Michael Hicks, Ph.D., director Bureau of Business Research, Ball State University
Few issues garner as much vitriol as the debate over illegal immigration. The dimensions of the debate are wide ranging, but as with most aspects of public policy, they are heavily influenced by economic issues. Indiana has embarked on an immigration debate, and so a bit of economics might be helpful.
First, according to the most reliable recent data, Indiana is underrepresented by illegal immigrants compared to neighboring states. I have seen estimates of between 45,000 to over 100,000, a number that varies seasonally with the agricultural industry. This is as much as 1.5 percent of our state's population. These workers add perhaps $3.5 billion to our state's economy each year.
Wages for illegal immigrants are undoubtedly lower than for either native workers of the same age cohort or legal immigrants (who, because of their tendency for high educational achievement actually earn, on average, more than native workers).
The very best evidence concludes that illegal immigration has not affected domestic wages, even at the low end of the scale. And, with a statewide unemployment rate of 4.6 percent illegal immigrants are certainly not costing U.S. citizens jobs. An American competing with an illegal immigrant has far bigger worries than job competition from illegal immigrants.
Illegal immigrants also use public services; schools, health care and sadly, the legal system. Illegal immigrants also pay taxes. In Indiana, immigrants pay income tax, sales tax and fees. At the federal level, illegal immigrants who employ falsified documents also pay income taxes and payroll taxes (FICA), which combine to somewhere between 15 and 20 percent of their incomes. Illegal immigrants pay taxes exactly like citizens.
Illegal immigrants cannot claim social security benefits or income tax refunds, so their marginal tax rate will be much higher than native workers. In truth, illegal immigrants are not very costly. The net cost to public coffers of an illegal immigrant is actually less than that for a legal resident making the same income.
Ironically, illegal immigrants are probably the only workers with below average income who pay federal taxes.
It is currently against Federal law to hire illegal immigrants. Proposed legislation in Indiana (Senate Bill 335) would provide state penalties for businesses hiring illegal workers.
I frankly do not believe the bill's sponsors are racist or anti-immigrant. After all, the typical illegal immigrant is a social conservative, with strong family ties and an admirable work ethic. These are the types of people the bill's sponsors should openly be courting.
I am afraid of the unintended consequences of this bill.
First, state level immigration laws increases costs for all businesses. Firms will be forced to alter hiring policies by their insurers, who will almost certainly raise liability rates. Second, this bill will almost certainly increase the probability of lawsuits. Third, this bill would single out Indiana as a place with more restrictive employment laws. That won't aid our business climate.
So, as we balance the complex issues of immigration, the economics of the matter deserve some attention.