Perhaps one of the most discussed matters in recent years is the subject of immigration, particularly with regard to individuals coming into the United States without proper authorization. This very emotional issue has received an enormous amount of media attention, and calls for reform have been escalating.
Undoubtedly, changes must be made in various aspects of the immigration process and border security. Numerous suggestions regarding ways to improve the process have been offered by a variety of organizations, both private and public.
However, reform should be approached with the recognition of the potential economic disruptions that could result if substantial impediments to labor force availability were imposed. If procedures are put in place that resulted in the decreased capacity to move goods and services across the border in a reasonable manner, significant harm could occur to the economy.
In Texas, as well as several other states, the undocumented population is a significant component of the workforce, particularly in certain industries such as construction and agriculture. Without these workers in the Lone Star State, the competitiveness and efficiency of our economy would be notably reduced.
Recently, my firm, The Perryman Group, examined the economic consequences of removing the undocumented population from the state’s workforce. There are, of course, many other aspects of immigration policies that are worthy of consideration, but the magnitude of the effects on business activity and sustainable prosperity cannot be ignored.
The foreign-born workforce in the US is growing at a faster rate than native-born workers. Currently, foreign-born workers represent approximately 15% of the nation’s labor force. However, this group accounted for about half of the workforce expansion from 2005 to 2006.
Texas has almost three million foreign-born residents, the third-largest amount behind California and New York. Currently, around seven out of every 10 non-US natives migrate from Mexico or other Latin American countries to our state.
The impact of immigrants entering the US through legal channels can be seen in their sheer numbers. However, the impact of undocumented immigrants and particularly undocumented immigrant workers is more difficult to determine. According to a special report presented by the Texas Comptroller of Public Accounts last year and data recently compiled by the Pew Hispanic Center, there were approximately 1.4 to 1.6 million undocumented immigrants in Texas in 2005. The number has assuredly increased since that time.
Across Texas, as with the rest of the nation, undocumented workers tend to fill workforce needs in low-wage occupations. The Bureau of Labor Statistics projects continued growth in the need for less-skilled workers in the coming decade.
Immigrants comprise a disproportionately large share of individuals in these kinds of occupations. In 2005, the biggest numbers of undocumented workers were in services occupations (31%); construction (19%); and production, installation, and repair (15%). While farming accounts for about 4% of undocumented immigrants, this industry has the highest concentration of such workers at nearly 25%.
For decades, undocumented workers have been integrated into the production complex of Texas in a significant manner. The pace has accelerated notably in recent years.
Undocumented workers presently represent more than 6% of the total workforce in Texas, as compared with less than 5% nationally. Not only do these persons fill a large portion of low-wage jobs, they are also consumers of both products and services.
Without doubt, any substantial disruption of this pattern would create significant economic dislocations across a broad spectrum of sectors. While all regions of the state would be negatively affected by the removal of undocumented workers, in terms of percentage impacts on the overall economy, the largest effects would be along the Texas-Mexico border.
Overall, a “snapshot” view of the immediate reduction in business activity if the undocumented workforce were removed reveals losses of $53.6 billion in output (gross product) and 833,345 jobs (based on 2006 levels of activity). Given time for market adjustments, an estimate of the economic fallout would be about $50.2 billion in output and a 753,913 loss in employment.
When viewed from the perspective of economic activity generated by undocumented workers compared to their costs to the state, including public education and health care, these individuals are responsible for a surplus across all State and local revenues and expenditures of some $301.1 million. Still, even though the revenue created by their activity exceeds public sector costs, there are distributional issues worthy of consideration in a policy context. In particular, while the State has a sizable surplus, local governmental entities experience a net deficit.
The undocumented workforce is highly important to the state economy, and actions taken regarding this valuable source of labor have the potential to cause significant losses in business activity. Thus, whatever policies might eventually be implemented should be crafted with an eye toward minimizing the potentially enormous economic fallout.