ARIZONA COULD SURVIVE WITHOUT ILLEGAL WORKERS
July 20, 2007
(Phoenix, AZ) Author: Robert Robb, The Arizona Republic Estimated printed
The business community is reluctant to make an honest argument against the
new state legislation imposing sanctions on employers who knowingly hire illegal
If they were to make an honest argument, it would be this: Arizona's economy
depends on illegal workers. Therefore, without amnesty and a generous
guest-worker program, we shouldn't be denied access to an illegal workforce.
It's worth noting that this is, in essence, a concession that requiring
employers to use the federal program to electronically verify work eligibility
will work -- that it will cut off access to illegal workers.
But what about the broader claim, that Arizona's economy is dependent on an
A recent study by the Udall Center at the University of Arizona purports to shed
some light on that question, evaluating the effects of immigration, legal and
illegal, on state finances and the state economy.
The study reasonably treats foreign-born non-citizens as a proxy for illegal
immigrants in Arizona. According to the study, foreign-born non-citizens cause
$1.246 billion in annual education, health care and incarceration expenses. They
generate $1.076 billion in state taxes, for a net deficit of $170 million.
I understand that the Udall study will be revised to increase the calculated tax
contribution from illegal immigrants, but an argument can be made that the
current figure is already overstated. It includes not only taxes paid directly
by illegal residents but also the taxes paid by others supposedly as a result of
their economic activities.
Additionally, education expenses are substantially understated.
English-language learners are used, again reasonably, as a proxy for the
children of illegal immigrants in the school system. However, only the state's
basic support level and direct English-learner supplemental funding is counted.
That excludes all capital spending and funding from other state and local
sources. Illegals would, of course, pay part of the local contribution, but
since such revenues are derived principally from property taxes, which skew
toward business, not much.
The Udall report cites a figure of $544 million for the overall cost of
educating the children of illegal immigrants. The true pro rata share of all
state and local taxpayer costs would be closer to $1 billion.
National studies increasingly indicate that low-wage workers consume more in
public services than they contribute in taxes. There's nothing in the Udall
report to suggest that Arizona is any different.
According to the study, illegal immigrants are responsible for about 8 percent
of Arizona's economic output. It asserts that, if the illegal workforce were to
dry up, most of that output would disappear as well.
That's because illegal workers tend to be poorly educated compared with legal
workers, so the assumption is that their labor is not substitutable.
However, the occupation analysis in the study belies that conclusion.
Illegal workers are reported to constitute 48 percent of the Arizona farming
workforce and 44 percent in landscaping. The next highest figure is only 31
percent. That means that for most jobs currently being done by illegals, at
least two-thirds of the workers in that occupation are legal.
If the illegal workforce went away, wages would probably increase, attracting a
larger number of legal workers to Arizona. The true substitution effect would
likely be substantial.
However, let's assume the entire 8 percent contribution evaporated. Since 1990,
when illegal immigration began to surge, Arizona's economy has increased by 235
percent, 78 percent faster than the national average. In fact, during this
period, Arizona has had the second fastest-growing economy in the country,
ranking behind only Nevada.
If today's economy were 8 percent smaller, removing the increment the Udall
report attributes to illegal immigration, Arizona's economic growth still would
have been 58 percent faster than the national average and still would have
ranked fourth highest among the states.
This is not to sugarcoat the potential economic consequences of the
employer-sanctions bill. More workers mean more output. Cutting off access to
illegal workers will result in a smaller economy. Reducing access to an
estimated 12 percent of the existing workforce will make for a very difficult
Overall, however, the state's business community has the relationship in
reverse. Arizona does not have a strong economy because it has a large number of
illegal immigrants. Arizona has a large number of illegal immigrants because it
has a strong economy.
Reach Robb at email@example.com or (602) 444-8472. His column
appears Sundays, Wednesdays and Fridays. Read his blog at robbblog.azcentral.com.
Edition: Final Chaser