Our crime: our desire to work.

Some notes regarding the illegal immigration debate in the United States

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Abstract This essay tries to outline the effects of illegal immigration in the US economy from an economic point of view. After briefly describing the main features of illegal immigrants in the US, two main conclusions may arrive. First, given the scarce success with antiimmigration programs, it is worthy to think in reducing expenses in them; the main flaw with these programs is that they do not reduce the incentives to cross the border illegally. Second, even though illegal immigrants do represent a net fiscal cost, the so called negative effects on the labor market are overstated.

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Our crime: our desire to work. Some notes regarding the illegal immigration debate in the United States The 2008 international crisis triggered the worst recession in the last seventy years, which had severe effects in the United States (US) economy including the destruction of jobs and a sharp increase in unemployment. As a first attempt to protect their native workforce1, on April 2009 the governor of Arizona passed legislation that gave local police districts authorization to verify the immigration status of anyone whom reasonably seemed suspicious of being in the US illegally2, reanimating a blistering debate concerning illegal immigration. There are those whom consider that it is necessary to reduce illegal immigration because of the negatives effects they entail to the native workforce and the government, and there are those who consider that these negative effects may not be as big as stated3. In this context, what are the consequences of illegal immigration? How negative are its negative effects? Are the millions of dollars spent in order to control these human waves fully justified? With these questions in mind, the main objective of this essay is to outline effects of illegal immigration in the US from an economic point of view, emphasizing that the so called negative effects of illegal immigration may be overstated.

Along this study the terms native labor, native worker or native workforce will refer to workers who were born in the US. 2 Since then, other states have followed this trend, as stated in Morales (2011): () 10 other states either have passed or are actively considering passing copycat anti-immigrant legislation. 3 Opponents to this law also claimed that this kind of laws infringes civil liberties and encourages racial profiling against immigrants.

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Before moving on this essay, it is relevant to make a clarification. Even though in common language immigration could be thought as a synonym of migration, it refers to the action of coming to live permanently in a foreign country; in contrast, migration refers to the action of moving to another country in order to find work4. The focus of this study is an analysis of illegal migration; in other words, only the effect of illegal foreign workers will be considered, while the current situation and effects of other groups (like, for example, refugees) will not be considered. This study is divided in four sections. The first section shows some statistics about the illegal immigrants in the US and briefly discusses some of the incentives of entering illegally into a developed country and, following Vargas Llosa (1997), the relationship between these incentives and the formulation of sound anti-immigration programs. The second section outlines the main negative effects of illegal immigration in the host country, while the third using a schematic view of the labor market such as in Nadadur (2009), refutes some of these negative effects. The final section concludes. Illegal immigrants: number and facts5 How many illegal immigrants are in the US? For obvious reasons, it is difficult to find reliable data regarding illegal immigration. However, as is pointed out by Nadadur (2009), three major methodologies have been used in the US to estimate their number: (i) Immigration and Naturalization Service (INS) or

4 5

www.wordreference.com. See also Cornelius (1984) for the evolution of illegal Mexican immigrants.

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Department of Homeland Security (DHS) apprehension-based estimates; (ii) survey-based methodologies; and (iii) residual methods techniques6. Based on estimations made in Passel (2010) and the references therein, illegal immigrants in the US were growing in a steady pace since 19907, reaching approximately 11.2 million in March 2010. Moreover, the number of illegal immigrants in the labor market reached almost 8 million and represents about 5.2% of the nations total labor force. Also, these workers are more geographically dispersed than in the past, but are still highly concentrated in California (1.5 million) and Texas (1.1million). Why does this phenomenon occur? Some countries have managed to organize their limited resources correctly, obtaining a higher level of development and prosperity than others. In contrast, other countries were not able to manage properly their resources, which have resulted in poverty, unemployment, violence, civil war, among other (Vargas Llosa 1997). As a consequence, people from these non developed countries migrate toward the developed ones in search of prosperity and better conditions of life. Even though these developed countries spend millions of dollars on immigration controls (a rough estimate made in Oppenheimer 2011 pointed out that the US spends an approximate 4.6 billion dollars a year), illegal immigrants are not discouraged to try to cross the border. Furthermore, some individuals engaged in illegal trafficking of people can avoid these

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Currently, this is the most commonly used technique for calculating illegal immigrants around the world. Exceptions are 2008 and 2009, when the number the number of illegal immigrants would have temporarily reduced, presumably as a consequence of the international crisis.

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controls and mobilize illegal aliens from one country to another; and it seems that the probability of being caught is relatively small. Balancing the benefits of improving their economic conditions, given a low chance of being caught, it is profitable for this people to try to enter illegally into a developed country. In other words, using an economic language, the incentives to try to go through the frontier illegally are high enough that they are willing to risk their life in doing so. In these sense, Vargas Llosa (1997) criticizes the current anti-immigration policies followed by developed countries, provided that they do not reduce this incentive. Instead, in his words, Immigration will only be reduced when countries that attract them stop being attractive (), or that the providing countries offer jobs and generate opportunities for improvement to its citizens (Vargas Llosa 1997; own translation). As a consequence, and given that there is not a completely successful anti-immigration program in the world, the author concludes that it is better to stop wasting tax-payers money on these programs8; the most effective way to stop illegal immigration is to provide to poor countries free-trade agreements, receive their products, boost exchanges and provide a vigorous policy of incentives and penalties for their democratization. This, in turn, will create jobs, increase the standard of living in developing countries and, eventually, reduce their incentives to travel into another country. The debate around illegal immigration: negatives effects

A less extreme point of view can be found in Oppenheimer (2011) published in February in the Miami Herald: If President Barack Obama and Congress are seriously considering drastic cuts in public spending () they should definitely cut waste in immigration enforcement spending.

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One common argument used to criticize illegal immigration is that it is not acceptable because, by definition, it is not legal. However, it can be considered superficial, because it puts aside other important considerations, specially the effects of illegal immigration in the host country. Although classical theory economics holds that immigration benefits the host country because it subsidizes the labor supply9, many contemporary economic theorists have focused on the negative economic effect that illegal immigration has produced on the labor market and the fiscal burden that this population represents. The effects on the labor market are well known. First, illegal workers are willing to accept a lower wage for their labor, so that they have a comparative advantage in the labor market against their native counterparts. Consequently, many native workers might be displaced, increasing their unemployment rate. Furthermore, illegal workers can create an excess supply in the labor market, generating downward pressures to the native workers wages. Both unemployment and lower wages reduces their income and, hence, their welfare. Second, illegal immigrants impose costs to the government. Based on Nadadur (2009), it is important to know whether they receive more publicly provided social services than the taxes they pay. Specifically, these costs include enrollment in public schools and the use of emergency health services. In relation with taxes, illegal immigrants usually pay payroll taxes. Although further research is necessary, research applied to the US done so far has
9

Following Perez (2001), it can be concluded from classical economists Adam Smith and David Ricardo that the international movement of goods and factors of production (like capital and labor force) is optimal because it increases the welfare of both the giving and the receiving countries. Some new evidence supporting these results within a more comprehensive mathematical context could be found in Palivos (2009).

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yielded a range of competing estimates, but it appears that illegal immigrants do impose an overall fiscal cost. The debate around illegal immigration: positive effects10 In this section it is showed that the negative effects of these workers on the labor market stated in the previous section are somehow small. This conclusion arises considering the main features of illegal immigrants and the US labor market. To illustrate more easily the evidence available to the US, this study will follow a simplified version of the US labor market assuming it as a dual one. In this dual labor market coexists two segmented labor markets: primary and secondary. As is explained in Nadadur (2009): The secondary sector is differentiated from the primary by short-term employment relationships and little or no prospect of internal promotion. () this sector consists primarily of low or unskilled work or service jobs, linked by the fact that they are characterised by low earnings, job impermanence and low returns on education. Primary labour markets, () are characterised by skilled work, employment stability, the presence of job ladders, effective trade unions and efficient management. (Nadadur 2009, p. 1041). Additionally, workers in the primary sector are costly to acquire, train and lose, while in the secondary sector are less costly to train and less costly to lose. Finally, native workers generally seek jobs in the primary sector of the economy where higher skills are required, pay is better and job status is secure. The shortage of labor in the secondary sector forces

10

This section follows closely Nadadur (2009).

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employers to turn to immigrant, unskilled labor to meet the less-stable demand. (Nadadur 2009, p. 1042). He then points out that the dual market model fits very well to the features of the US labor market, because illegal workers in the US tend to be more temporary and are more willing to accept high labor turnover and poor working conditions than their legal or native counterparts. Evidence for the US shows that only the secondary market is accessible to illegal immigrants; it is in this secondary market where illegal workers would compete against legal and native workers. This is supported by the fact that, in average, illegal workers tend to have a lower educational level and tend to receive a lower wage. However, there are two reasons why illegal and native workers are not substitutes. Firstly, illegal immigrants fill a (growing) gap between the jobs existing in the secondary sector and the number of native workers (excess supply of jobs in the secondary market); then, illegal immigrants are working in jobs that many native workers do not want to do. Secondly, illegal workers do not compete directly with illegal immigrants because they do not necessarily work in the same local labor markets; as explained before, illegal immigrant population is concentrated only in some cities. Notwithstanding, even when considering that some native workers work in secondarysector jobs alongside illegal immigrants, there is a lack of evidence for the US that illegal and native workers occupy the same jobs. Moreover, some other authors have found that illegal immigrants positions tend to complement native workers positions instead of competing for it.

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On the other hand, some researchers have found evidence that illegal immigration have little effect on native workers wages (see Nadadur 2009 and the references therein). Again, this is the consequence of the existence of a segmented labor market that shields native workers. Accordingly, evidence for the US shows that illegal immigration the native workers are not completely displaced nor the wages are strongly depressed. So, although illegal immigrants do represent a fiscal cost to the US, the so called negative effects on the labor market are overstated. Conclusion Two main conclusions may arrive. First, given the scarce success with anti-immigration programs, it is worthy to think in reducing expenses in them; the main flaw with these programs is that they do not reduce the incentives to cross the border illegally. Second, even though illegal immigrants do represent a net fiscal cost, the so called negative effects on the labor market are overstated.

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References: Cornelius, Wayne (1984). La inmigracin ilegal mexicana a los Estados Unidos: conclusiones de investigaciones recientes, implicaciones polticas y prioridades de investigacin. Foro Internacional 18. Morales, Peter (2011). Immigration in Arizona, One Year Later. Available at
http://www.huffingtonpost.com/rev-peter-morales/immigration-in-arizona_b_912071.html.

Oppenheimer, Andres (2011). U.S. should cut waste in immigration budget. The Miami Herald (February). Available at http://www.miamiherald.com/2011/02/18/2074648/us-shouldcut-waste-in-immigration.html#ixzz1Ek7Fgl9x.

Palivos, Theodore (2009). The welfare effects of illegal immigration. Journal of Population Economics 22:131-144. Passel, Jeffrey and DVera Cohn (2011). Unauthorized Immigrant Population: National and State Trends, 2010. Washington, DC: Pew Hispanic Center. Perez, Juan (2001). Notas de clase. Historia del pensamiento econmico 2. Ayacucho: Universidad Nacional de San Cristbal de Huamanga. Vargas Llosa, Mario (1997). Los inmigrantes. Revista Caretas N1970 (june).