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Illegal Workers Subsidize U.S. Economy


While the U.S. Senate and the House of Representatives hammer out their differences over reforming immigration laws, public opinion polls show that the majority of Americans want to stem the tide of illegal immigration into the country. But many economists point out that the United States is becoming increasingly dependent on illegal labor.

According to many experts, there are about 12 million illegal aliens in the United States. But estimates vary widely - - from some nine million to nearly 20 million people - - the majority of whom are from Latin America - - and most of them from neighboring Mexico.

Cheap Labor

Most researchers say the majority of these immigrants left low-skilled, low-paying jobs back home in search of a better life in America's underground economy.

"They basically are subsidizing in very many ways the lifestyle of the majority of Americans," says Demetrios Papademetriou, President of the Migration Policy Institute here in Washington. "Illegal immigrants contribute immensely; they work extremely hard. About 94 or 95 percent of the people of working age who are here illegally actually are engaged in the labor market. And they produce products and services that are heavily subsidized for the average consumer because of their labor."

It is estimated that illegal aliens in the U.S. make, on average, less than half of what legal immigrants or American citizens earn. And nearly 60 percent of illegal families live at or below the poverty line. Nonetheless, they are crucial to several sectors of the economy.

In construction, for example, it is estimated that some 15 percent of the labor force consists of undocumented workers. Many others are farm laborers. And many personal services occupations such as maid services, building cleaning and gardening are dominated by illegal immigrants.

"Everything comes down to supply and demand," says Robert Justich, Senior Managing Director at the financial investment firm, Bear Stearns Asset Management in New York. "Obviously, it is labor demand, but it is also the fact that the supply of labor is cheaper. It's lower cost to import from other countries, which is what we're doing. I mean, this is similar to outsourcing, except it's outsourced labor that's delivered to our doorstep."

By most estimates, America's illegal immigrant economy generates hundreds-of-billions of dollars in untaxed wages, goods and services each year.

Competition at the Bottom

Another concern driving the call by many in the United States to curb illegal immigration is job competition.

Jack Martin, Special Projects Director for the Washington-based Federation for American Immigration Reform, says that because undocumented laborers are willing to work for low wages and no benefits, many U.S. citizens are priced out of a job.

"Those generally are the country's most needy citizens in that they don't have the educational levels that would allow them a great deal of mobility in terms of the jobs that they're doing. Most recently, this is playing out in the rebuilding of New Orleans where American blacks, in particular, are complaining that they have been bypassed in terms of doing that construction work because employers have preferred to hire illegal alien workers," says Martin.

"They compete with the least skilled Americans," says James Smith, an economist who specializes in immigration issues at the RAND Corporation in Santa Monica, California. "And anyone who competes with undocumented immigrants is going to lose out and their wages are going to go down. I think a reasonable number for that is that their wages go down about four or five percent. There are people who lose out and those are the people who compete with undocumented immigrants and that includes less skilled, native born Americans."

A Growing Consumer Market

In addition to fueling a large portion of the labor market, Rakesh Kochhar, Associate Director for Research at the Washington-based Pew Hispanic Center, sees illegal workers as an increasingly important customer base for American businesses.

"They are interested in the size of this population because, demographically speaking, growth of the U.S. population is coming from immigration [, both legal and illegal]. The native-born population is virtually at a standstill. And it's either Hispanics or it's Asians -- those are the major demographic segments that are growing right now and that is the growth market," says Kochhar. "Right now, it is relatively small. The foreign-born population in the United States is less than 15 percent and their share in terms of income and output is also less than 15 percent [for the country as a whole]. But all of the growth is happening in this segment [of the population]. So in the next 20-to-25 years, this is going to double."

That is why analyst Robert Justich at Bear Stearns in New York says U.S. businesses are catering to immigrants, regardless of their legal status. "If you go to lower income neighborhoods that immigrants are living in, you'll see more satellite dishes per household than in high income areas," says Justich. "In terms of financial services, we've seen the market for remittances [take off]. For example, to Mexico alone, migrant workers ship back approximately $15 billion a year. And financial services make a very nice margin on that business. The price of real estate has been influenced by this massive influx of people who need places to stay. Rental costs and home costs in these neighborhoods have actually gone up proportionally more than in other areas. So there is no question that the consumption side of the equation has strengthened due to immigration."

It is not known exactly how many illegal immigrants are in the United States, how much they earn, how much they spend, how much they pay in taxes or how much of a strain they put on the nation's social welfare system.

What experts do know is that unless lawmakers reform the country's immigration policies, America's dependence on undocumented labor will likely continue to grow.

This story was first broadcast on the English news program,VOA News Now. For other Focus reports click here.

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