Setting aside the question of whether policymakers have the political will to deport millions of individuals so well established in our society, studies indicate that any such effort would come at an enormous cost. Deporting the estimated 8. The reasons are twofold: By shrinking the number of consumers, entrepreneurs, and taxpayers, mass deportation would shrink our economy and the number of jobs available.
Secondly, natives and immigrants often possess different skills and education levels, meaning they are imperfect substitutes. Chamber of Commerce, April 14, If Congress provided a path to legalization for the millions of undocumented immigrants already here, the economic benefits would be sizable. While legal status would increase access to a variety of public benefits programs, it would also allow newly legalized immigrants to pursue new job opportunities, boosting productivity and earnings.
The accompanying increase in consumer spending and tax revenue would help federal, state, and local governments offset associated costs. If undocumented immigrants were required to pay back taxes, U.
View All Issues. New American Economy is a bipartisan research and advocacy organization fighting for smart federal, state, and local immigration policies that help grow our economy and create jobs for all Americans. On January 27, he signed an executive order at the Pentagon on refugees and visa holders from designated nations.
Read More. Search Our Publications. Major findings include the following: There were 3. Of these US-born citizens, 5.
Three-quarters of a million undocumented residents are self-employed, having created their own jobs and in the process, creating jobs for many others. Of those with college degrees, two-thirds, or ,, have degrees in four fields: engineering, business, communications, and social sciences. Six million undocumented residents, or 55 percent of the total, speak English well, very well, or only English.
The unemployment rate for the undocumented was 6. Sixty-two percent have lived in the United States for 10 years or more. Gross domestic product GDP would be reduced by 1.
Economically, undocumented residents were doing reasonably well in Their unemployment rate was 6. Mixed-status Households The examination of mixed-status households allows us to measure some of the possible negative consequences for US citizens who live with the possibility that any day an undocumented resident in the household could be apprehended, detained, and deported.
Undocumented residents who live in households with US citizens: have lived in the United States longer 69 percent vs. US Citizens in Households with Undocumented Residents The previous discussion described the characteristics of US undocumented residents and discussed the effects of their deportation on US citizen children and other household members.
As would be expected, the US citizens speak excellent English: 95 percent speak English well, very well, or only English, compared to 55 percent of all undocumented residents. Most of the US citizens have health insurance coverage 87 percent vs. Broader National Implications The consequences of mass deportation would not be limited to legal household members and the US-born children of undocumented residents.
Authors Rugh and Hall conclude their study of the effects of deportations on the housing market on a cautionary note which is consistent with the analysis set forth in this paper: As the country prepares for the possibility of increased enforcement and mass deportations, the lessons learned from this analysis take on new meaning and have increased relevance. APPENDIX The identity of individual undocumented residents cannot be derived from the CMS data for the following reasons: The US Census Bureau is required by law to take steps to make sure no individual can be identified in survey data: It removes all identifying personal information and other statistical operations — income capping, data switching, etc.
The survey covers only one out of every hundred people. The legally resident foreign-born population outnumbers undocumented residents in every state and the District of Columbia, making it extremely unlikely that individuals or groups of undocumented residents can be distinguished from other foreign-born residents or foreign visitors.
In the 10 states with the lowest numbers of undocumented residents, more than 90 percent of the foreign-born population consists of legal residents, and no community has only undocumented residents. The CMS estimates are restricted to areas with population sizes of , or more. In a population that large, individuals or small groups of undocumented residents will be indistinguishable from all other residents, including legal foreign-born residents and foreign visitors.
The CMS estimates are no longer publicly available below the state level. The smallest deviation from the above model of identical immigrants and natives was developed in earlier work by Feigenbaum.
In this section, the distinction in the ability to invest in education will be the only difference between legal residents and illegal immigrants. Mass deportation is then simulated as a sudden removal of some low-educated households from the economy.
Note that an unexpected upheaval of this magnitude would undoubtedly cause huge disruption to the economy in the short run. We would, in particular, likely see significant volatility in financial markets while the news is processed. Also, some low-skilled jobs might see wages skyrocket until employers can find cheaper substitutes.
These perturbations are outside the scope of this model to investigate. We are only able to consider the effect of the deportation on labor and capital markets after everyone has rationally adjusted to the new regime of fewer illegal immigrants.
Since most of the economy would be hurt even more, accounting for these effects would just reinforce our results. A deportation should raise wages by reducing the supply of less-educated workers.
This intuition is captured in figure 2. In the graph, the x -axis measures the number of low-educated workers in the labor force, and the y -axis measures their wage. The line labeled S represents the initial supply of labor. Here we assume that all workers are full- time workers. Since the amount of labor does not vary with the wage, the supply curve S is vertical. The demand curve, labeled D , shows how many workers firms will hire for each wage. This slopes downward since firms hire fewer workers as labor becomes more expensive.
Lastly, the wage w is set by market forces equal to the y -coordinate of the point where the demand and supply curves intersect. However, if firms are more responsive to labor costs—that is, if the demand for labor is more elastic, as shown in figure 3—the wage increase in response to a mass deportation is much smaller.
More generally, the slope of the demand curve can be represented by a formula that depends on only two parameters, both of which are bounded by observable data. This lends greater support to the smaller wage increase shown in figure 3. Economists quantify the slope of the demand curve in terms of what is known as its elasticity: the percentage by which low-educated wages will increase decrease in response to a 1 percent decrease increase in the supply of low-educated labor.
For low-educated workers, the elasticity of their wage with respect to their labor supply is: 17 The formula is derived in James A. To be precise, because most researchers estimate that illegal immigrants comprise 5 percent of the labor force 4 percent of the population , deporting all of these illegal immigrants should increase low-educated wages by 5 percent.
In the formula above, the numerator of is the share of gross domestic product GDP that goes to highly educated workers and the owners of capital. An upper bound on the numerator is 1, and a lower bound is the share of output going to just capital, which has been approximately one-third for the United States going back to before World War II.
The denominator of measures how often firms will replace low-educated workers with alternative resources as the cost of low-educated workers increases.
A high elasticity of substitution means it is easy to replace low-educated workers with machines and highly educated workers, while a low elasticity means it is difficult to substitute one for the other. In the latter case, when production requires a combination of low-educated labor and other resources, the inputs are complements.
Given that the numerator is capped at one, generating a large wage response to deportation requires a small-value denominator. That would imply a strong degree of complementarity between less-educated labor and other inputs to production. In such a scenario, less-educated labor would be nearly irreplaceable, which contrasts with the anxiety that many low-educated workers feel about the prospect of automation and outsourcing causing large employment losses and dislocation.
If instead the denominator were equal to 1—a common intermediate case—the most that wages could rise for less-educated workers would be 5 percent. Concretely, less-educated native workers with an initial wage of 10 dollars an hour might see a cent per hour increase after a mass deportation.
This back-of-the-envelope calculation lines up with empirical evidence. For example, in , over , Cubans, mostly without a high school education, made the mile boat trip from Cuba to Florida. Based on what happened to wages and employment for workers with less than a high school education in the Miami job market, Borjas estimates the wage elasticity for these far less educated workers was between 0.
For example, janitorial services are not easily performed by machinery. Since the share of GDP going to janitors will be practically zero, if we focus exclusively on janitors the numerator will be 1 and the denominator may be somewhat less than 1, resulting in a wage elasticity for janitors bigger than 1.
See Michael A. Assuming this area was a representative sample of the nation as a whole, about 5 percent of the population would have had less than a high school education, so the native population competing with these workers likely numbered on the order of , workers. Thus the Mariel boatlift should have increased the size of the labor force without a high school education by roughly 50 percent, and Borjas reports that some workers saw a 10—30 percent drop in wages.
The boatlift episode demonstrates that an influx of less-educated workers can have a substantial effect on less-educated natives if these new workers concentrate in a few industries or geographic regions.
If instead they are more dispersed across the country, their effect on wages is much smaller on average, even though individual workers may be affected more or less than the average. Assessing the extent to which illegal immigrants congregate in specific labor markets, Keeton and Newton find that immigration has a mixed effect on localized imbalances of supply and demand in regional labor markets.
William R. Keeton and Geoffrey B. On the one hand, many immigrants do settle in localities with a high demand for labor, such as farming communities. On the other hand, some cities like San Diego and Miami are immigration magnets because of established social networks created by earlier migrants, which facilitate finding employment and affordable housing.
Because illegal immigrants face harsher search frictions than legal immigrants, one would expect them to be drawn more to magnet regions where they can obtain more help overcoming these frictions.
In these magnet regions, native workers should experience larger than average disruptions to labor markets as a consequence of immigration. However, any excess labor market distortion attributable to illegal immigration is a consequence of this illegality, not to immigration per se. Moving from wages to other aspects of the economy, note that goods are produced by combining capital and labor. If a mass deportation causes the labor force to shrink by 5 percent, the economy will not be able to produce as much.
In other words, gross domestic product—which is the same as aggregate income— must fall. Thus, if total income falls but the income of less-educated workers rises, it must be the case that highly educated workers earn less following a mass deportation. Moreover, because less-educated workers considerably outnumber highly educated workers, the income losses per highly educated worker will be substantial.
Low-skilled workers suffered moderate welfare losses, but these were more than made up for by the gains to the rest of the population. The previous section analyzed only the short-run response to a deportation under the assumption that all illegal immigrants are less educated while legal residents get to choose their education level. A mass deportation of highly educated workers will have far more severe effects on the macroeconomy than a mass deportation of low-educated workers and will unambiguously reduce, rather than increase, low-educated wages.
For more on this issue, see James A. Feigenbaum and Josh T. Following a mass deportation, the reduction of less-educated households increases the ratio of highly educated to less-educated workers remaining in the economy, thereby driving down the wage premium. Over time, subsequent generations of workers would face less of an incentive to attain higher education, which would gradually cause the education population shares to return to their pre-deportation levels and erase any wage gains to less-educated workers from the deportation.
Similarly, individual savings rates and all other per capita economic variables would converge to their pre-deportation levels, leaving workers no better off after implementing such a costly mass deportation. If one choice is perceived to be better than the other, all households would make the better choice.
What would the nation stand to lose in terms of production and income if these workers were removed and returned to their home countries? The economic and fiscal harm from mass deportation is severe. This report focuses solely on the economic effects of removal of 7 million unauthorized workers, which are much larger. It is beyond the scope of this report, however, to estimate the economic consequences of removing from the U.
And there are also likely to be harmful noneconomic consequences felt by communities and families that would have to adjust to the removal of millions of people. It is also beyond the scope of this report to estimate response of native employment. But with current unemployment rates low in most industries, the incentives for remaining residents to work more in order to fill in any gaps left by deported workers would most likely be small and temporary.
Viewed in this context, our results suggest that a policy of mass deportation faces a high bar in terms of a cost-benefit calculation. Click to enlarge. Ryan D.
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