Arizona’s Unapologetic Liberal has published a useful link to a report from the Center for American Progress and the Immigration Policy Center titled “A Rising Tide or a Shrinking Pie”
The thrust of that report is that rather than fearing the effect of undocumented workers on our economy we should welcome their contributions. Here are some highlights from that report.
The first section of the report examines the role of immigrants, legal and otherwise, in Arizona’s economy. The report notes that the immigration debate rarely touches on the complex role undocumented immigrants play in the economy, not only as workers but as consumers and taxpayers.
According to 2008 estimates, first generation immigrants make up 15% of Arizona’s population, with undocumented immigrants about half that (7%). The economic output of immigrant workers in Arizona was $84.6 billion in 2008, with more than $42 billion of that coming from the undocumented workforce. The output and spending of all immigrant workers generated 1.2 million jobs in Arizona in 2008, with output from undocumented workers generating 581,000 jobs. According to the report, “immigrants on the whole paid $6 billion in taxes in 2008 while undocumented immigrants paid approximately $2.8 billion.”
The complex relationship of labor and consumption means that driving undocumented workers from the state would not “free up” more jobs for native Arizonans. Instead, it would have the same impact as driving out any other significant slice of the workforce. The report uses the town of Riverside, New Jersey, as an example.
After a construction boom in Riverside led to an influx of undocumented construction workers in the first half of the 2000s, the town adopted an ordinance in 2006 that imposed heavy fines on any businesses or landlords who hired or rented to undocumented immigrants. The ordinance was never enforced, but nonetheless had a big impact.
Feeling persecuted, 75% of Riverside’s immigrant population left, resulting in 45% of the town’s businesses being boarded up as they had been before the influx of immigrants. The legal cost of defending the ordinance in court also forced the town to delay infrastructure repairs and improvements. The ordinance was rescinded in 2007, but the damage had been done.
We too often forget that forcing immigrant labor (both documented and undocumented) out of the state would deprive the state of the earned income of those workers, the taxes they pay, and the money they spend on local goods and services.
The report claims that Arizona would lose $29.5 billion in labor income (pre-tax salary and wage earnings) if all undocumented workers left the state. Furthermore, earnings that would have been spent in the state’s economy on things like groceries and housing, would also be lost. This would create a “cycle of diminished earnings, consumption, and demand” that would shrink the state domestic product by $48.8 billion, or nearly 20% of Arizona’s economy.
The report concludes that if SB 1070 were implemented and successful at driving out undocumented immigrants, “it would trigger a loss of 581,000 jobs, decrease total employment in the state by 17.2 percent, and reduce the state’s tax revenues by 10 percent.”
Far from being a hinderance to solving Arizona’s budget problems it may be that easing the path to legality for the state’s undocumented workers might be part of the solution to balancing the state’s budget.
Because undocumented workers earn about 18% less in wages than legal workers, a program that required undocumented workers to get on the right side of the law would close the income gap. This would increase labor income in Arizona by $5.6 billion, which would create a spike in demand for goods and services, which would produce a “virtuous cycle” of job growth and revenue. According to the report, legalizing Arizona’s undocumented workers would add 261,000 jobs and $1.68 billion in state tax revenue.
Ironic, isn’t it?