The Trump administration has committed to deport millions of undocumented immigrants. However, such wide-reaching deportations are costly. Deportations carry significant direct costs. Wholescale deportations undermine the US labour market, put loan repayments at risk, and harm immigrants’ US citizen dependents. The administration should weigh these costs when designing an efficient immigration policy.
The United States government has sought to curb illegal immigration. The administration claims that this is to ensure citizens’ safety and security. Nevertheless, the government should find the most economically efficient solution. Mass deportations are not it.
Recent legislation has targetted undocumented immigrants. The House has passed legislation has addressed sanctuary cities1 and people who repeatedly enter the US illegally.2 The Department of Homeland Security (DHS) has issued memos,3 which potentially place most4 of the 11 million undocumented immigrants at risk of deportation. These cement the approach in President Trump’s executive orders5. The deportations are potentially wide-reaching.
These deportations can have economic consequences. These involve shocks to labour supply, lending, and to US citizen dependents. This is in addition to the significant cost of deportation itself. These costs should be considered when pursuing any deportation plan.
Undocumented immigrants are a useful source of labour in some sectors. Undocumented immigrants constituted around 8 million, or 5%, of the workforce in the United States according to the Pew Research Center.6 This has remained relatively stable7 since 2009. This labour spikes in several key states,8 such as Nevada, California, Texas, and Florida.
Figure 1: Unauthorised Immigrant Labour Force Participation, By State
This graph contains unauthorised immigrant labour participation by state in 2014. Data is from the Pew Research Center.9
Undocumented immigrants are unlikely to be “stealing” citizens’ jobs. Undocumented immigrants often work in less desirable jobs that citizens often shun, and will often do so at lower cost. This manifests in unauthorised labour concentrating in specific industries. US businesses might not be able to directly replace undocumented immigrants, and if they did, would face lower profits. This, in turn, undermines corporate growth and future job creation.
Figure 2: Unauthorised Immigrant Participation in Certain Industries
This figure contains the percent of the labour force comprised of unauthorised immigrants, by industry, in 2014. The data is from the Pew Research Center.10
Recent estimates highlight the significant cost to growth of mass deportations. Deporting all 11 million undocumented immigrants is estimated11 to reduce the US GDP by $1.6 trillion. This should be a major deterrent to wholescale deportations.
Illegal immigrants can take out loans, and indiscriminate deportations put those at risk. Illegal immigrants can borrow money to buy property,12 and cars, for example. Such loans can be to people who were originally lawful residents, but who overstayed their visas. It can also arise because some lenders will lend if the borrower provides an Individual Taxpayer Identification Number (ITIN), which an undocumented immigrant could obtain, rather than requiring a Social Security Number (SSN).
Deported immigrants remain liable for that debt. However, deported immigrants are unlikely to have the income to service the debt. This is significant: 35% of all undocumented immigrant households are homeowners, rising to 45% in those households that have been in the US for at least a decade.13 Many of these homeowners will own their properties outright. However, at least some will have incurred debt, which would be put at risk under mass deportations.
Illegal immigrants can have dependents who are US citizens. As a general rule, people born in the United States are automatically citizens. Around 8% of all births in the United States are to illegal immigrants.14 Around 4 million undocumented adults live with their US born children, a number that is only increasing as heretofore undocumented immigrants start families.15
Deporting productive members of society with dependents risks those dependents’ future education and career outcomes. Children have better career and education outcomes when they live in a stable family environment. Deporting undocumented parents leaves those children reliant on other family members, if they exist, or the state-based childcare system.
Deportations thus impose future costs. These costs arise from increased welfare payments, reduced future productivity, and reduced tax revenue. Disrupting families also jeopardises future entrepreneurship, which is ordinarily a key benefit of allowing immigration.
Mass deportations will further encumber the already overburdened immigration system. The immigration department faces a backlog of at least 500,000 cases,16 which take around two years to resolve, on average.17
Increased deportations with exacerbate these problems. Several cities have sought to raise funds to help fight deportation cases. These include a $10 million fund sought in Los Angeles,18 a $1 million fund sought in in Seattle,19 and the allocation of $10 million to undocumented immigrants’ cases in New York.20 These resources would further prolong deportation cases, and add to the cost and backlog already inherent in the system.
The deportations themselves are also costly. ICE indicates that the cost of deporting one undocumented immigrant is $10,854. ICE spent $3.2 billion deporting undocumented immigrants in 2016.21 ICE removed nearly 250,000 undocumented immigrants in 2016.22 Even deporting an additional one million immigrants over President Trump’s four-year term would more than double ICE’s existing workload. The American Action Forum argues that deporting all 11 million undocumented immigrants would cost $400-600 billion, so even deporting one million such immigrants would cost at least $35-55 billion.23
Where To From Here
Mass deportations will hurt the economy. Undoubtedly, some undocumented immigrants do drain the United States economy. However, mass deportations risk further economic costs. Indeed, immigration brings myriad economic benefits.24 Immigrants also are especially prone to establish new businesses,25 which, in turn, drive economic growth. A more productive approach would seek to leverage these economic benefits. The government should further weigh the costs of deportations when considering whether to embrace such a policy.
About the Author
Mark Humphery-Jenner is an Associate Professor of Finance at UNSW Business School. His research spans Corporate Finance, Venture Capital, and Law. He has published and forthcoming papers in finance journals including the Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Review of Finance, Journal of Financial Intermediation, and Journal of Corporate Finance.
1. No Sanctuary for Criminals Act 2017. Available from: https://judiciary.house.gov/wp-content/uploads/2017/06/GOODLA_028_xml.pdf
2. Kates Law 2017. Available from: https://judiciary.house.gov/wp-content/uploads/2017/06/GOODLA_029_xml.pdf
3. United States Department of Homeland Security. 2017. Memorandum “implementing the President’s Border Security and Immigration Enforcement Improvements Policies.” Available from: https://www.dhs.gov/sites/default/files/publications/17_0220_S1_Implementing-the-Presidents-Border-Security-Immigration-Enforcement-Improvement-Policies.pdf
4. Casselman, Ben and Bacon, Perry. FiveThirtyEight. 2017. “How Trump’s New Plan Affects The 11 Million Undocumented Immigrants In The U.S.” Available from: https://fivethirtyeight.com/features/how-trumps-new-plan-affects-the-11-million-undocumented-immigrants-in-the-u-s/
5. Executive Order: Enhancing Public Safety in the Interior of the United States. 2017. Available from: https://www.whitehouse.gov/the-press-office/2017/01/25/presidential-executive-order-enhancing-public-safety-interior-united
6. Krogstad, Jens Manuel and Passel, Jeffrey S and Cohn, D’Vera. 2017. “5 facts about illegal immigration in the U.S.” . Available from: http://www.pewresearch.org/fact-tank/2017/04/27/5-facts-about-illegal-immigration-in-the-u-s/
7. Passel, Jeffrey S and Cohn, D’Vera. 2016. “Size of U.S. Unauthorized Immigrant Workforce Stable After the Great Recession”. Available from: http://www.pewhispanic.org/2016/11/03/size-of-u-s-unauthorized-immigrant-workforce-stable-after-the-great-recession/
8. Pew Research Center. 2016. “U.S. unauthorized immigration population estimates”. Available from: http://www.pewhispanic.org/interactives/unauthorized-immigrants/
9. Pew Research Center. 2016. “Estimated unauthorized immigrant population, by state, 2014.” Pew Research Center. Available from: http://www.pewhispanic.org/interactives/unauthorized-immigrants/
10. Passel, Jeffrey S. and D’Vera Cohn. 2016. “Size of U.S. Unauthorized Immigrant Workforce Stable After the Great Recession.” Pew Research Center. Page 27.
11. American Action Forum. 2015. “The true cost of Trump’s immigration plan”. Available from: https://www.americanactionforum.org/oped/true-cost-trumps-immigration-plan/
12. Huseman, Jessica. 2014. National Mortgage News.“Setting the Record Straight on Mortgages for Undocumented Immigrants”. Available from: https://www.nationalmortgagenews.com/news/setting-the-record-straight-on-mortgages-for-undocumented-immigrants
13. Passel, Jeffrey S and Cohn, D’Vera. 2009. Pew Research Center. “A portrait of unauthorized immigrants in the United States: Social and Economic Characteristics”. Available from: http://www.pewhispanic.org/2009/04/14/iv-social-and-economic-characteristics/
14. Passel, Jeffrey S and Cohn, D’Vera. 2015. Pew Research Center. “Number of babies born in U.S. to unauthorized immigrants declines”. Available from: http://www.pewresearch.org/fact-tank/2015/09/11/number-of-babies-born-in-u-s-to-unauthorized-immigrants-declines/
15. Passel, Jeffrey S and Cohn, D’Vera and Krogstad, Jens Manuel and Gonzalez-Barrera, Ana. 2014. Pew Research Center. “As Growth Stalls, Unauthorized Immigrant Population Becomes More Settled”. Available from: http://www.pewhispanic.org/2014/09/03/as-growth-stalls-unauthorized-immigrant-population-becomes-more-settled/#parents-of-u-s-born-children
16. The Economist. 2017. “Congress and the courts will poke holes in the president’s deportation plans”. Available from: http://www.economist.com/news/united-states/21717387-barack-obamas-administration-deported-hundreds-thousands-people-every-year-donald
17. Blitzer, Jonathan. 2017. The New Yorker. “What Will Trump Do with Half a Million Backlogged Immigration Cases?”. Available from: http://www.newyorker.com/news/news-desk/what-will-trump-do-with-half-a-million-backlogged-immigration-cases
18. Smith, Dakota. 2017. Los Angeles Times. “A $10-million fund will help immigrants fight deportations. But should it help those with violent criminal convictions?”. Available from: http://www.latimes.com/local/lanow/la-me-ln-la-justice-fund-20170417-story.html
19. Beekman, Daniel. 2017. The Seattle Times. “Seattle wants $1M legal-defense fund for immigrants facing deportation”. Available from: http://www.seattletimes.com/seattle-news/politics/seattle-wants-1m-legal-defense-fund-for-immigrants-facing-deportation/
20. Blanco, Octavio. 2017. CNN Money. “New York to provide lawyers for immigrants facing deportation”. Available from: http://money.cnn.com/2017/04/13/news/economy/new-york-immigrant-legal-defense-fund/index.html
21. Blanco, Octavio. 2017. CNN Money. “How much it costs ICE to deport an undocumented immigrant”. Available from: http://money.cnn.com/2017/04/13/news/economy/deportation-costs-undocumented-immigrant/index.html
22. S. Immigration and Customs Enforcement. “FY 2016 ICE Immigration Removals”. Available from: https://www.ice.gov/removal-statistics/2016
23. American Action Forum. 2015. “The true cost of Trump’s immigration plan”. Available from: https://www.americanactionforum.org/oped/true-cost-trumps-immigration-plan/
24. The National Academies of Science, Engineering, and Medicine. 2017. “The Economic and Fiscal Consequences of Immigration”. Available from: https://www.nap.edu/catalog/23550/the-economic-and-fiscal-consequences-of-immigration
25. Kerr, Sari Pekkala and Kerr, William R. 2016. Harvard Business Review. “Immigrants Play a Disproportionate Role in American Entrepreneurship”. Available from: https://hbr.org/2016/10/immigrants-play-a-disproportionate-role-in-american-entrepreneurship