The Arizona Experiment

I guess we will soon find out if employer sanctions work:

Arizona businesses are firing Hispanic immigrants, moving operations to Mexico and freezing expansion plans ahead of a new law that cracks down on employers who hire undocumented workers.

The law, set to take effect on Jan. 1, thrusts Arizona into the heart of the national debate on illegal immigration, which has become a hot topic on the presidential campaign trail. Republican candidates, in particular, have been battling to show how tough they are on the issue.

Arizona's law, believed to be the strictest in the nation, is shaping up as a test of how employers will react when faced with real sanctions for hiring undocumented labor. It is being closely watched by businesses across the country. While proponents say the crackdown will save the state money on services for illegal immigrants, some businesspeople fear Arizona's economic growth may be at risk.

Under the law, people will be encouraged to contact a county sheriff's or county attorney's office to report businesses they suspect of employing an illegal immigrant. After the sheriff investigates, the county attorney can then seek to suspend and ultimately revoke the business license of an employer who knowingly hires an illegal immigrant. The measure would also require all Arizona businesses to use E-Verify, a federal online database, to confirm that new hires have valid Social Security numbers and are eligible for employment.

The WSJ article also makes reference to a University of Arizona study that allegedly predicts what will happen to Arizona's economy. Here is the summary:

A University of Arizona study released earlier this year concluded that economic output would drop 8.2% annually if noncitizen foreign-born workers were removed from the labor force. Researchers estimate about two-thirds of the workers in that category are in the state illegally.

"Getting rid of these workers means we are deciding as a matter of policy to shrink our economy," says Judith Gans, an immigration scholar at the university's Udall Center. "They're filling vital gaps in our labor force."

It doesn't take a doctorate in nuclear physics to deduce that GDP will fall when the labor force shrinks. But a more relevant question is: what happens to per-capita GDP? If one takes economic theory seriously (and if the aggregate production function in Arizona has constant returns) one would expect no change in per-capita income as a result of this newly found enthusiasm for employer sanctions.

Having read too many of these types of studies, I know which adjectives to look for to figure out the spin the writers are trying to push. The give-away adjective here is "vital." As far as I know, the concept of "vital workers" is not defined or mentioned in any of the leading textbooks in labor economics.

Comments

[T]

"some businesspeople fear Arizona's economic growth may be at risk"

No, some businesspeople fear they will have to hire Americans at higher wages...

[George Weinbaum]

You write, "It doesn't take a doctorate ... " Many years ago, when I was a young CPA with an MBA from Chicago, I took economic statistics much more seriously than I do today. I long ago concluded you can get a professor from some school, maybe even: Harvard, Stanford, Chicago, et., to say ALMOST ANYTHING. Therefore, when faced with economic statistics, user beware. Oskar Morgenstern wrote a humbling book about economic observations in 1950. Nothing's changed since then

[äml]

Not all "noncitizen foreign-born workers " are low skilled illegal immigrants who sneaked in from the Mexican border without a visa or a passport.

In fact, the most productive (i.e. those contributing most to the GDP) of the foreign workers are scientists and engineers who work in the high-tech, high-value added industries, and who have valid work visas. These are the folks who are "vital" to the economy.

Ergo, any study that confuses these two fundamentally different groups of workers is useless.

[anon]

To aml -

No, even the so-called high tech workers are being used as cheap labor. There is no shortage of able and willing American engineers.

Yes, the high tech workers are legal - but that's only because of the fraud and abuse in the way visas are granted and how the wage rules are written and enforced.

I work in IT - I know the devastation that has been caused by these visas.

[MDT]

Yes, Legal <> Vital.

There is a whole lot of abuse and discrimination against US workers in IT and software. It has made that field low wage, low skills and not accessible to Americans.
http://itmanagement.earthweb.com/article.php/3714756