Research

Podcast: The tangled web of illegal immigration — what do we really know?

The ascent of a Democratic majority in Congress shifts the balance in the debate on illegal immigration. Voices on both sides quote numbers to prove their points, but as decision makers formulate policy, it's important to separate myth from reality. Dawn McLaren, research economist at the W. P. Carey School of Business, cuts through the spin about the demographics and the economic impact of the immigrant population and uncovers some commonly held assumptions that may not be true.

2007-02-14

The ascent of a Democratic majority in Congress shifts the balance in the debate on illegal immigration. Voices on both sides quote numbers to prove their points, but as decision makers formulate policy, it's important to separate myth from reality. Dawn McLaren, research economist at the W. P. Carey School of Business, cuts through the spin about the demographics and the economic impact of the immigrant population and uncovers some commonly held assumptions that may not be true.

Knowledge: There was one bright spot for President Bush after Democrats took control of both houses of Congress following the midterm elections. With Democrats in charge, the president's plan for a guest worker program to deal with the problem of illegal immigration now has a greater chance of being enacted in some form.

That doesn't mean critics of any such program will be going away quietly. With both sides citing an array of figures to support their positions, Dawn McLaren, research economist at the W. P. Carey School of Business, says it's important to separate myth from reality and bring to light little-known facts about the impact illegal immigration has had on the nation's economy.

Dawn McLaren: The biggest problem that we have in terms of looking at the economic impact of illegal immigration is deciding what the numbers of illegal immigrants are over here. Whether you call them illegal immigrants, illegal aliens or undocumented workers, we know that we are talking about people who are here, working, and not authorized to work — and sometimes they have their family with them.

The most commonly cited source of the number of illegal aliens in this country is the U.S. Census Bureau. The problem with that is that the U.S. Census Bureau does not collect, have, or publish figures on illegal immigration. They don't — when they go and do their ten year census (the centennial census) — they do not go and figure out and ask people, "What is your legal status in this country?" They will say, "Are you a foreign national? Are you a U.S. citizen?" and that's the farthest they'll go.

They don't say, "Well, what kind of visa are you here on? Do you have a visa at all to be here? Are you authorized to work in this country?" They don't ask that. Which means the people that are saying that their estimate of the population of illegal immigrants is based on the Census Bureau, they're saying, "I looked at the number of foreign nationals that we have in this country and I decided from that how many I thought were here legally and how many I thought were here illegally."

It gets even worse, because you have some places that publish the statistics of the illegal immigrant population that bias their estimates one way or another — some of them quite badly — others not so much and more subtly. I was really surprised to find out for instance, that the Pew Hispanic Center, in their estimate, had included a set of legal aliens in their illegal figure — people who were authorized to work to work here but who may not get permanent visas to work here or there's a special visa circumstance.

They actually included this group of people in their illegal category even though they're clearly here legally. OK, so they did that. Then they also added another million to their figure. So where did that million come from? We don't know. They added it probably because they were worried about undercounts at the Census Bureau in terms of counting the population, even in certain areas. It could be to off set that undercount.

It's a very fluid figure — you could change it at any time and move it any way that you want to and that's one of our biggest problems. We don't know, so we can't really say a positive number or negative number on impact with any certainty. That's the problem: the figures you usually hear are given with such certainty. Each side is very sure of their figures, and that just may not be.

Knowledge: It's obvious that everyone's able to twist these figures. If asked to give validity to them, is there really a way they can give that validity or are there things that really point to the fact that, "No you may be wrong." Or are people just being confused to all sorts of numbers?

McLaren: I think there's a lot of confusion. I think that because these numbers have such fluidity to them, that it makes it very difficult for the average person to figure out what's going on and certainly it's very difficult for our politicians to figure out as well. Our policy makers have a very difficult time because they're seeing either one side or the other and then they pick a side and we don't really know whether that side is correct or not.

I can look at some of these figures and say that the methodology that certain groups use is so flawed that you really shouldn't look at those figures at all. Those are the ones that will estimate, for instance, the number of children in school belonging to illegal immigrants, (calculating) at the same rate that U.S. citizens have children in school, and that may not be.

The reason why that may not be is that the population of illegal immigrants has a higher ratio of male to female. That's because traditionally, the males come across the border to work. Again, I'm going to talk mostly about the groups we're concerned about: from Mexico, Central America, and into South America. That is the group that has the highest percentage.

In fact, when you're looking at percentages of the Mexican illegal alien population, we do know that Mexico makes up the higher percentage compared to for instance, India or China or any of these other countries. There's good reason for that, because they're right on our border, and again it's very hard to tell that. If you just even look at the ratio of foreign nationals you'll see that Mexico has a higher rate of foreign nationals here.

Knowledge: I guess also another concern with illegal immigrants from Central America and Mexico is the fear that they're "draining the nation's welfare system." Is there some validity to that comment?

McLaren: You know, I don't think that there's validity to that and there's good reason. For the last twenty years, since our 1986 amnesty, we've had an interesting system in play. That is a system where an employer, as long as he does not knowingly hire an illegal immigrant, will not be sanctioned and will not face fines and will not be in any trouble whatsoever if he just does not knowingly hire an undocumented immigrant.

The undocumented workers that come across over here get documents, fake documents, made up social security numbers that you can buy on the streets. They look very real. You can get yourself a fake green card and there you have the documents to protect your employer. You go to the employer and the employer puts them on file and treats that illegal immigrant as though he were here legally. He picks up social security and sends it off to the Social Security Administration.

The Social Security Administration receives it and they look at it and they say, "Oh OK. Here we have a number but doesn't match the name that's on this card," or on the filling that they get there with the money. They say "OK", and they put it off into something called the Earnings Suspense File. The number of items hitting the Earning Suspense File got up to 10 million in 2003.

An item means a job and a person, so a person with two jobs would end up being two items or a person with one job would end up being one item. The amount of money, the wages, that are being reported into that same fund, again the Earning Suspense File, is about $56 billion. We're talking about a lot of money and a large number of items that are going into that.

Knowledge: This is money that these people are not going to claim.

McLaren: That's correct, there is no way for them to claim the money. While it is a fake number, it doesn't accept any US citizens because the US Social Security administration knows that this is not a good number. Now, we have been going towards higher and higher enforcement.

We're changing what we had going for the last 20 years, and we're starting to say that "employers must check and verify the social security numbers" and now employers will get what are called "no match letters." If they have a certain number of employees whose Social Security numbers do not match, they will get a warning letter. They will have to correct the situation. Instead of being able to make up a number, the illegal immigrants will need to give the employer a matching social security number and a name.

And we have a word for that, when the social security number and the name match when someone else is using it, called ID Theft. In fact, the FTC released in February a report on consumer fraud and identity theft, and it turns out the state of Arizona in 2005 had a very large percentage of ID theft, particularly in the area of employment.

We have, for employment-related fraud — which would be ID theft, meaning the social security number used for employment purposes is like this "no match" thing — for Arizona, 39 percent of ID theft is in that employment related category.

That's for January 1st to December 31st 2006, so for the most recent year we're hitting 39 percent in Arizona being employment related theft. Arizona happens to be where there are a lot of "crossings" these days, because as more enforcement occurred in California, the path to cross came more into Arizona into the Arizona desert. There's been a lot of coverage of deaths occurring at the border because of that.

Knowledge:Let's say another general amnesty is given. These illegal workers, who through false papers, had been putting money into the social security system, money that had been unclaimed, would they be able to get that money?

McLaren: We actually have 20 years more worth of history on this little game of "give us a fake social security number and we'll protect the employer" and it started back in the mid 1970s. We had a history on it when we went into the 1986 amnesty act and we legalized two and a half million people.

What happened was, the money that was going into that earning suspense file, part of that illegal alien population, were going to end up causing money to drop out of that earning suspense file and instead the money will go into a valid social security number for them that is their own identity, and it will be benefits that they could claim later on.

Knowledge: You could get into some pretty ethically sketchy areas when people are thinking about giving them amnesty or not giving them amnesty. When you start putting this money into it, all of a sudden it's adding a little something to the debate.

McLaren: Looking at Social Security, it brings you to an ethical problem, because you say to yourself, "Well, now, if we legalize them, we lose our money that is being poured into the system and we will have to give benefits." It's a reason to be anti-immigrant. Another thing that you'll often hear is, "Oh, well, that's federal money, but it's the states that are bearing the burden and having to pay out in welfare and hospitals." Lists of all kinds of things!

Interestingly enough, the Texas comptroller's office did a study on just the finances on the state level, not even including the money that is being sent off to social security. They looked at it only on a state level, and they found out that financially the situation is a wash. Usually people say it is negative on a state level, but they found out that it's either a wash or a little bit positive. Nothing to prove that it was a drain on the state as has been said.

Now, there is a difference between Texas and the rest of the nation, and that is that Texas does not have an income tax. You might say that the states that collect income tax may be collecting less than they could from that particular population. Texas doesn't test that. So that's a unique situation for Texas. Still, like I said, it was a wash or a little bit positive. They are collecting property tax and sales tax from illegal immigrants who are here.

We're collecting sales tax every time they buy something and we collect property tax even if they're renting. There are some contributions, and again, it's really hard to tell because this particular population is pushed into the shadows. It's very hard for us to define how much it is one way or another. All we can say is, "We know they are paying towards this and that." And one day, maybe we will know how much it is. But it is very hard to tell.

Knowledge: So when someone says, "OK, so what's the answer, a guest worker program, amnesty, look the other way..." Has anyone been able to judge what the impact of the economy would be under all the scenarios?

McLaren: This is an interesting thing for me, because we say, "How about a new program to fix the situation?" and in reality, there are ways for the people who are coming here illegally. There are ways for them to come here legally. The problem is, that if they file their application, it will take the US Government a good fifteen to twenty years to even look at the application. To even look at it!

Part of our trouble is that we have said, "Here's a legal pathway, we're just going to make it impossible for you to follow that legal pathway." So a guest worker program isn't really necessary. Or do we just need to clean up what we have got already in terms of the backlogs and giving out visas. There is a lot of finger pointing when it comes to this, one group points to another saying, "Well it is not our fault that there is a backlog, it is those folk's fault."

And in the end everybody ends up pointing the finger at Congress saying that, "Well they have quoted, they are defining how we have to do our jobs and it is because of them that we have backlogs." Congress gets the blame again. I suppose I should talk about another myth that people tend to buy into. Which is that we want cheap labor. It is not a matter of cheap labor; it is a matter of the labor at all.

A construction worker, an undocumented worker will earn about, in an unskilled job, $10 an hour, for instance; in agriculture, $10 an hour. In construction $10 to $14 an hour, lettuce pickers in Yuma make $12 to $14 dollars an hour. We are not talking about low wage here, we are not talking about minimum wage, we are certainly not talking about less than minimum wage, we are talking about the labor that is necessary.

The reason it's necessary is that we have a little bit of a demographic problem. If you look at over the last hundred years our population of people between the ages of 44 to 64 has grown and grown and grown in terms of a percentage of our total population. And the percentage of people in the 15 to 24 year old age bracket has been declining and declining and declining — lower and lower percentages over the last hundred years.

Now why is this important? Well, the 44 to 64 year olds make a lot more money. In their life cycle they are making more money than they will after they retire after 65 and certainly more money then they did in their younger years. And the people who have that income want services. They want someone to clean the house, they want someone to cut the lawn, do the landscaping, they want services provided to them.

Now usually, what happens if you don't have our little demographic problem is the group of 15 to 24 year olds, the kids in high school and the ones putting themselves through college and this kind of thing, they will come out and do this type of work. We are not seeing that. That is partly because we are having this little demographic problem, we have got a lower percentage of that population to serve the much higher percentage of 44 to 64 year olds.

Not only that, but we have put them into jobs when they do work, they are working in things that are related to computers like computer help centers. The more skilled, the more knowledge economy-oriented jobs and would it be a good idea to say to them, "Stop doing those knowledge economy jobs and start doing the manual labor."

That has put a lot of pressure on bringing in unskilled labor into the country. That is starting to go away because we are starting to see that percentage ease off so that there are now becoming more 15 to 24 year olds. The housing boom is over so we don't have that same pressure, that intense pressure to bring in labor to do construction jobs. This is easing off a little bit.

Knowledge: When do you think we would start seeing this reverberate through our economy?

McLaren: You can't say that illegal immigration causes economic growth. I have noticed a relationship between the crossings on the border and economic growth. Usually what happens is that when the crossings go down, economic growth slows down. That does not mean we will go into a recession, it just means that that particular population reacts very quickly and you can see the ripples across it as soon as something happens in our economy. So they are highly networked and they are not going to come here with out a job first.

It is very expensive and very dangerous to cross the border at this time and one is not going to undertake that unless there is a reward on the other side. Something should also be said about the fact that now it is costing well over $2,000 to cross the border illegally whereas to file the papers to do it legally is a matter of just a few hundred. If they are choosing to pay a few thousand versus a few hundred, then that says something is very wrong with our system to allow them in legally to do the work that is necessary. That is why we are looking at a guest worker program.

Knowledge: Really no easy answers to any of this.

McLaren: No, there are absolutely no easy answers. At the same time you look at it and you say "Well what about these people who need jobs and the employers need them to do the work." One thing that we don't think about is, "Let's not be dependent to what is supposedly cheap labor." Like I said, it is not really cheap labor at all. What if we decided to get rid of these people?

This idea of sending them all back, ship them back and we will pay Americans to go and do those jobs, and if it costs $35 an hour, if it costs $60 an hour, we will pay Americans to do those jobs. What would happen is, that labor cost would be so high that agricultural producers would be more likely to move to capital equipment. This has happened before, it happened with the tomato industry back in the 1960s. They moved to capital equipment.

That puts everybody who that was in that agricultural picking business out of work. There is an estimate of about 45 percent of the agricultural workers, now remember I am talking here specifically agriculture, because when you look at the main nation as a whole foreign nationals in this country whether legal or illegal make up less than 10 percent of the population.

When we are looking specifically at agriculture and you say, for them 45 percent is the estimate of undocumented workers in their industry. If you take them out and try to replace them, it might be too costly to do, so you move to a lower cost alternative to the labor, you go to capital equipment. That meant that 55 percent of the agricultural workforce that were here legally, and that were US citizens, et cetera, also lost their jobs.

We would also see not only higher food prices but a higher reliance on imports because we would stop producing as much of our food here as much of our agriculture here, we would move it abroad and then we would have to rely on imports. It is a tough question, it is really a tough question.

Economics Faculty