President Barack Obama’s decision to lift the economic ceiling on almost half the nation’s 11.4 million undocumented immigrants will give those workers a chance at higher pay and better jobs.
That means it will also raise costs for businesses that rely on off-the-books labor.
Dishwashers will become waiters, and day laborers will move to full-time work on farms, forcing employers to pay higher wages for new workers. A 1986 immigration law covering 2 million people pushed up pay by 15 percent in the first six years for those workers.
Those are some of the effects of the president’s plan to protect about 5 million people from deportation.
“We’re going to see these people do better in the job market,” said Sherrie Kossoudji, an associate professor at the University of Michigan in Ann Arbor. “They’re going to be more mobile.”
On the higher end of the economic scale, workers with specialized technical expertise will have more freedom to change employers. And their spouses -- often highly skilled themselves -- will be allowed to work, too.
The consequences for the broader economy will be slight. The order has the potential to boost U.S. output by between 0.4 percent and 0.9 percent over the next 10 years, according to a report from the White House Council of Economic Advisers.
In contrast, the sweeping, bipartisan immigration legislation passed by the U.S. Senate last year would raise the gross domestic product by 3.3 percent by 2023, according to the Congressional Budget Office. That bill failed to advance in the Republican-controlled House.
Wage Pressures
Obama’s plan, which he outlined this week, will defer for three years the deportation of those who came to the country as children, as well as the parents of children who are citizens or legal permanent residents.
As a result of the order, the agricultural industry, which relies heavily on immigrant labor, could face rising wage pressures. Once workers are documented, they won’t stay in seasonal work for long, said Baldemar Velasquez, president and founder of the Farm Labor Organizing Committee of the AFL-CIO.
“How are you going to replace the people you’re losing?” Velasquez said. “Farmers will still be looking for workers to harvest their short-term crops.”
Restaurant Workers
An estimated 18 percent of undocumented workers -- about 1.5 million -- are employed in low-paying restaurant and hospitality jobs, according to the Migration Policy Institute, a Washington-based research group. Another 1.3 million work in construction and 723,000 in retail.
For restaurants, Obama’s action will make it easier for those employing undocumented workers to follow the law, said Darren Tristano, an analyst at Technomic Inc., a research firm in Chicago.
“It will help the operators who are not compliant, who are running the risk of being closed or fined,” Tristano said. “It should take some of the complexity and pressure out of a business that is hugely labor oriented.”
One of the smaller groups aided by Obama’s directive may see the biggest gains: Some 40,000 foreign students who earn graduate degrees to get jobs in technology industries will be allowed to work in the U.S. for up to 29 months.
These students, who have degrees in science, technology, engineering and math, would have a significant effect on productivity and innovation, said Giovanni Peri, an economist at the University of California at Davis.
“It involves few people, but very crucial people,” said Peri, whose research shows that undocumented labor complements, rather than competes with, U.S. workers. “Those workers will go beyond the effect of matching the right person to the right job and increasing efficiency. They’ll create innovation.”
Good Start
For employers, the steps are a good start toward addressing the shortage of skilled workers, said Emily Lam, vice president of federal issues for the Silicon Valley Leadership Group, a San Jose, California, trade association. Still, the effect is limited because it’s only a temporary fix, she said.
Another large impact might result from a provision that expands opportunities for skilled immigrants and their spouses. Workers with specialized technical expertise would have more freedom to change employers. Their spouses would also be allowed to work.
Settled Debate
While Obama’s order has sparked a clash with Republicans over its legality, the economic debate over easing immigration laws is largely settled: Decades of research shows the economy benefits from greater worker mobility.
The 1986 amnesty law signed by President Ronald Reagan raised wages and boosted the economy. Almost 2 million undocumented immigrants living in the U.S. were given legal status, as were about a million seasonal workers.
By 1992, real hourly wages for those workers had risen an average of 15.1 percent as they moved out of low-status, low-paying jobs, according to a Department of Labor survey. Wages continued to rise, according to a 2012 study by the Economic Policy Institute in Washington, even as the nation entered a recession that lasted from July 1990 to March 1991.
Obama’s plan is even less controversial from an economic viewpoint because it mostly applies to people already working in the U.S. For them, the move brings opportunity.
“It’s quite a small effect in the aggregate,” Peri said. “There’s no harm done to the American worker and a big gain for the immigrants who can take these opportunities. That’s the big picture.”
Cumbersome Process
Peri was one of those immigrants, moving to the U.S. from Italy to study in 1993. He earned a doctorate degree and landed an H-1B visa, which are set aside for highly skilled people. The system made it almost impossible for him to get his green card granting permission to live and work in the U.S.
“It was so long and cumbersome I had to marry an American,” he said with a laugh. Now he’s a citizen raising three children. “I’ve invested in the U.S.”
For undocumented workers, moving up the economic ladder can be difficult, if not impossible. The economy creates and destroys millions of jobs a month, and that churn is one key to raising wages. Companies hired more than 5 million employees in September, according to Labor Department data, and almost 2.8 million people voluntarily quit their jobs, the most since April 2008.
The threat of deportation typically discourages workers from switching jobs, even within an off-the-books economy. Many don’t consider more visible jobs with their current employers to reduce the risk of detection, cutting off the easiest route to better wages, Kossoudji said.
With the danger of deportation at least temporarily lifted, “it releases them from having to be in the back of the restaurant,” she said.
To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net
To contact the editors responsible for this story: Carlos Torres at ctorres2@bloomberg.net; Steven Komarow at skomarow1@bloomberg.net Mark McQuillan, Justin Blum
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