Economy vs. border security? It doesn't have to be that way

In Arizona alone, non-citizen immigrant workers contribute $29 billion to the economy. That's 8 percent of the state's output, created by about 280,000 workers. State and local tax revenues resulting from their economic activity totaled $1.5 billion. What if that labor supply became unavailable? Economists, policy-makers, business people and others discussed the impact of immigration on the economy at a recent forum sponsored by Arizona State University, The Communications Institute, and the Thomas R. Brown Foundations.

Non-citizen immigrant workers contribute $29 billion to Arizona's economy. That's 8 percent of the state's output, created by about 280,000 workers. State and local tax revenues resulting from their economic activity totaled $1.5 billion. What if that labor supply became unavailable?

Economists, policy-makers and citizens considered the role of the immigrant in the economy at a recent forum, "Immigration: Confronting the Challenges in Arizona," co-sponsored by Arizona State University, The Communications Institute, and Thomas R. Brown Foundations.

"I cut my own lawn"

The session's panelists agreed that one of the principal motivators of immigration is jobs. "Immigrants come here for jobs," said Dawn McLaren, research economist at the W. P. Carey School. "They come here illegally because it can take 15 to 20 years for the U.S. government to even look at a Visa application — it's a bureaucracy that's impossible to deal with."

Dennis Hoffman, director of the Seidman Research Institute at the W. P. Carey School of Business and moderator of the discussion, asked whether we could turn to U.S. citizens to replace immigrant workers. "From radio talk shows to opinion columns, you hear people saying that we can do these services ourselves rather than turn to illegal immigrants," he said.

"You hear people proclaim proudly, 'I cut my own lawn.' But is there a willing and able pool of domestic citizens that can fill the jobs that illegal immigrants currently hold?" Probably not, according to some. "There aren't enough Arizonan citizens to fill all of the low-skill jobs our economy relies on" said Judith K. Gans, program manager for immigration policy at the University of Arizona.

"Arizona's workforce would be significantly smaller without immigrant workers. Immigrants are vital to Arizona's economy." Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, agreed. "Obviously we need these workers. We're at less than 4 percent unemployment in the state, which is full employment. It's not a question of jobs getting ripped from American citizens. It's a question of much-needed labor supply."

One forum participant spoke from his own experience as an Arizona employer. "There is an absolute tightness in the labor force," said restaurant owner Jason LeVecke, CEO of LeVecke & Company. "I don't have any workers making minimum wage. So it's not a matter of paying more to find legal workers. I'm paying more already — and there aren't any more workers."

The idea that American workers are being robbed of their jobs by immigrant workers is false, according to Daniel T. Griswold, Director of the Center for Trade Policy Studies at the Cato Institute, a free-trade think tank. "Immigrants aren't like us," he said. "That's why they're beneficial. Americans are much better educated on whole, which is why Americans are largely unwilling to do the jobs immigrant workers do."

Data bear out Griswold's explanation. In a report titled "Immigrants in Arizona: Fiscal and Economic Impacts," Gans demonstrates that immigrants make up 12 percent of the state's total population, but 55 percent of the population with less than a high school diploma. "Immigrants are primarily low-skilled workers," she said. "In contrast, relatively few native-born Arizonans are low-skilled."

Wage differentials

W. P. Carey's McLaren said immigrants come to the United States not only looking for a job, but because they can find a job that pays so much more than jobs in their home countries. "Where we see a low-wage job, immigrants see a job that pays dramatically more than jobs in their home countries," she said. "That wage differential is their motivation to move here."

Critics suggest that the presence of immigrant workers depresses wages for all workers — native-born and foreign-born. In her report, Gans concluded that in some cases competition among native-born and immigrant workers may lead to lower wages, but in other cases the presence of immigrant workers increases wages.

"When immigrants' skills are very similar to native-born workers, the two groups are more likely to compete with each other in the workplace. This competition leads to lower wages and higher profits, causing a tendency toward increased investment in existing industries," Gans writes.

In contrast, "When immigrants' skills are very different from those of native-born workers, the two groups are more likely to play complementary roles in the workplace. In this case, the types of production possibilities expand and wages of complementary workers tend to rise."

Economy: 1, Security: 0

Whatever economic contribution undocumented workers make, the argument about the legality of those workers remains. And on that topic, there was surprising consensus among a diverse group of participants. "I don't disagree with the statement that we need workers," said Arizona State Representative John Kavanagh. "Who will fill those jobs is the question. Do we take people who broke the law and aren't screened or do we go with a list of people who've been screened?" he asked.

A guest worker program, Kavanagh said, would allow immigrant workers to fill jobs where we need them, and do so legally. Nan Walden, Vice President and Counsel at the Farmers Investment Company, agreed that a comprehensive immigration policy is in order. "We have one, but we've ignored it," he said. But he also stressed the need to augment the U.S. workforce. "More Baby Boomers are retiring than younger workers are coming into the labor force. You can't add two and two and make it six."

So far, it seems that economic forces have largely trumped efforts to halt illegal immigration. "We don't have a good record legislating against economic forces," Gans said. "Right now the U.S. immigration system pits border security against a robust economy and the economy wins." We need a system that accommodates both border security concerns and economic considerations, she said.

Costs and benefits

The forum aimed to clear the air about the nature of those economic considerations. "What are the fiscal impacts — benefits and costs — of immigration?" Hoffman asked. Robin Herskowitz, president of RH2 Consulting, Inc. and author of the Texas State Comptroller's Immigration Impact Study, said her research showed that undocumented immigrants are not a drain on the economy, particularly in states like Arizona that rely so heavily on immigrants as workers.

Gans came to similar conclusions in her study. She found that in Arizona, the total state tax revenue attributable to immigrant workers (naturalized citizens and non-citizens) was $2.4 billion. Associated fiscal costs (including education, health care, and law enforcement) were $1.4 billion — yielding a net benefit of $940 million. None of the forum participants doubted whether there were costs associated with undocumented workers.

Herskowitz said the problem is that those costs are unevenly distributed. "It's worth noting, with some irony," she said, "that the federal government bears the least cost for undocumented immigrants; the state bears the second least cost; while the local governments bear the largest costs." Yuma County Sheriff Ralph E. Ogden agreed. "The distribution of funds looks good when you read it on paper, but when you get on the ground and start paying the bills, it's a little bit more difficult."

He said that the State Criminal Alien Assistance Program (SCAAP) appropriation — a federal reimbursement program — is minuscule. Over the last four years the federal government's SCAAP appropriation has covered about 10 percent of the border counties' costs. "The question of the fiscal impacts is probably one of the most heated aspects of the public debate," Gans said. "I think it's one of the areas where there's a lot of information that gets thrown around and I think one question is how do you measure the fiscal benefits."

"There's no question that low-skill workers consume more in services than they pay in taxes," she said. "But because immigrants are filling gaps in the labor force, they're making economic activity possible that would not otherwise happen. There are fiscal consequences of that economic activity. The tax pie is bigger because the economy is bigger." Gans added, "If we get rid of undocumented workers who fill gaps in the labor force, we're deciding as a matter of policy to shrink the economy."

Bottom Line:

• Non-citizen immigrant workers contribute $29 billion to Arizona's economy. That's 8 percent of the state's output created by about 280,000 workers. The state tax revenues resulting from their economic activity totaled $1.5 billion.
• For the most part, undocumented immigrants don't take jobs from Americans. Because there are many more low-skill immigrant workers than low-skill native-born workers, immigrants fill a gap in low-skill labor.
• When immigrant workers compete with native-born workers, wages may drop. But when immigrant workers fill jobs complementary to native-born workers (for example, immigrant workers fill low-skill jobs that are complementary to native-born workers' mid-skill jobs), wages rise.
• When economic interests are pitted against security interests, economic considerations come out ahead. But a guest worker program could balance the need to fill U.S. jobs and the need to secure the border.
• In Arizona, the total state tax revenue attributable to immigrant workers (naturalized citizens and non-citizens) was $2.4 billion. Associated fiscal costs (including education, health care, and law enforcement) were $1.4 billion — yielding a net benefit of $940 million.
• But the distribution of costs is uneven. The federal government bears the least cost for undocumented immigrants; the state bears the second least cost; while the local governments bear the largest costs.
• In the absence of comprehensive immigration reform, the decision to eliminate the supply of immigrant labor is a decision to shrink the economy. But with reform, we can achieve economic growth and border security.

"Immigration: Confronting the Challenges in Arizona" was cosponsored by the Thomas R. Brown Foundations, The Communications Institute, Arizona State University and the University of Arizona.