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Throughout its history, the United States has been known as the haven for immigrants from all around the world. They are seeking the freedoms that America guarantees and the economic opportunities that the American economy presents. However, in recent times, the increase in illegal immigration has been troubling the country. There has been many debates about whether these immigrants are positively or negatively impacting the United States, and legislators are working to figure out how to deal successfully with this issue. Some of these debates include topics about how the country is continuing to seek low-wage labor while still trying to provide better opportunities for its citizens and how the 9/11 attacks has brought a new concern with illegal immigration being a problem for national security. Illegal immigration is a difficult topic to discuss and study because the exact number of undocumented immigrants entering the United States is not known. Even though it is difficult to study, there has still been great debate about the economic consequences of this type of immigration in order to concur if there are actual merits.
Before getting into the history of illegal immigration into the United States, there needs to be examination of the general pattern that has categorized illegal migration streams. The pattern begins with the initial migration of the first generation or pioneer migrants who were mostly young males looking for work in agriculture and other low-wage jobs. As time went on the pioneer migrants have made multiple trips into the United States and have established their own secret paths into the country. Once they had founded these paths and settled in the United States, they started bringing in their wives and children and encouraged other relatives to migrate with them. The ‘maturation’ of the migrant stream also included the introduction of friends and acquaintances into the migratory stream (Massey et al., 1994).
How it works
The initial roots of illegal immigration into the United States can be traced back to the end of the Bracero Program in 1964. The Bracero Program provided agricultural growers a steady supply of cheap labor from Mexico and when the program officially ended, the growers substituted illegal labor for the previously legal bracero labor (Calavita, 1992). The first period of mass illegal immigration occurred between 1965 and 1986 after the Bracero Program was ended (Massey et al., 2002). During this 20 year time span, there was an increase in the numbers of women and children illegally migrating into the United States. Also, this time span showed that there was a variety of demand for cheap labor in the United States that included agriculture and other unskilled jobs such as transportation, production, construction and service (Woodrow-Lafield, 1999).
Since the 1990s in just 15 years illegal immigration into the United States has increased dramatically. For example, in 1990-94 about 2.2 million undocumented immigrants settled in the US at a rate of 450,000 per year; between 1995 and 1999, about 3.6 million settled 750,000 per year, and between 2000 and 2004, about 3.1 million 700,000 per year. To show just how much of an increase this is, between 1984 and 1988 only 1.3 million undocumented immigrants settled in the United States (Passel, 2005). However, is there an economic benefit to this increase in illegal immigration?
Conventional economics states that immigration benefits the host country because it pays for the labor supply whereas the sending country ultimately bears the cost of raising a worker to the age when he/she is able to enter the labor market. Thus, the sending country pays for the labor productivity of the receiving country. Also, immigrants benefit the economy by increasing demand, inciting investment, and keeping the receiving country’s industries competitive by improving capital productivity (Borjas, 1994).
On the other hand, there are arguments that focus on the negative economic impacts illegal immigration has on the labor force. These arguments have stated that great numbers of illegal immigrants jeopardize the economy by displacing low-skilled US natives, depressing wages and nullifying market pressures that would otherwise result in a rise in wage trends. Thus, native US workers have taken upon this train of thought and called for stricter immigration laws in order to protect US jobs and the wage structure. However, scholars argue that the illegal immigrants perform jobs that no other US worker will do and because of this these scholars stand tall on the fact that reducing the illegal immigrant population in the United States will only be devastating for the economy (Lerman and Schmidt, 1999).
There is a segmentation of the labor market and is split into two labor markets: the primary and the secondary sectors. This segmentation occurs because of the way that the employers use capital and primary labor as opposed to secondary labor to deal with the uncertainties of the economy. Workers in the primary sector are ‘capital intensive’ and are costly to acquire, train, and lose. On the other hand, workers in the secondary sector are less costly to train and less costly to lose. Since employers face unstable demand for their products, they have the enticement to use skilled labor to meet stable portions and unskilled labor to satisfy unpredictable portions. As a result, the secondary labor market is characterized by job insecurity, low wages and little prospect of upward mobility. When looking at jobs and the aspirations to do those jobs, the native workers generally seek the jobs in the primary sector of the economy because higher skills are required, pay is better and job status is secure. The shortage of workers willing to do labor in the secondary sector forces employers to turn to immigrant, unskilled labor workers to meet the less stable demand (Espenshade, 1995).
Evidence of the segmentation of the labor market between a secondary sector filled by illegal immigrants and a primary sector comprised of native workers provided by multiple sources states that illegal immigrants occupy unskilled jobs that involve low wages, tend to be temporary and where working conditions are harsh, unpleasant and unsafe (Espenshade, 1995; Massey, 2005). For example, while only 4.3 percent of workers in the entire labor force are undocumented, 20 percent of farming occupations, 17 percent of cleaning occupations, 12 percent of construction and 11 percent of food preparation occupations are held by undocumented workers (Passel, 2005).
Additional evidence of the segmentation of the labor market between the two sectors is the fact that undocumented immigrants are paid less than other workers. Illegal immigrants receive the same wages as native and legal immigrant workers only when they have comparable levels of skill, thus the difference in overall wages can be attributed to the lack of labor experience (Espenshade, 1995). Thus, the education levels of illegal immigrants only allows them to get certain jobs; for example, it is estimated that 32 percent of undocumented adults did not complete 9th grade as compared to 12 percent of legal immigrants and 2 percent of natives (Espenshade, 1995). Therefore, the lower educational levels that characterize illegal immigrants and the lower pay they earn proves that only the secondary portion of the labor market is accessible to them.
The final evidence of the segmentation of the labor market is that illegal immigrants show a great deal of mobility between jobs in the secondary sector. For example, studies have proved that illegal agricultural workers transfer to other unskilled jobs as time progresses and they acquire more US specific skills (Marcelli, 1999). Although, even with the acquiring of more US job skills, illegal workers still have not shown the ability to leave the secondary labor market for the primary sector. While research shows that workers in the labor market increase wages and enhance job opportunities by gaining experience and knowledge over time, the lack of mobility for illegal immigrants from the secondary sector to the primary sector proves that the labor market is segmented and prevents this type of ascending mobility (Woodrow-Lafield, 1999).
Also, illegal immigrants positively contribute to the US economy as consumers in the market. Even though there is no significant quantitative estimates of the contribution that illegal immigrants make, it is imperative to acknowledge their impact. There are estimates that 90 percent of the wages that the illegal immigrants earn are currently spent in the United States (Hinojosa, 2005). Therefore, the total consumptive capacity of illegal immigrants remaining in the US is around $450 billion (Carter et al., 2005).
Recently, it is witnessed that there was an increase in the use of matricula cards, photo identification cards given out by the Mexican consulate to Mexican nationals, and the Mexican government reports that the majority of the applicants for these cards do not have documented status (Delson and Gorman, 2005). However, these cards are accepted as valid identification by big companies such as Sprint, Costco and Wells Fargo. Wells Fargo has opened 525,000 matricula accounts which add up to 6 percent of the bank’s total. Another company, No Borders Inc., sells debit cards to matricula holders on which they can store cash and send portions home. Also, health insurers like the Blue Cross of California have begun to sell health insurance to matricula holders. The growth in the acceptance of these identification cards shows the growing desire on the part of US businesses to capture the consumer buying power of illegal immigrants. There is evidence from Business Week magazine stating that consumer companies in the United States have decided that a market of 11 million potential customers is just ‘too big to ignore’ (Carter, 2005). In addition, since 84 percent of illegal immigrants are 18-44 years old and in their prime spending years (Passel, 2005), the positive contribution that illegal immigrants make as consumers is an important factor to notice when discussing the economic consequences of illegal immigration.
The fiscal impact of illegal immigration is an important issue to examine, such as whether undocumented residents in the United States receive more in publicly provided social services than they pay for in taxes. Illegal immigrants inflict costs on government that include the enrollment in public schools and the use of emergency health services. However, many illegal immigrants pay payroll taxes that are automatically taken from their pay and remove taxes that are incorporated into the prices of goods such as fuel. Unfortunately, measuring the fiscal impact of illegal immigrants has yielded a range of competing estimates (Berk et al., 2000). Therefore, even though an exact monetary value cannot be distinguished, it appears that illegal immigrants impose an overall fiscal cost which is a cost that is focused at the state and locals levels.
In conclusion, there is a wide range of issues involving illegal immigration. Even though there is difficulty in researching information and drawing conclusions about illegal immigration, one can notice that illegal immigration benefits the United States economically. Especially considering that the US labor market is segmented into a primary and a secondary sector. However, when you consider the fiscal impact it appears that illegal immigration is a net fiscal cost. Although, further research into the tax contributions that are made is necessary to determine the exact monetary fiscal costs they impose. It is important to note that fiscal costs are disproportionately carried out at the state and local levels and consequently the fiscal cost of illegal immigration is a question of the allocation of necessary resources between the federal and state governments.
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