Thread: Illegal immigration's bottom line

Illegal immigration's bottom line
Low pay drags down wages for legal workers, study says

By Max Showalter • mshowalter@journalandcourier.com • July 20, 2008



Sancho Sanchez, the assumed name of a 28-year-old immigrant worker in the local food services industry, moved to Lafayette from Mexico five years ago.

"Of course, wages and working conditions are much better here. We don't have a lot of the rights and benefits that the law gives to legal workers, but at least some of us can survive or have a better life here," said Sanchez, who did not want his real name used in this story for fear of prosecution.

"Being illegally in the states is not an easy task, but for many of us, it is not a choice -- it is a need."

Even though wages here are better than in his native country, undocumented workers like Sanchez can earn significantly less than documented workers in the same industry, according to Julie Hotchkiss, a research economist and policy adviser for the Federal Reserve Bank of Atlanta.

Hotchkiss recently co-authored a working paper that measured the difference in wages paid to documented and undocumented workers in Georgia industries. The study also measured the overall impact of undocumented workers on documented workers' wages.

On average, undocumented workers were paid 23 percent less than documented workers in the same industries. This had an effect of depressing wages for documented workers as well.

The impact of the presence of undocumented workers was heaviest in construction, where a typical Georgia construction worker making $30,000 saw an average negative wage impact of 6.2 percent, or $1,860 a year. The average wage impact across all industries was estimated at negative 1.5 percent.

The effect on wages varies with the number of undocumented workers in the labor force and the industry in question. The working paper did not address the impact in states other than Georgia, which has an estimated 504,000 illegal foreign-born residents.

The impact in Indiana, which has 55,000 to 85,000 illegal residents, would likely be smaller.

In Indiana, if all illegal foreign-born residents worked they would make up less than 3 percent of the labor force compared with an estimated 7 percent of Georgia labor force, based on estimates from the Pew Hispanic Center and other sources.

'Getting by'

Eric Clawson, president of the Tippecanoe Building and Construction Trades Council, which represents 2,600 union workers in Greater Lafayette and the surrounding area, is well aware of the growing role undocumented labor plays in the construction trades.

Clawson said the presence of undocumented workers reduces the number of jobs available for legal resident workers as well as the wage levels for those jobs. His observation parallels the study's findings.

"They're making a living and getting by. But they're also restricting pay for other working people," he said.

Clawson said the building and construction trades council has talked with some undocumented immigrants about the advantages of union representation.

But those meetings ended when the discussion turned to the need to have a valid driver's license and Social Security card.

"We've had quite a few applicants come in," he said. "We're willing to work with them. We'd like to see them be able to come in here and have clean documentation so they're capable of coming into the U.S. and living by the law of the land."

Hotchkiss said the lower wages paid to undocumented workers is not surprising given the "inflexibility" of the undocumented work force.

Undocumented workers have fewer options than documented workers when it comes to obtaining higher paying jobs, bargaining for higher wages or filing grievances.

Not all employers will hire undocumented workers, and undocumented workers in this country tend to have less formal education than native workers.

Add a language barrier and fear of deportation and you have a situation where employers can pretty much dictate the wage.

"If these workers were legitimized, which increases their flexibility, it would reduce the downward pressure on wages," Hotchkiss said.

Kelly Duncan, compensation manager for Wabash National Corp., a Lafayette-based trailer manufacturer, said she doubts undocumented workers are having much of an impact on manufacturing wages in Lafayette.

"While we cannot answer for all industries, the local employment market has the greatest impact on our wages and benefits paid to associates," Duncan said.

"In addition, we strongly feel that all area employers are actively verifying an individual's right to work in the United States.

"Wabash National's average hourly rate is approximately $16 an hour before adding in the cost of benefits. Therefore, we do not believe area wages and benefits are impacted by illegal immigrants."

Role in economy

The U.S. debate over undocumented workers and illegal immigration oscillates between calls for mass deportation and calls for amnesty. There are differing views on what deportation of an estimated 12.5 million undocumented immigrants would mean to the U.S. economy.

"The impact would be quite substantial," said Adriela Fernández, an associate dean in Purdue's College of Liberal Arts.

"We have to stop the 'pretend model.' We pretend we don't hire undocumented workers, pretend we don't need them and pretend we're not taking their money. All the undocumented workers I know of pay taxes."

The Center for American Progress, which opposes deportation, estimates it would cost $41.2 billion a year over five years to apprehend, process and deport all undocumented residents, plus secure the border.

Those in favor of deportation point to job opportunities for native workers and cost savings for taxpayers. The Federation for American Immigration Reform estimates taxpayers could save $36 billion a year in reduced education, emergency medical and law enforcement expenses.

The next generation

Earlier this year, Fernández and others formed United Businesses Serving the Community -- a Hispanic organization that promotes community partnerships and discussion of issues ranging from the economy and education to religion and politics.

Fernández feels it's important to stress the need for better education, so Hispanic schoolchildren won't have to follow in their parents' footsteps if those people are doing menial tasks.

"The replacement pool is in K-12. That's where the future taxpayers are," she said. "If we don't prepare them for high-paying jobs we're preparing the next generation of worker immigration."

David Hummels, a professor of economics at Purdue University's Krannert School of Management, said foreign-born workers play important roles throughout the economy.

"We couldn't run Purdue without foreign-born Ph.D.'s ... and the same is true of the medical field. You have to have the right kind of people to do the job," Hummels said.

"Exactly the same thing is going on at the low end of wage distribution where there is direct competition with low-skilled immigration labor."

Hummels said native workers could probably be found to perform at least some of the jobs currently done by undocumented workers. Other jobs might pack up and move.

"If you shut off the (labor) supply, tomatoes can be produced elsewhere. You can't outsource restaurants. You'll have to pull U.S. workers into the back room."

Tony Del Real, a Lafayette native whose family is involved in auto sales, is current president of United Businesses Serving the Community. He wondered how many native workers would line up for the jobs currently held by immigrants.

"The Hispanics in the kitchen and landscaping -- those industries are very labor demanding. There are not a whole lot of people who want to do that for the wage being paid."

John Foster, the owner of Foster's Home Repairs & Maintenance in Lafayette, agreed.

"It would be a tremendous blow. They are very prevalent in our work force," he said. "Some of the work they do, we spoiled Americans aren't willing to roll up our sleeves and get dirty. If they went home, it would cause a lot of us to step up to home plate and get it done."

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John Foster, the owner of Foster's Home Repairs & Maintenance in Lafayette, agreed.

"It would be a tremendous blow. They are very prevalent in our work force," he said. "Some of the work they do, we spoiled Americans aren't willing to roll up our sleeves and get dirty. If they went home, it would cause a lot of us to step up to home plate and get it done."

Only one way to find out, John. Deport them all and jobs will open up for us "spoiled" Americans. Wages would go up too.

It's a WIN-WIN situation!