World Economy

Trump Deportation Threats Will Restrain US Job Market

Undocumented workers are heavily concentrated in sectors such as agriculture, construction and hospitality.Undocumented workers are heavily concentrated in sectors such as agriculture, construction and hospitality.

President Donald Trump’s sweeping crackdown on undocumented immigrants will strain an already tight US job market, with one study suggesting that removing all of them would cost the economy as much as $5 trillion over 10 years.

That represents the contribution of the millions of unauthorized workers to the world’s largest economy, about 3% of private-sector gross domestic product, according to a recent paper issued by the National Bureau of Economic Research. 

At an average of $500 billion in output a year, removing all such immigrants would be like lopping off the equivalent of Massachusetts from the US economy, said study co-author Francesc Ortega, Bloomberg reported.

 “It’s a big number,” said Ortega, an economics professor at Queens College in New York, who published the study in November with colleague Ryan Edwards. “Undocumented workers are present across the whole economy, even if they are heavily concentrated in sectors such as agriculture, construction and hospitality.”

Any undocumented immigrant may now be deported, according to a pair of memos issued Tuesday by the Department of Homeland Security implementing Trump’s executive orders. 

In the memos, the administration pledged to hire 15,000 more border patrol and immigration agents and begin building a wall on the Mexican border. 

There were about eight million unauthorized immigrants in the US working or looking for work in 2014, with California, Texas and New York accounting for the largest share of the workforce, according to Pew Research Center estimates. 

Most of them are likely to be of working age, which makes them about 5% of the US labor force and 3.5% of the total US population. Unauthorized immigrants include those who enter the country without legal permission and those who overstay their visas.

 Tight Market

Following through on plans to deport undocumented workers would hit industries that already complain of worker shortages, said Ethan Harris, Bank of America Merrill Lynch’s head of global economics in New York.

The jobless rate in the US was 4.8% in January, a level some economists consider to be full employment.

“The challenge is particularly high now because the labor market has tightened up not just overall but in areas in which you would think undocumented immigrants would be important, so that means that it’s going to be hard to fill these jobs if you deport these employees,” Harris said. “You have to think about indirect effects when you disrupt production in industries in which they’re a critical part of getting things done. 

So there’s a transition cost, as well as the cost of a reduced labor force.”

Harris estimates that for every one million fewer workers in the economy, GDP would be reduced by about 0.5%. That’s the equivalent of $94 billion, based on the annualized pace of $18.9 trillion in fourth-quarter GDP.

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