How illegal workers affect the economy

updated 7:38 p.m. ET April 4, 2006

WASHINGTON - They pick fruit and vegetables and clip hedges. They hang drywall and clean houses, hotels and office buildings.

The millions of illegal workers in the United States have come under a fresh spotlight as Congress and President Bush grapple with revamping the nation’s immigration policies.

Illegal workers’ relationship to the economy is intricate.

They are willing to work for lower wages than legal workers, helping to keep down prices. But illegal immigrants also can depress wages for unskilled, legal workers and strain local hospitals and schools.

“There is not a simple economic case here. It is complex. It is interwoven, and it is very hard to extract,” said Terry Connelly, dean of the Ageno School of Business at Golden Gate University in San Francisco. “It is like pulling some sort of piece of thread out of a fabric. If you pull that thread out, you don’t know to what degree you have weakened the fabric.”

There are an estimated 11 million to 12 million illegal immigrants in the United States. Some 7.2 million of them are employed — about 5 percent of the U.S. labor force — according to the Pew Hispanic Center, a research organization. The illegal workers are mostly men and are heavily concentrated in construction, agriculture and cleaning jobs, Pew says. Those jobs tend to be low skill or unskilled manual labor, economists said.

“From lawn services to meat packing. You name it. The primary benefit to consumers from illegal workers is lower prices,” said Nariman Behravesh, chief economist at Global Insight.

For businesses, cheap labor can translate into fatter profits. If owners use those profits to expand their businesses, it would boost economic activity.

While consumers and businesses may benefit from such cheap labor, the U.S. born-worker could be hurt by it, according to some research.

Between 1980 and 2000, legal and illegal immigration reduced the average annual earnings of U.S.-born men by an estimated $1,700 or roughly 4 percent, according to research done in 2004 by George Borjas, economics professor at the John F. Kennedy School of Government at Harvard University.

The situation was worse if one considers only the 10 million U.S.-born men who lack a high school degree. For them, the increased supply of workers depressed wages by 7.4 percent, he found.

Economists at the Federal Reserve banks in Dallas and Atlanta found no evidence in 2003 that wages of higher-skilled U.S.-born workers were hurt by immigration, although lower-wage workers were affected.

Illegal immigrants use federal, state and local resources, including schools, medical care and emergency services, straining government coffers and costing taxpayers money. However, many of the costs are tied to their kids — many of them American-born children who are U.S. citizens.

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