Who Gains and Who Loses if We Turn Off the Immigrant Jobs Magnet?

The Issue:

Political concern about illegal immigration and refugees appears to be growing in many industrial countries. Many Americans worry about the competition for jobs that these immigrants represent and about how immigration might affect the cultural and social landscape of the country. During the presidential campaign Donald Trump made unauthorized migration a signature issue and, in his first week in office, he signaled that he plans to follow through with this stance: he signed a pair of immigration-related executive orders and appears poised to push for substantial changes to immigration policy.

Making it more difficult for undocumented immigrants to work in the U.S. is one area where policy change seems likely. As a candidate, Trump promised to "turn off the jobs and benefits magnet" and stated that "many immigrants come to the U.S. illegally in search of jobs, even though federal law prohibits the employment of illegal immigrants".

Efforts to sanction employers who hire unauthorized workers and stricter employee screening could reduce unauthorized employment and lower immigration. But they could also shift employment to the informal sector and adversely impact some industries.

The Facts:

• Many undocumented immigrants come to the United States seeking employment, and a  majority are hired despite their unauthorized status. The majority of undocumented immigrants who are employed work in low-wage jobs in the agriculture, construction and hospitality industries. There were 8 million undocumented immigrants who were either working or looking for work in 2014 and they made up about 5 percent of the U.S. workforce – more than their share of the population, according to a study by the Pew Research Center. Pew estimates that the number of undocumented immigrants in the U.S. workforce, like the unauthorized population as a whole, has remained roughly unchanged since 2009 (see this memo for trends in the undocumented population).

• Though efforts have increased in recent years, there are few sanctions for employers who hire unauthorized workers. There was a shift in tactics under the Obama administration away from workplace raids that led to arrests of workers toward paper audits and fines for employers. However, it is still the case that significant financial penalties for employers who hire unauthorized workers are rare.  To meaningfully affect the “jobs magnet,” much tougher enforcement of employers would be necessary.

• Expanding the use of E-verify, the federal electronic employment verification system, could improve employer compliance, but it is not a silver bullet. E-Verify is a free, Internet-based system run by the U.S. Department of Homeland Security that compares information from an employee's Form I-9 (also known as Employment Eligibility Verification form, completed by all employees) to Homeland Security and Social Security Administration records to confirm employment eligibility. The system is currently voluntary. Some sectors of the businesses community have resisted broader adoption of E-Verify on the grounds an E-verify mandate would harm small business, cripple the agricultural sector, and add unnecessary red tape. A number of states require some categories of employers to use the system, with Arizona at the forefront of this effort. Though erroneous mismatches for authorized workers are rare, critics note that errors may create hardship for some legal immigrants and citizens. In addition, the system cannot detect unauthorized workers who fraudulently use the documents of authorized workers, suggesting that widespread adoption would only partially prevent employment of the undocumented.

• One unintended consequence of these efforts is a shift in employment into the informal sector. For example, a study from the Public Policy Institute of California notes that Arizona’s E-verify law reduced wage and salary employment among non-citizen Hispanic men by 11 percentage points, as would be expected if the law was effective.  But about half of the decrease was offset by increases in self-employment, suggesting unauthorized workers are being pushed into informal or underground employment. Hence, one impact of tighter restrictions in the formal sector will be to encourage more off-the-books and independent contractor work, making it more difficult to enforce labor law and safety standards.

• Some segments of the American workforce would see jobs gains, but a major reduction in the number of immigrants would likely harm the economy as a whole. Some Americans suffer from lower wages and employment when they compete with immigrants, with the biggest observed impacts on the less-educated and African-Americans (see here for a review.) These groups could benefit from a reduction in the number of immigrants.  However, most economists believe that immigration benefits the economy as a whole by allowing American-born workers to specialize. Because they are able to hire less-educated workers to perform tasks such as gardening or child care, for instance, more educated workers such as doctors or lawyers can spend more productive time working in the areas where they have special training or skills. Similarly, a skilled tradesman can be more efficient if there are low-wage laborers to support his work. In addition, because immigrants tend to be more mobile than native-born Americans, they allow cities to recover more quickly from economic downturns. Immigrants also go out to eat, get haircuts, and buy cars, and in that way stimulate the American economy.

• Certain sectors are particularly likely to be harmed by a reduction in the number of immigrants. Many businesses rely on the low-wage work that immigrants - especially unauthorized immigrants - are willing to provide. In the absence of that workforce, some employers would hire native-born workers at higher wages. But others would increase automation, relocate abroad, or go out of business. For example, there is evidence that the manufacturing sector automates more slowly in areas with immigrant inflows. Similarly, a United States Department of Agriculture study notes that roughly half of farmworkers in the U.S. are undocumented, and predicts that a 40 percent reduction the unauthorized workforce would reduce output in more labor-intensive sectors such as fruit, tree nuts, vegetables, and nursery products by 2 to 5 percent.