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A rich study of the illegal workforce’s economic impact

Waco TX-base The Perryman Group published an indepth and data rich study of the illegal workfroce in the country with a scenario were the illegal workforce eliminated. And partial replaced with domestic workers. It is called: An Essential Resource: An Analysis of the Economic Impact of Undocumented Workers on Business Activity in the US with Estimated Effects by State and by Industry

Key statistics from the study: There are 8.1 million illegal workers in the U.S., in 2008, a figure equal from that which the Pew Hispanic Center would estimate based on a 68% workforce participation rate within the illegal population. The total immigrant population in the U.S has grown to 37 million, or 13% of the population compared to 5% of the population in 1970.

A “dynamic” forecast of job loss within the 130 million total civilian workforce estimates that after the elimination of these 8.1 million jobs, about 2.8 million jobs would no net be lost. Arizona would relatively speaking be the worst off. 65% of its immigrant population if illegal, or 15% of its workforce. It would lose 5% of its workforce compared to 4% in California and 5% nationwide. Arizona now has about 400,000 illegal workers compared to 2 million in California and 1.2 million in Texas.

Were the elimination of illegal workers to happen, the per capita loss of income would be $1,251 in California, $$1,159 in Arizona, and $1,099 in Nevada.

Excerpts from the study:

In this study, The Perryman Group (TPG) considered factors such as

• the likely numbers of undocumented workers by state,
• concentration of undocumented workers by industry,
• dynamic adjustments that would be set in motion by a major change in immigration policy,
• spillover effects as various supply chains and payrolls are affected, and
• relative differentials in skill levels and compensation associated with undocumented workers.

The analysis uses appropriate modeling techniques to provide an assessment of the magnitude of the impact of the undocumented workforce as well as the economic dependency of various areas and sectors on this source of labor.

Highlights of the key findings from this study are presented below.

• The latest Census data indicates that 1 of every 8 people living in the US is an immigrant, with approximately one-third of them being undocumented.
• Estimates performed by The Perryman Group as a part of this study indicate that there are currently approximately 8.1 million undocumented workers in the US economy. If these workers were removed from the workforce, the effects would ripple through many industries and the ultimate job losses would be even higher. • Undocumented immigrants comprise a large component of the workforce in some industries and geographic areas. In 10 states, the percentage of undocumented workers as a share of the workforce equals or exceeds the national average of 5%. Arizona has the highest proportion with 12%.

The Perryman Group measured losses if the undocumented workforce is removed for a static scenario (reflecting the immediate losses that would be associated with an enforcement-only type of program) and dynamic scenario (reflecting losses after time for market adjustments such as changing production processes and raising wage rates to attract additional workers). Provisions for accepting those already in the system would allow for meaningful reform without the massive negative effects that would accompany more reactionary policy options.

• For the US as a whole, the immediate negative effect of eliminating the undocumented workforce would include an estimated $1.757 trillion in annual lost spending, $651.511 billion in annual lost output, and o 8.1 million lost jobs.

• Even after the economy had time to make market adjustments (which could only fully occur if some provisions for additional entry were available), the foregone economic activity would be sizable, as noted in the following graph.

There is clear evidence that undocumented workers are currently making contributions to the US economy and society, especially in certain industries and occupations.

• If all undocumented workers were removed from the workforce, a number of industries would face substantial shortages of workers, and Americans would have to be induced into the labor pool or provided incentives to take jobs far below their current education and skill levels. For this phenomenon to occur to a meaningful extent, substantial wage escalation would likely be necessary, thus eroding competitiveness in global markets.

• As the domestic workforce becomes older, more stable in number, and better educated, the US production complex increasingly requires foreign, low-skilled workers. In 1960, about 50% of men in this country joined the low-skilled labor force without completing high school; the number is now less than 10%. Shortages in the low-skilled labor force are likely to continue to escalate.

• Available evidence suggests that undocumented workers pay far more in overall taxes than they receive in benefits from various governments.3 However, many (but not all) state and local public entities experience a net deficit resulting from the specific services they offer (education, health care, law enforcement, etc.) relative to their principle sources of revenues. Thus, there is a legitimate policy debate regarding the proper distribution of the taxes paid by undocumented workers.

• It is imperative that any rational policy recognize the basic and inescapable reality that the resource represented by undocumented workers is an absolutely essential element of the modern US economy.

The Perryman Group is an economic research and analysis firm located in Waco, Texas. TPG has been involved in hundreds of impact analyses and labor market studies over the past 25 years, including many related to the workforce needs of specific sectors and regions and others related to issues of international trade and production.

TPG is uniquely qualified to conduct this analysis. Dr. M. Ray Perryman, the founder and president of the firm, developed the US Multi-Regional Impact Assessment System (USMRIAS) and has consistently maintained, expanded, and updated it for more than 20 years. This model has been used in hundreds of significant and innovative studies over an extended period, and enjoys an excellent reputation for the reliability of its findings.

The key underlying models used in this analysis were developed in the early 1980s, and have been maintained and updated since that time. Among the many studies the firm has conducted related to international activity are (1) several transportation analyses for US-Mexico corridors, (2) an assessment of cross-border maquiladora impacts, (3) a multi-state evaluation of the effects of inefficiencies in border crossings and changes in policy, (4) an empirical investigation of net gains from the North American Free Trade Agreement, (5) a prior measurement of the impact of the undocumented workforce in Texas, and (6) a quantification of the overall consequences of global trade on various regional economies.


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