Legalizing Undocumented Workers Could Hit Construction GDP

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By Elliott T. Dube

Nov. 17 — Removing undocumented workers from the construction industry would ultimately decrease industry GDP by about 8 percent, a research group estimates.

If the construction industry excluded undocumented workers, it would face a short-run drop in its gross domestic product of $30.9 billion (about 5 percent) and a long-run decrease of $47.6 billion from the industry’s GDP in 2013 of $619.87 billion, according to a working paper released Nov. 14 by the National Bureau of Economic Research, a nonpartisan group that distributes research findings among academics, public policy makers and business professionals.

If undocumented workers gained legal status it would cause a short-run increase in the construction industry’s GDP of 1.2 percent ($7.7 billion annually) and a long-run increase of 1.9 percent ($12.1 billion annually), the report calculated.

Wholescale legalization and mass deportation are both “extreme scenarios” that are unlikely to occur in the foreseeable future, Randy Capps, director of research for U.S. programs at the Migration Policy Institute, told Bloomberg BNA Nov. 16. The Migration Policy Institute is a think tank that says it favors “fair, smart, transparent, and rights-based immigration and refugee policies.”

The report goes a “little bit further than some of the past research” and importantly focuses on industry-specific productivity effects of immigration policy, Capps said.

But the notions either that legalizing undocumented workers would give industry GDP a major boost or that removing them would cause a major productivity decrease deserve skepticism, Ira Mehlman, a spokesman for the Federation for American Immigration Reform, which advocates for lower immigration levels, told Bloomberg BNA Nov. 15.

Immigration Observers Differ on Findings

The report’s researchers, economics professors Ryan Edwards and Francesc Ortega at Queens College in New York, said their distinction between short- and long-run effects is whether the capital stock is assumed to remain fixed or adjusts over time following workforce changes.

With respect to a homebuilder, for instance, an immediate loss of labor power would translate into a short-term reduction in the number of houses the company can build, Capps said.

“But over the longer term, you’re going to have to pay workers more,” he said. “That’s going to make your houses more expensive to build, and that’s going to affect the planning of how many you can afford to build, and that’s going to mean some construction firms leave the industry. That’s where capital adjustment comes into play.”

The report’s findings linked to the theoretical removal of undocumented workers should be taken with a grain of salt, Mehlman said. He downplayed the report’s estimated hit to construction industry GDP caused by undocumented workers’ removal.

“You have millions of people here who are unemployed or marginally employed,” Mehlman said. “There’s no reason to believe that they wouldn’t fill whatever vacuum is left by enforcing laws against illegal aliens.”

Meanwhile, the legalization of undocumented workers would provide a “better matching of workers with their skills” and unlock higher paying jobs and construction trade certification opportunities for some workers, Capp said.

On the other hand, many workers would use their newfound labor market mobility to leave behind physically demanding jobs with low pay, Mehlman said. He pointed to the 1986 enactment of the Immigration Reform and Control Act, which made more than 1 million undocumented seasonal agricultural workers eligible for legal status. Many of those workers left the agricultural sector, he said.

Report Gauges Undocumented Share of Workforce

There were about 1.1 million undocumented workers in the construction industry for the 2011-2013 period, making up a 13 percent share of the industry workforce, Edwards and Ortega found.

Most of the paper’s analysis stems from data for the years 2011-2013 from the Census Bureau’s American Community Survey as processed by the Center for Migration Studies.

The researchers’ methodology took into account the skill distribution of undocumented workers, their relative productivity and their substitutability in terms of both native and documented foreign-born workers, the report said.

To contact the reporter on this story: Elliott T. Dube in Washington at edube@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

The NBER working paper is available for purchase at http://www.nber.org/papers/w22834.

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