Aaron's Real Opinions (Yikes!)

THE BENEFITS OF ILLEGAL IMMIGRATION

The immigration debate has become one of the hottest topics in the nation but, strangely, a key economic component remains missing.  That is, “What would the economic impact on the U.S. Economy be if all illegal immigrants were returned to their countries of origin?”

It seems few people, if any, who are involved in the immigration debate are discussing this issue or are even trying to quantify it.  On my program recently, my guest was Congressman Tom Tancredo -- considered one of the most prominent of those leading the debate against illegal immigration.

Tancredo claims there are 12 to 20 million illegal immigrants in the United States out of our population of over 300 million people.  This represents 4 to 7% of the total number of people in America.  Are we really threatened by such a percentage?  After all, even Tancredo’s numbers mean that, in the worst case, 93% of the people here are in the country legally.

This is not to say people who are here illegally should be ignored or that our laws should not be enforced.  I present this analysis only to point out that illegal immigrants have not taken over the country and are not about to do so.

Tancredo and I estimated and agreed that the vast majority (approximately 90%) of illegal immigrants are working and are here because of economic opportunities.  They are performing jobs in a $5 to $20 per hour range which otherwise would be paid $15 to $40 per hour.  We agreed the average “gap” between what illegal immigrants were paid and what U.S. citizens or other bona fide employees were paid was probably close to $17.50 per hour.

When employee benefits and taxes are included, the average gap easily could exceed $20 per hour in savings to the employer.  Is it a surprise many American businesses do not want to stem the tide of illegal aliens?

So, if Tancredo’s numbers are correct (we can assume the midpoint of 16 million illegal aliens), we can calculate how much more American businesses would have to pay if illegal immigrants did not work here.  We’ll do that next and find out who shoulders that cost.

Using the midpoint of leading illegal immigration opponent Congressman Tom Tancredo’s estimate of the number of illegal aliens residing in the United States (16 million) and the fact businesses easily save an average of $15 to $20 per hour per employee, it becomes a simple arithmetic calculation to estimate the “savings” experienced by both American businesses and consumers due to the availability and hiring of illegal immigrants.

Assuming 90% of illegal immigrants are in the United States working at any point in time (after all, isn’t that why they are here?) and assuming they work an average of 50 hours a week (this likely is a low number, given the number of hours most immigrants put in), the total number of hours worked in a week is 800 million across the nation.  This means that, in a 52-week year, these people work 41.6 billion hours annually.

Now, if the “savings” for these workers averages just $17.50 per hour, the total value of the amount “saved” thanks to their work is $728 billion a year or almost three-quarters of a trillion dollars annually. 

Everything else being equal, this means consumers would have to shell out an extra three-quarter trillion dollars if all illegal immigrants were gone.  This represents about 5% of the nation’s Economy.  One could reasonably assume wages and benefits would have to rise by this amount ($17.50 per hour) to attract the labor needed to get the jobs done which today are being performed by illegal immigrants.

If prices were increased by this amount (which would represent a significant increase in inflation), so businesses could legally employ Americans to do these jobs, consumers, businesses, and/or shareholders would have to pay this increased cost in some form.

Another way to absorb this cost would be for businesses to lower their profit totals and, instead, use those profits to pay for their higher labor costs.  In some cases, companies which are profitable today would become unprofitable.

One side-effect may be that the increased income of American citizens taking these jobs might further bolster the Economy.  These Americans might even require much higher wages to take these jobs, bringing the $17.50 per hour gap closer to $20 or more -- especially if businesses found it difficult to convince Americans to take certain jobs.  How much extra per hour would you have to be paid to pick vegetables in the hot sun, clean toilets, or handle hazardous materials?

This also begs the question of the cost of actually identifying, finding, and removing all illegal immigrants -- estimated by some to be about $200 billion -- but this number is a one-time cost compared to the annually recurring “cost” or loss of $728 billion.

Of course, booting out illegal immigrants also means losing their contributions to the Economy as they likely spend a much higher percentage of their disposable income (the money you have in your pocket after you pay your taxes and certain expenses) than the average American, even after discounting for funds they send to their mother countries.

The question is “If getting rid of illegal immigrants means a one-time 5% increase in the base rate of inflation, are Americans willing to pay this cost?”  Today, American citizens and businesses are being subsidized by illegal immigrants who are willing to work for lower wages, receive poorer or even no benefits, and pay taxes (yet not qualify for many tax-funded services).  Is this a “win/win” or “lose/lose” proposition?

In conclusion, illegal immigrants may be giving Americans a $¾ trillion gift every year.  Are Americans ready to look that gift horse in the mouth and deport it or do we want to keep this subsidy going?  This is one reason the immigration debate is so complex.

Sorry, your browser doesn't support Java(™).