The economics of mass deportation

Shortly after the country elected him as its 47th president, Donald Trump told NBC’s Meet the Press that he believed he was going to have to deport every illegal immigrant in the United States. On his first day in office, Trump called the droves of illegal immigrants the Biden administration permitted to enter the country an “invasion.” In an executive order, he alleged that the illegal aliens entering the country were a threat to national security.

On the same day, Trump ordered the U.S. Department of Homeland Security to remove all aliens entering or already inside the country in violation of U.S. immigration laws. He also suspended refugee resettlement programs allowing people from other countries to enter the United States. And, earlier this month, the administration decided to terminate the legal status of an estimated half a million people from Venezuela, Nicaragua, Cuba, and Haiti.

While the administration has framed its new policies as long-overdue measures needed to preserve the United States’ national identity and security, economists predict they will have mixed effects on the bank accounts of American businesses and could do more harm than good in the long term.

More workers, more jobs

“There’s a net increase in income for the native-born population in the United States from interacting with the immigrants who come here,” Texas Tech University economics professor Benjamin Powell said, adding that it also leads to a gain for the U.S. economy. Powell has written several books and numerous articles analyzing the economic effects of immigration.

It’s relatively uncontroversial among economists that immigration generates massive economic benefits, Powell said. Most of those benefits flow to the immigrants who come into the United States, but many native-born Americans benefit from interacting with those immigrants. Some analysts warn that, if immigration is going to take any jobs, it’ll be from Americans without a college degree—or even a high school diploma, in some cases.

Jared Pincin teaches economics at Cedarville University. “They tend to get hurt the most because a lot of the immigration that the U.S. has seen over the last several decades, just number-wise, are lower-skilled immigrants,” Pincin said. “I would say that wages… [for] the lower income are suppressed by increased immigration. In this case, increased illegal immigration, because your average illegal immigrant, for example, is not going to be holding a high-wage position.”

But Powell argues that you can never really have too many workers.

“The biggest factor that determines the number of jobs in our economy is the size of the labor force. When you add more workers, we add more jobs, because we have a virtually limitless demand for goods and services,” Powell said. “We’ve roughly tripled the size of the labor force since the late 1950s with the entry of baby boomers, more women, and immigrants to the workforce. And we’ve roughly tripled the number of jobs.”

And Pincin explains that even pushing lots of lower-skilled immigrant workers into the workforce could be beneficial. “If it's just something, like a delivery driver that’s freeing up time for somebody like a high-skilled worker—a CEO, for example … that's time that they can now focus on what they do better.” But Pincin still cautions that workers who aren’t CEOs could find themselves losing jobs to immigrants.

It isn’t just legal immigrants working jobs in the United States that generate economic activity. Stan Marek is the CEO of Marek Brothers Construction. He explained that, where his company is based in Texas, the population has had fewer native births, and the workforce has seen more U.S. citizens retiring.

“And the labor demand is met with the immigrant worker, whether legal or illegal. The problem employers have is we have no way of knowing if they have legal status. Because anybody can get a fake ID,” Marek said. The federal government has an ID verification system that employers can use to check whether someone is authorized to work in the United States. Ten states require employers of a certain size to use the system, called E-Verify, but it is voluntary for most private businesses elsewhere. Many businesses avoid using the system because of concerns about accuracy, privacy, and delays in hiring essential workers.

If an employer is hiring a worker for a position that would require them to have a W-2, then the employer has to fill out an I-9 form. If the prospective worker is an illegal immigrant, they can fool the prospective employer by just providing a fake ID that matches one of the several kinds of IDs that fulfill the requirements of an I-9 form and providing a fraudulent Social Security number.

Oftentimes, employers have no other option but to hope that the worker is legally allowed to be in the United States, Marek said. “I have workers been with me 20, 30 years that I hope they're legal, but how am I going to find out?” Marek said.

Even the fact that Social Security numbers are required doesn’t prevent illegal immigrants from getting jobs, Marek explained. Some illegal immigrants provide a Social Security number that doesn’t match their name, but the fraud only comes to light after federal authorities show up at the workplace and take a look at the books, Marek said. Other illegal immigrants pay for stolen identities with Social Security numbers attached to them and use those.

In the past decade, many illegal immigrants have opted to work as independent subcontractors, not W-2 employees. And that means employers don’t have to collect an I-9. That allows them to work, but it also puts them in a weak position, Marek said. Those immigrants can’t get workers' compensation for themselves, and they aren’t going to pay self-employment and income taxes to the government, either, Marek explained.

And sometimes, it isn’t even Marek’s own company that’s hiring the illegal immigrants, either through W-2s or 1099s. “If we do a job for the city or the county, we have to hire minority subcontractors, and we don't know what their labor practices are,” Marek said. “So many construction companies hire only independent subcontractors.” And the workers like that because it means they don't have to fill out an I-9 and they don't have to pay taxes, Marek said.

Drain or gain?

Many opponents of illegal immigration argue that illegal immigrants cost taxpayers millions of dollars each year by attaching themselves to welfare programs. Pushing them out of the country will save taxpayers millions in welfare programs, they argue.

But Powell argues that’s an issue with the welfare system, not with migration. “Letting people in and putting them in hotels in New York City but not working is a dumb way to do migration,” he said. “But allowing people to come into the country and legally work, they’re mostly a fiscal benefit, not a drain. And when you do find drains, which some local jurisdictions do have, the answer isn’t, ‘shut off immigration,’ it’s ‘change your fiscal policy vis-à-vis immigrants to turn any drains into gains.’”

Pushing illegal immigrants out of the United States could even cost taxpayers more than it will save them. “I did a forecast in December where we found that, depending on how things shake out, maybe we could see between 0.1-0.4% percentage point lower GDP growth this year,” said Stan Veuger, a senior fellow in economic policy at the American Enterprise Institute. That gross domestic product decrease would largely come because fewer immigrants are expected to be coming into the United States, Veuger said. But an increasing number of immigrants leaving the United States could also contribute to the number.

“So that means [a] smaller economy. That means that the existing federal debt, for example, has to be paid by a small number of people,” Veuger said. “If you’re a firm that produces consumer goods, you just have fewer customers.”

Not all sectors of the economy will suffer equally, though. “Some businesses may go under in agriculture or in landscaping, right? If you suddenly can’t hire people you would have been able to hire,” Veuger said. Other families might go without a nanny, and that could mean that the mother in that family may not be able to work outside the home as much.

Veuger emphasized that pushing illegal immigrants out of the country would create an earthquake for some people while leaving others largely unaffected. “The average American, I would say, probably not enormously [affected]. Maybe, you know, wages a little higher or a little lower,” Veuger explained. “The big effect is if you have a relative, or someone you're close to, who gets deported … That's the big shock. Or an employee.”

Pincin argues that cracking down on illegal immigration specifically isn’t going to affect the economy too drastically. “I don't think the U.S. as a whole is reliant on illegal immigrants in particular—and that's a key term there,” Pincin said.

“There are some segments of the economy that have a heavier immigration component to [them]—both legal and illegal. They tend to get put to the focus.” One such portion of the economy is seasonal agricultural labor, he explained. “You tend to hear that a lot,” he explained. “But we do have in the United States legal immigration status for those types of workers, and there's no reason we can't see that expanded.”

But Powell says that legal immigration is easier said than done: “For the vast majority of the world's population—that is not high-skilled—legal immigration to the United States is virtually impossible,” he explained. The fact that legal immigration is so difficult to do makes illegally immigrating a much more appealing option, he said.

Upholding the law

But some economists argue that the economic effects really aren’t the point so much as ensuring that people follow the law. “If you believe in the rule of law, then illegals should be deported,” said Charles Steele, who teaches economics at Hillsdale College. “The economic effects are irrelevant to that question.”

But Steele also argues that widespread deportations of illegal immigrants could still have economic benefits. “A contributor works to produce useful goods and services for others. A taker relies on government benefits, which are paid by the producers, through taxes,” he said. “Deporting a producer weakens the economy. Deporting a taker strengthens it by reducing the burden on productive taxpayers. The best evidence at present is that illegals are mostly takers. Deporting them would improve the economy.”

Powell argued that, to uphold the rule of law and benefit the economy, allowing Americans to freely associate with whomever they choose is a good starting point. “There’s a difference between what the existing law happens to be and the concept of the rule of law,” Powell said. “I would argue that the type of immigration restrictions we currently have in the United States violate the spirit of the rule of law as it applies to existing native-born American citizens.”

Current immigration law prevents native-born American citizens from freely associating with citizens of other countries, Powell said, limiting them from employing and renting apartments or selling property to whomever they choose. And that violates the spirit of the rule of law, he argued.

He added that it’s also really easy to get rid of the “illegal” aspect of illegal immigration. “There are very few things in this world that have magic wand solutions,” Powell said. “And when someone says, ‘My only objection to immigration is that it happens illegally,’ that is one of the few cases where you could have a magic wand solution.”

Steele emphasized that it was important for every immigrant—legal or illegal—to understand and appreciate American principles and values. Powell argues many of them do. For years economists have argued that immigrants from collapsing countries with anti-American values could have a corrupting influence on the United States.

“Cuba is poor because Cuba is socialist. Cuba is socialist, at least in part because of the culture and beliefs of its population,” Powell explained. “If a bunch of Cubans migrate to Florida and recreate Cuban socialism in Florida, it'll make them not get the gains from immigration, and it'll make existing Floridians poor.” But that isn’t what’s happened, historically. “All of us know the most anti-socialist voting bloc in the United States is Cuban immigrants in Florida. In fact, they come wanting our freedom and wanting America to be more free.”

Historically, a majority of the Cuban population in the United States has voted Republican, according to the Pew Research Center. Before the 2020 election, almost two-thirds of Cuban Americans were ready to vote Republican, while two-thirds of the rest of the Hispanic population were ready to vote Democrat.

In a more contemporary example, Powell argues that the Trump administration’s recent decision to terminate the legal status of an estimated half-million Haitians, Venezuelans, and Cubans in the United States is going to do more harm than good.

“Taking away their legal status creates 500,000 new illegal immigrants who fled socialist or semi-socialist countries for the benefits of the United States,” Powell said. “These are the type of people we want coming to our country, fleeing these awful regimes, and who are going to be patriotic Americans, not advocates of the type of socialism that they fled.”