Arizona as a Test Case for Immigration Effects on Employment

Lauren Godles

Lauren Godles is a student at Harvard Law School.

In Arizona, between 2007 and 2012, the number of undocumented immigrants dropped by forty percent.  The exodus has been largely attributed to two sweeping laws targeting undocumented immigrants: the Legal Arizona Worker’s Act (LAWA) (2008) and the controversial SB 1070 law (2010), which advocates on both sides of the issue called “the broadest and strictest immigration measure in generations.”  Though the 2008 nationwide economic downturn explains some of the departures, other large states similarly affected by the recession saw much smaller losses in immigrant populations. The next-largest drops from states with high concentrations of immigrants were 25% (New York), 13.6% (Illinois), and 12.5% (California).

The plunge in numbers in Arizona’s undocumented immigrant population offers a unique opportunity to evaluate the effects of immigration on employment for the workers who remained.  This post provides some background on the immigration laws and how Arizona’s employment landscape changed as its number of undocumented immigrants plummeted.

LAWA and SB 1070: A Refresher

In 2007, the Arizona Legislature passed LAWA, which went into effect in 2008.  The law mandated the use of the E-Verify work authorization program for all employers and instituted sanctions for employers who hired undocumented workers.  Though other states had also required E-Verify, at the time, Arizona’s law was deemed “the most comprehensive and restrictive.”  Subsequently, the Arizona Legislature took even more drastic measures in 2010 when it passed SB 1070.  That law’s stated purpose was to “discourage and deter the unlawful entry and presence of aliens and economic activity by persons unlawfully present in the United States.”  From 2010 to 2012, SB 1070 sparked massive protests within Arizona and nationwide.  The New York Times called it “the nation’s toughest bill on illegal immigration.”

LAWA remains intact, but four of the provisions of SB 1070 were challenged in court by the U.S. government on federal preemption grounds.  (Though many argued that the law constituted impermissible discrimination of the basis of race, that argument was not part of the government’s case.)  The four challenged provisions required law enforcement to investigate a person’s immigration status when there was “reasonable suspicion” that the person was undocumented, made it a crime to be in Arizona or apply for a job without valid immigration papers, and permitted police officers to arrest anyone without a warrant if they had probable cause to believe that person had committed an offense that would justify deportation.  The Supreme Court struck down all but the first of these (the so-called “show me your papers” provision) in Arizona v. United States in 2012.  Nevertheless, remaining legal barriers for immigrants, extreme anti-immigrant sentiment, and a heightened fear of being deported contributed to a massive departure of undocumented immigrants from Arizona.

Six Years Later: The Takeaways

Six years after the passage of SB 1070, data has begun to emerge about the law’s effects on Arizona’s economy.  Most notably, the Wall Street Journal recently released statistics on the impact of Arizona’s immigration policies from 2008 to 2015.  The article received increased attention when Ted Cruz cited it on the campaign trail as evidence that Arizona’s policies saved the state hundreds of millions of dollars.  But, as CBS pointed out, the overall impact is more mixed than Cruz suggested.  And, using the Wall Street Journal’s own statistics, Mother Jones points out that the net effect of the massive immigrant departure is a deficit of over 5.5 billion for the state.

The economic rationales behind LAWA and SB 1070 were that they would cause undocumented immigrants to leave the state, which would shrink the workforce.  Then, in order to attract workers from the diminished labor pool, employers would raise wages, resulting in benefits to native and documented workers.  Some also hoped it would open farm jobs to the unemployed.  However, contrary to proponents’ expectations, in the wake of the massive immigrant exodus, Arizona experienced 1) a labor shortage with only marginal benefits to native workers and 2) wage levels that increased at a rate no faster than those of neighboring states, which did not experience the same declines in immigrant populations.  This post will analyze these two consequences in turn.

1) Effects on Employment: A Labor Shortage

Arizona has experienced a notable worker shortage since the implementation of LAWA and SB 1070, especially in industries that rely heavily on immigrant labor—documented or not.  In the years immediately following LAWA, researchers at the Public Policy Institute of California found that there the law resulted in no benefit (or harm) to native workers.  And Moody’s Analytics found that since 2008, low-skilled native and documented immigrants took over “less than 10% of jobs once held by undocumented immigrants.”

Within specific, immigrant-dependent industries, the changes were particularly stark.  For example, the construction industry in Arizona today has only half the number of jobs that it did in 2006, before the economic recession.  Furthermore, in an analysis of data from the Bureau of Labor Statistics, the Cato Institute found that Arizona’s employment levels in Construction, Building Construction, Agriculture, and Crop Production decreased faster and did not recover nearly as well as those in the neighboring states of California, Nevada, and New Mexico.  Though a loss of jobs coupled with a loss of workers is not necessarily bad for the labor market, the loss had significant consequences for the state as a whole.  Arizona experienced a significant decline in its GDP from 2008-2014, which the Wall Street Journal directly attributes to the loss of undocumented immigrants.

Finally, despite the existence of a labor shortage, Arizona still has a surprisingly high unemployment rate.  In fact, in 2013, the border-town of Yuma, Arizona had the nation’s highest unemployment rate, with almost a third of the population unemployed.  Moreover, the unemployment rate for the state overall has remained comparable to or been higher than that of neighboring states, suggesting that the immigrant exodus did not help to reduce unemployment levels.

2) Effects on Wages: No Greater Increases than in Neighboring States

In the wake of Arizona’s immigrant exodus, wages have faired slightly better than employment levels.  Wages increased in farm work by 15% and in construction by 10%.  However, these increases do not appear to be attributable to the immigrant exodus.  The same Cato Institute analysis cited above concluded that the wages in Construction, Building Construction, Agriculture, and Crop Production increased no more than comparable wages in neighboring states.

What’s Behind The Surprising Results?

No one can state definitively why the immigrant exodus has not created the anticipated boon to native workers, but there are some interesting hypotheses being circulated.  One is that the benefits haven’t been realized because the immigrants, instead of leaving jobs open for native and documented immigrant workers, simply “took their jobs with them” to Mexico and other states.  A second hypothesis is that there simply aren’t many low-skilled native-born workers, meaning the immigrants are “filling gaps in the labor force.”  This explanation is plausible given the simultaneous labor shortage and significant unemployment rate in Arizona.  Finally, the American Center for Progress posits that “immigrants don’t simply ‘fill’ jobs; they create jobs,” because of the demand for goods and services they create.

Though most of the findings described here were published by journalists, the effects of Arizona’s immigrant exodus on the state’s economy have been remarkable as compared to its neighbors.  Similar economic harms have also been seen in other states with analogous immigration policies.  Policymakers debating such legislation today would do well to take note of the effects on Arizona’s economy before endorsing such restrictive measures.

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