Why Undocumented Workers Are Good for the Economy

Tough immigration laws in Arizona and Alabama are costing the states billions of dollars. Business and agricultural leaders have had enough.

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Matt York / Associated Press

Protesters march against Arizona's illegal immigration law, SB1070, in Phoenix, in this April 25, 2012 file photo.

State-level immigration laws don’t pay off. That’s the consensus from business and agricultural leaders who gathered in Atlanta this week for the first-ever Southeast Summit on Immigration. CEOs, farmers and law enforcement officials from several southern states—fed up with the federal government’s do-nothing immigration policy—pointed repeatedly to the devastating economic toll of immigration laws on local economies.

The growing angst comes as the U.S. Supreme Court considers the constitutionality of the mother of all state immigration laws: Arizona’s SB 1070, which made it a crime to be an undocumented immigrant and spawned a flurry of copycat bills in state legislatures across the country last year. While five states—Utah, Indiana, South Carolina, Georgia and Alabama—eventually signed immigration bills into law in 2011, over two dozen states rejected Arizona-style measures. Alarmed by the potential economic woes, experts say, these states eventually thwarted efforts to pass restrictive immigration reform amidst an already trying economic climate.

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Political motivation aside, Arizona’s law was viewed as an attempt to deport the state to economic prosperity. But SB 1070 only worsened Arizona’s fiscal woes, according to several studies. In the few months after its passage, Arizona’s economy lost $141 million, including $45 million in hotel and lodging cancellations and $96 million in lost commercial revenue, according to a joint study by the Center for American Progress and the Immigration Policy Center. A drop in tourism also resulted in an estimated 2,761 jobs lost, resulting in $253 million lost in economic output. The U.S. Court of Appeals for the 9th Circuit blocked most of SB 1070’s provisions. But if ever fully implemented, the study adds, the law would eliminate an estimated 580,000 jobs for immigrant and native-born Arizonians, shrinking the state’s economy by $48.8 billion. These figures don’t include the $1.9 million Arizona has spent to defend the state from lawsuits, which have forced Gov. Jan Brewer to establish a legal defense fund for contributions.

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Despite the fiscal fallout, Alabama followed Arizona’s footsteps and approved its own immigration law in September. That measure, which analysts say is more draconian than Arizona’s, could result in a $10.8 billion loss to the state’s GDP, mostly due to reduced demand for goods and services provided by Alabama businesses, according to a widely cited study by economists at the Center for Business & Economic Research at the University of Alabama. Professor Samuel Addy, who led the study, estimates that the loss of 40,000 to 80,000 undocumented immigrants would result in 70,000 to 140,000 lost jobs in Alabama, which amount to $1.2 to $5.8 billion in lost earnings. An additional $57 to $264 million would be lost in state income and sales tax collections.

These dire forecasts contrast starkly with the rosy economic projections of hypothetical immigration reform. The libertarian CATO Institute argues in a recent report that comprehensive immigration reform, which would pave the way to citizenship for the roughly 12 million undocumented immigrants, would yield at least $1.5 trillion in added GDP over 10 years as a result of increased consumption, job creation and additional tax revenue. In this scenario, California would see a $5.3 billion increase and Arizona would generate a $1.6 billion increase, the study adds.

In many states, business leaders are increasingly leading the charge against restrictive immigration measures. In Arizona, for example, efforts to pass additional measures after SB 1070 were met with resistance from CEOs who argued that the immigration law was costing jobs and jeopardizing an already struggling economy. Sixty CEOs from Arizona-based companies urged the senate not to pass additional immigration laws that would further cripple the economy and tarnish Arizona’s image.

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Other states have clearly taken notice. Recently, Kentucky concluded that passing Arizona-like legislation would cost the state up to $89 million annually, mostly to train additional law enforcement officers and personnel to implement the measure, according to a state senate-funded study. And the Florida Chamber Foundation last year argued that immigrant workers add $4.5 billion to the state’s coffers every year in the form of tax revenues. Business groups in Kansas, Texas and Mississippi produced similar studies that helped squash Arizona-style legislation. SB 1070 “is not an economic growth strategy,” said Ali Noorani, Executive Director of the National Immigration Forum, which organized this week’s conference in Atlanta. “But moral questions and public safety concerns are also involved. It’s a combination of business, bibles and badges.”

Indeed, opposition to Arizona-style legislation has surged in recent months, especially in states with industries that rely on seasonal workers. Farmers in Alabama and Georgia have been especially hard hit by state immigration laws, with farmers forced to leave produce to rot in their fields after immigrant workers have failed to show up for work. In Georgia, 56% of farmers say they are having trouble finding farmworkers. The Georgia Agribusiness Council says that migrant labor shortages could cost state farmers between $300 million to $1 billion.

Utah approved a ground-breaking guest worker law last year that will allow undocumented immigrants to live and work in the state as long as they pass background checks and pay fines. The Utah law, which goes into effect in 2013, has inspired copycats of its own. Kansas, Oklahoma and New Mexico, all facing agricultural labor shortages, have recently structured guest worker bills based on the Utah model.