contribution undocumented workers make to the national economy. As reported by Pacific Standard,
In the research, economists Ryan Edwards and Francesc Ortega break down the economic contributions of unauthorized workers across different industries, while also exploring how mass deportations would affect those industries and looking at the effects of legalization. Undocumented immigrants constitute 4.9 percent of the American workforce. Some industries rely more heavily on these workers. In agriculture, for example, illegal immigrants represent 18 percent of the workforce. In construction, they constitute 13 percent; 10 percent in leisure and hospitality.
If all those workers were to disappear, gross domestic product (GDP) would go down by about 3 percent (that’s $5 trillion) over a 10-year period. “Once capital has adjusted, value-added in Agriculture, Construction and Leisure and hospitality would fall by 8–9%,” Edwards and Ortega write. “However, the largest losses in dollars would take place in Manufacturing, Wholesale and retail trade, Finance and Leisure and hospitality.”
And as for the opposite counterfactual, the one in which the country’s undocumented workforce was suddenly legalized? The authors find that legalization would increase private-sector GDP by about 0.5 percent, with larger gains (anywhere from 1.1 percent to 1.9 percent) in leisure and hospitality, construction, and agriculture.
Edwards and Ortega’s conclusions are consistent with past research, which overwhelmingly concludes that immigration is good for the economy at large, and that legalizing undocumented workers is beneficial to both the economy and native workers.
Maybe amnesty isn’t a bad thing.
2 thoughts on “What’s the Economic Impact of Undocumented Workers?”
“If all those workers were to disappear…”
Does this imply no one would take their spots, or that their spots would be taken by citizens or legal immigrants? If the former, what’s the basis for the assumption?
From pg. 26 of the study:
“Even though our calculations were produced for each industry in isolation of the others, the spirit of the analysis is to assess the effects of a simultaneous removal of unauthorized workers from all industries. Thus unauthorized workers from one industry would not be able to offset the departure of unauthorized workers in another. Even though native workers and legal immigrants could potentially relocate to those industries, this is also unlikely. The reason is that once the stock of capital adjusts to the reduced size of the workforce in a given industry, the marginal product of labor in the industry will go back to its baseline level (prior to the removal). As a result, the incentives of native and legal immigrant workers to move to that industry would not be different from the incentives they faced in the baseline scenario. Offsetting labor flows could potentially happen during the transition, while capital is undergoing adjustments, but in practice short-run wage rigidities and other frictions would probably pose a substantial impediment to this short-lived adjustment.
Besides the theoretical arguments just presented, it is also illuminating to examine empirical studies that are relevant to the discussion of the potential labor supply responses by natives. In the context of agriculture in North Carolina, Clemens (2013) provides evidence that the supply of native employment appears to be unresponsive to foreign employment in the short run, ostensibly because “natives prefer almost any labor market outcome …to carrying out manual harvest and planting labor.” The nature of farm work might be special enough that this result may not generalize perfectly across industries. But given that unauthorized workers are probably less substitutable with native workers than the foreign-born population at large, we believe it is unlikely that our results are biased due to omitting employment responses of natives.”
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