Immigrants are vital to recovery

By Walter Ewing

As Pennsylvania grapples with a budget deficit brought on by the current recession, state and local policy makers would do well to keep in mind that immigrant communities are a potent force for economic recovery.

Immigrants and their adult children already contribute billions of dollars to the state economy each year as workers, taxpayers, consumers, and entrepreneurs. These contributions would be even greater if illegal immigrants had a pathway to legal status, which would draw all of them into the tax system. Moreover, newly legalized workers could earn higher wages, further increasing their tax contributions and the amount of money they have to spend in Pennsylvania.

For these reasons, the debate over immigration reform in Washington is very relevant to state and local governments struggling with budget crises. During the summit in Mexico last week, President Obama promised to turn his attention to the issue next year.

A broad measure of the economic impact of immigrant communities in Pennsylvania is the purchasing power and entrepreneurship of Latinos and Asians, most of whom are either immigrants or the children of immigrants. More than 33,000 Latino- and Asian-owned Pennsylvania businesses generated sales and receipts of $8.2 billion and employed more than 52,000 workers as of 2002, according to the most recent available data from the Census Bureau. The purchasing power of Latino and Asian consumers in Pennsylvania was $22.6 billion as of last year, according to the Selig Center for Economic Growth at the University of Georgia.

Some critics of immigration reform argue that, regardless of such statistics, we would be better off without the roughly 12 million illegal immigrants in the United States, an estimated 140,000 of whom live in Pennsylvania. They advocate either mass deportation or a mandatory employment-verification system that, presumably, would make it impossible for illegal immigrants to get a job and thereby persuade them to go home.

Leaving aside humanitarian and human-rights issues, neither of these options is cost-effective. The Center for American Progress estimates that the mass deportation of illegal immigrants would cost more than $200 billion over five years. And this doesn't count the economic impact on businesses (and their workers) of suddenly losing that many consumers. The Perryman Group estimates that Pennsylvania would lose $5.3 billion in expenditures, $2.3 billion in economic output, and more than 27,000 jobs if its unauthorized workers and consumers disappeared.

As for a mandatory employment-verification system, the Congressional Budget Office has concluded that it would cost at least $12 billion over 10 years to implement one. It also predicted that federal revenue would drop by $17.3 billion over the same period as more workers were paid "under the table."

More important, the Government Accountability Office points out that the federal "E-Verify" employment-verification system that some want to make mandatory is incapable of detecting a common form of identity fraud. To top it all off, E-Verify relies on databases that contain errors involving 12.7 million native-born U.S. citizens, according to the Social Security Administration's inspector general.

So what makes the most economic sense in the middle of a recession: Spending hundreds of billions of dollars to deport millions of unauthorized workers and consumers? Spending tens of billions of dollars on an employment-verification system that could incorrectly flag U.S. citizens, fail to detect identity fraud, and depress tax revenue? Or a pathway to legalization that increases the tax contributions and purchasing power of formerly unauthorized workers and consumers?