Economic Benefits of the Undocumented Workforce
By: Dr. M. Ray Perryman
Published in syndication February 10, 2016
Immigration policy has long been a source of heated rhetoric and debate in the political arena, particularly as it relates to the undocumented population. While there are numerous considerations surrounding this issue, it is clear that immigrants, both legal and undocumented, influence business activity in fundamental ways. The value of a readily available workforce cannot be denied, but neither can costs of immigrants such as health care, education, and social services.
The issues surrounding immigration are complicated (particularly in the case of the undocumented segment), ranging from security to tax policy to the provision of social services. Moreover, given the emotional nature of the immigration debate at times, the statistics emphasized and the conclusions drawn vary widely. Radical proposals, such as immediate deportation of all undocumented individuals, are often suggested, as well as sensible reforms to make the labor force and the process more effective and efficient.
Beneath all of the sound and fury, however, is one incontrovertible fact: TEXAS NEEDS THE WORKERS! In fact, the estimated number of undocumented workers in Texas today is approximately twice as large as the total number of unemployed persons in the workforce. Even if all currently unemployed persons filled jobs now held by undocumented workers (which is impossible for myriad reasons), the state would be left with a glaring gap of hundreds of thousands of workers if the undocumented workforce were no longer available.
In a recent study, my firm (The Perryman Group) took a balanced view of the economic costs and benefits of the undocumented workforce for Texas, considering factors such as the likely numbers of undocumented workers and concentration by industry, spillover effects as various supply chains and payrolls are affected, and relative differentials in skill levels and compensation associated with undocumented workers. On the cost side, expenses associated with the undocumented population were estimated based on available data regarding outlays by governmental entities. (The study is available for free download on our website at www.perrymangroup.com.)
Analysis of undocumented immigration and the undocumented workforce is complicated by a lack of detailed data. However, several thorough investigations of the issue have been conducted, and available information from well-respected organizations has been compiled. While there is some variation across studies due to such factors as methodological differences, the major findings are relatively consistent.
In Texas, a recently released study from The Center for Migration Studies estimates that the undocumented immigrant population exceeds 1.7 million. Over the past several years, the number of undocumented immigrants in the state has remained fairly stable, with fluctuations linked to overall economic conditions. These immigrants are an important component of the workforce and, thus, economic activity.
As an initial phase of our analysis, we measured the direct contribution of the undocumented workforce by industry. We used available data related to the employment patterns of the undocumented workforce as a starting point, and allocated to various industries based on the best available information regarding employment patterns. We then quantified the resulting output, income, and spending based on the coefficients of our impact assessment model. We also fully adjusted for the wage and productivity characteristics of the relevant population. The net direct economic benefits of undocumented workers in Texas were found to include almost $326.1 billion in total expenditures and $144.7 billion in output (gross product) each year as well as 1.2 million jobs.
This direct economic activity generates multiplier effects through the economy, which we also measured. We then took out the costs involved with undocumented workers such as health care, education, social services, and law enforcement. The result is an estimate of the net economic benefits associated with the undocumented workforce. We estimate that the total net economic benefits of undocumented workers in Texas are estimated to include $663.4 billion in total expenditures and almost $290.3 billion in output (gross product) each year, as well as more than 3.3 million jobs when indirect and induced effects are considered.
In order to illustrate the potential costs of a restrictive immigration policy, in our study we also looked at a scenario reflecting a program that would restrict entry, have more enforcement mechanisms, and not provide a sensible approach to obtaining needed labor resources. The adjustment process would be disruptive, resulting in potential fallout ranging from failing farms due to unharvested crops to an inability to complete construction projects in a timely manner. Tourism would also likely be affected, as significant numbers of undocumented worker jobs fall within accommodations and food services industries. We estimate that when multiplier effects are considered, the economic cost of restrictive immigration policy would include hundreds of thousands of Texas jobs. Obviously, more extreme measures would bring correspondingly greater disruptions. On the other hand, policies that promoted greater labor market efficiency would bring corresponding benefits.
As immigration policy reform is considered, it is important to fully examine the economic implications. A balanced analysis reveals that the economic effects of the undocumented workforce are clearly positive, including hundreds of millions in business activity and millions of jobs. In addition, the economic activity associated with this important segment of the Texas labor force generates millions in tax receipts to federal, State, and local governments each year (which I will discuss in a future column).
There are certainly valid concerns regarding undocumented immigration (such as security).