What if all illegal immigrants were deported?

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Question: 

Please disregard the implausibility of this question, I am curious on a purely hypothetical level. What would happen if all of the illegal immigrants and legal Muslim refugees were both deported and/or kicked out at approximately the same time. (As Donald Trump has sometimes suggested we should do) I would imagine that there would be significant negative impacts to the economy and specifically the housing market. But, I'm wondering how catastrophic those would be and if there would be any... Less obvious results?

Answer: 

A 2012 United States Department of Agriculture Economic Research Service study used a simulation analysis to estimate the impact a 5.8-million-person reduction in the number of unauthorized workers—agricultural and nonagricultural. This was compared to a base forecast which simulated how the economy would evolve under current laws and policies.

The unauthorized workforce was assumed to decrease by 2.1 million over the first 5 years. In Year 5, the unauthorized workforce in the U.S. economy as a whole would be 4.0 million people smaller than in the base forecast. Growth in the unauthorized workforce was assumed to resume thereafter but at a slower pace than in the base forecast. By Year 15, the projected size of the unauthorized workforce was 8.5 million, compared with 14.3 million in the base forecast, a difference of 5.8 million, or 40%.

Here is a summary of the study’s findings.

The long-run results from the decreased unauthorized labor supply showed a reduction in the labor supply to agriculture with effects on agricultural output and exports. Fruit, tree nuts, vegetables, and nursery production were among the most affected sectors with long-run relative declines of 2.0% to 5.4% in output and 2.5% to 9.3% in exports. These effects were smaller in other, less labor-intensive, parts of agriculture—a 1.6% to 4.9% decrease in output and a 0.3% to 7.4% decrease in exports.

The number of unauthorized workers employed as farmworkers fell by between 34.1% and 38.8 %, relative to the base forecast for Year 15. The number of farmworkers who were either U.S.-born or foreign-born, permanent residents increased by about 2.4% to 4.0% in the long run, compared with the base forecast, and their wage rate increased by 3.3% to 7.5%. However, the increased farm employment of U.S.-born and other permanent resident workers was not sufficient to offset the decrease in unauthorized farmworkers. As a result, the total number of farmworkers decreased by 3.4% to 5.5%.

Model results suggested that wages would rise for U.S.-born and other permanent resident workers, relative to the base forecast, in some lower paying occupations where unauthorized workers are common, decrease slightly in many higher paying occupations, and decrease on average. Several factors accounted for the slight decrease in earnings. First, the decrease in the supply of unauthorized labor lead to a long-run relative decrease in production, not just in agriculture but in all sectors of the economy. This, in turn, reduced incomes to many complementary factors of production, including U.S.-born and foreign-born, permanent resident workers in higher paying occupations. Second, with the departure of so many unauthorized workers, the occupational distribution of U.S.-born and other permanent resident workers necessarily shifted in the direction of more hired farm work and other lower paying occupations, such as food service, child care, and housekeeping, and away from higher paying occupations which is a much larger category. The effect of this compositional change was to reduce the average real wage for U.S.-born and foreign-born, permanent resident workers in all sectors of the economy, even as real wages in many lower paying occupations rose.

In the long term, overall gross national product accruing to U.S.-born and foreign-born, permanent residents would fall by about 1%, compared with the base forecast. This result indicated that the negative economic effects generated by the departure of a significant portion of the labor force outweighed the positive effects on the wages of U.S.-born workers and other permanent residents employed in lower paying occupations.

A summary of the study can be obtained at http://www.ers.usda.gov/amber-waves/2012-june/immigration-policy.aspx#.V7ycZq0sAtM and the full report at http://www.ers.usda.gov/media/619408/err135_1_.pdf.

Answered by:
Dr. Lee Schulz
Associate Professor
Last updated on March 9, 2018