The Wall Street Journal is running an article (subscriber link) which touches upon one of the more interesting points to ponder, while discussing Arizona’s attempts to crack down on employers who hire undocumented immigrants—the role that cheap labor might play in the economy.
Under the law, people will be encouraged to contact a county sheriff’s or county attorney’s office to report businesses they suspect of employing an illegal immigrant. After the sheriff investigates, the county attorney can then seek to suspend and ultimately revoke the business license of an employer who knowingly hires an illegal immigrant. The measure would also require all Arizona businesses to use E-Verify, a federal online database, to confirm that new hires have valid Social Security numbers and are eligible for employment.[...]
About 500,000 undocumented immigrants live in Arizona, according to the Pew Hispanic Center, and independent estimates suggest about 350,000 of them are working. Immigrants, both legal and illegal, account for 14% of the work force. The state enjoys one of the fastest-growing economies in the nation, and its unemployment rate last year was just 3.3%.
A University of Arizona study released earlier this year concluded that economic output would drop 8.2% annually if noncitizen foreign-born workers were removed from the labor force. Researchers estimate about two-thirds of the workers in that category are in the state illegally.[...]
Sheridan Bailey, president of steel-beam manufacturer Ironco, said he has fired several Hispanic employees in anticipation of the sanctions law. “This law has the potential of sinking a business,” he said. Mr. Bailey, who has formed a business group to address the issue, said Congress’s inaction has allowed “policies to be generated on the fringe.”
Ironco recently sealed a deal to outsource some production to a Mexican company. “The labor market is tight, and I face fines if I don’t meet my commitments,” said Mr. Bailey.
On a couple of her good days, my wife and I have had a little fun debating immigration. She usually argues that cracking down on illegal immigration, without adjusting legal immigration quotas, will simply mean that employers will have to start paying wages for what the jobs are actually worth, to attract legal employees. My usual comeback is to point out the downstream impacts—increased costs, the drag to the economy…and the outsourcing of work to cheaper locales.
If we’re going to be paying a certain group of folks for making our cheap merchandise, shouldn’t we be doing so in a way that encourages them to pump at least some of that money back into our economy?
I think the idea of Arizona as an “experiment” is interesting. I’m of the opinion that blocking illegal immigration without providing an alternate, appropriately documented means for folks to take jobs in the country could trigger a cascade effect with, at a minimum, some rather unfortunate short-and-midterm chaos until a new equilibrium is found.
Unfortunately, trying to put metrics around a belief such as mine is difficult, due to the under-the-table nature of employing undocumented workers, and some of the fuzziness around attempting to measure economic impacts. But perhaps the, um, “Arizona experiment” will test whether my concerns are well-founded, or if I’m simply being paranoid again.