America’s Brand New Police State: The Effects of a New Immigration Law on Arizona’s Struggling Economy
By Colin Gray, published June, 2010
There’s no doubt that Arizona’s new law, the “Support Our Law Enforcement and Safe Neighborhoods Act” – more commonly referred to as SB 1070 – is creating quite a stir nationwide. Arizona is home to an estimated half-million undocumented immigrants; that’s about 12% of the state’s total population, according to one study by the Center for Immigration Studies in Washington, D.C. The law makes illegal immigration a state crime as well as a federal crime as of July 28, 2010. This means that not only Federal agents, but state police, are required to ask for proof of citizenship from any suspicious-looking individual. Police are now allowed to make arrests “without a warrant, if… the officer has probable cause” to believe that the immigrant is an “alien” (SB1070). The law also encourages individuals to sue counties where the law is not being adequately enforced and, notably, makes it illegal to hire workers or be hired out of vehicles impeding traffic (a move designed to curtail day labor). Despite the passage of House Bill 2162, which specified when police could and could not question individuals, critics around the country are arguing that the bill legalizes racial profiling.
Threatened by an up-and-coming conservative rival, John McCain has voiced his support for the bill. Governor Jan Brewer, also threatened in the upcoming gubernatorial race, has signed the bill into law. Rasmussen polls suggest that 70% of Arizonans are in favor of the law, while a similar Gallup poll suggests that 51% of Americans (out of the 78% who have heard about the law) support it. On the other side, protests have broken out around the country, including a 50 000 person protest in Los Angeles led by singer Gloria Estefan. Regardless of the emotion, the Constitutionality, or the efficacy of the law, a crucial and often unmentioned question remains: is the bill actually good for Arizona? More specifically, what are the likely ramifications of such a law on an Arizonan economy, which is already struggling with a $3 billion budget deficit this year? In this particular case, a draconian immigration law such as this is likely to do more harm than good to Arizona’s economy.
The first and perhaps most obvious effect of the law is an exodus of undocumented immigrants. Is this a bad thing for the Arizonan economy? Some will say “no”: less undocumented immigrants means less competition for jobs and higher wages for unskilled labor. This is absolutely true in the short-run. George Borias and Lawrence Katz of Harvard University estimate that “illegal immigration caused a 3.6 percent reduction in the wages of non-high school graduates in the U.S. during 1980-2000″ . However, the influx of workers into these low-skilled jobs via illegal immigration greatly benefits the middle and upper classes in the U.S., who get cheaper goods without the drawback on increased job competition. According to the New York Times, the study originally cited a wage decrease of 8.2%, but shaved that number down as other factors were taken into account.
The second major economic argument of those who support SB1070 is that removing illegal immigrants frees the state of liabilities in health, education, and other social services. Again, this is a valid argument in the short-run. In their first years of work, undocumented immigrants do not pay as much into taxes as they use in services, not because of their undocumented status but because they are low wage and thus fit into a low tax bracket. It is a common misconception that illegal immigrants use more social services than citizens. In fact, studies have shown that the average immigrant costs the government less than half of the money spent on full citizens in social services. Another major misconception is that these immigrants do not pay taxes. Aside from sales taxes, two-thirds of undocumented immigrants pay payroll taxes, Social Security taxes, and Medicare taxes. Yet, without a social security number, undocumented immigrants are not eligible to receive Social Security nor Medicare benefits, and thus add a subsidy of about $1.5 billion to Medicare and about $7 billion to Social Security every year (that’s about 10% of Social Security’s current surplus). These workers can file taxes with the IRS using an Individual Tax Identification Number rather than a Social Security number. The mechanism was invented in 1996 to allow foreigners who need to file U.S. taxes the ability to do so, although most individuals with ITIN numbers are probably undocumented immigrants. The IRS does not share this information with other government agencies, and issued 1.5 million ITINs in 2006. Between 1996 and 2003, the IRS received $50 billion in tax payments through this method. Thus, as workers gain skills and their children become educated in the U.S., their family begins to pay positive dividends to the U.S. government.
Some studies do suggest a net cost to illegal immigration, including a study by the Center for Immigration Studies in D.C. which put the yearly net cost at $10.4 billion. Yet, the study drew intense criticism for failing to account for the revenues from American-born children of illegal immigrants. One study by the Tomas Rivera Policy Institute claimed a net cost of $179.2 million ($128 per undocumented immigrant), while a 2007 study by the White House Council of Economic Advisors estimated that immigrants and their descendants contribute as much as $80,000 (per capita, measured in 1996 dollars) more than they use. The Council also suggested a net gain to the U.S. economy of about $37 billion per year due to illegal immigration. In Arizona specifically, the Perryman Group estimates that the state would lose $26.2 billion in economy activity, $11.7 billion in gross state product, and approximately 140 324 jobs in the long run. It is not unreasonable to say that an attempt to drive out these workers in a state $3 billion past its budget may do more harm than good.
Less contested but equally significant is the idea that SB1070 will drive away documented Latinos and other minorities who feel targeted. This will have unanimously deleterious effects on Arizona’s economy. First, these immigrants will bring their purchasing power with them when they leave. One study by the University of Georgia’s Selig Center for Economic Growth claims that Latino purchasing power in the U.S. was $735.6 billion in 2005, and is quickly approaching $1 trillion per year. Immigrants will leave with their labor businesses, as well. A study by the University of Arizona suggests that Arizona’s immigrant workers contributed $44 billion to the Arizonan economy in 2004. Latinos owned 35 000 businesses, employed 39 363 people, and had sales receipts of $4.3 billion in 2002 (the last year for which data are available). It is unwise for the state of Arizona to drive this demographic away, if for no other reason than lost revenue.
Another significant cost is already becoming apparent: the cost of lawsuits against the State for racial profiling. Numerous examples provide a sense of how expensive such lawsuits can be. County supervisors in Prince William County, Virginia repealed a proposition increasing police enforcement of immigration law after hearing the estimated minimum cost: $14 million in five years. Sheriff Joe Arpaio of Maricopa County in Phoenix, Arizona has seen the cost of racial profiling lawsuits first-hand. His office faced 2 700 lawsuits between 2004 and 2007 alone That’s 50 times the number of lawsuits against the sheriffs of New York, Los Angeles, Chicago, and Houston combined. This has cost the state $43 million since his tenure in 1993.
Many non-Latino employers are also hurt by this bill, and might rationally decide to take their businesses elsewhere. The law explicitly curtails hiring workers on the street for day labor jobs by making it illegal to hire or be hired “if the motor vehicle blocks or impedes the normal movement of traffic” (SB1070). Day laborers are commonly hired out of trucks. The economic effects of this have yet to be studied, but are most likely far from negligible. Other more subtle effects are already being seen. Some out-of-state firms are refusing to do business in Arizona in protest of the law: the Arizona Hotel & Lodging Association was notified of 19 canceled meetings in the first week after the bill was signed into law. This represents a loss of $6 million in a single industry within the first week after the bill’s approval.
In the last two years, 100 000 immigrants have left Arizona due to immigration crackdowns and a bad economy. Regardless of moral, legal, or political affiliations, it is reasonable to predict a sharp contraction in Arizona’s economy due to SB1070. Arizona’s legislature cannot afford to ignore this.
Correction: The original version of this article suggested that the Center for Immigration Studies conducted the polls showing 70% of Arizona residents supported S.B. 1070. This was due to a misprint on the Center for Immigration Studies website – it was a Rasmussen poll that gave the above figures. The Stanford Progressive apologizes for the mistake.
10 Comments »
To my knowledge, the Center for Immigration Studies never commissioned a poll of AZ SB1070. I am referencing the below quote from your story.
“Arizona polls by the Center for Immigration Studies suggest that 70% of Arizonans are in favor of the law…”
Please correct this error. Or, if I am incorrect, please contact me.
Center for Immigration Studies
Some people just love spreading mis-information and outright lies.
SB 1070 is actually more lenient than federal law. The BP can pull people for absolutely no reason and demand ID while Arizona law enforcement officers can’t. Those that are here legally have nothing to worry about, only those here illegally and their advocates are having fits about it.
Aliens of the state are not all criminals, although some of them but not all. Some aliens were just scammed by an illegal recruiter or other stories like that. I think they should be given a chance to prove themselves that they are worthy to be in Arizona for the skill they have, give them pardon and pay for the taxes they missed.
I agree with Bradford Fleming that aliens need to have some opportunity to prove their skills or whatever than they can bee good citizens. I can’t imagine such way but I am not the person who runs this regions
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