Arizona Republic
July 20, 2007


(Phoenix, AZ) Author: Robert Robb, The Arizona Republic Estimated printed pages: 3

The business community is reluctant to make an honest argument against the new state legislation imposing sanctions on employers who knowingly hire illegal workers.

If they were to make an honest argument, it would be this: Arizona's economy depends on illegal workers. Therefore, without amnesty and a generous guest-worker program, we shouldn't be denied access to an illegal workforce.

It's worth noting that this is, in essence, a concession that requiring employers to use the federal program to electronically verify work eligibility will work -- that it will cut off access to illegal workers.

But what about the broader claim, that Arizona's economy is dependent on an illegal workforce?

A recent study by the Udall Center at the University of Arizona purports to shed some light on that question, evaluating the effects of immigration, legal and illegal, on state finances and the state economy.

The study reasonably treats foreign-born non-citizens as a proxy for illegal immigrants in Arizona. According to the study, foreign-born non-citizens cause $1.246 billion in annual education, health care and incarceration expenses. They generate $1.076 billion in state taxes, for a net deficit of $170 million.

I understand that the Udall study will be revised to increase the calculated tax contribution from illegal immigrants, but an argument can be made that the current figure is already overstated. It includes not only taxes paid directly by illegal residents but also the taxes paid by others supposedly as a result of their economic activities.

Additionally, education expenses are substantially understated.
English-language learners are used, again reasonably, as a proxy for the children of illegal immigrants in the school system. However, only the state's basic support level and direct English-learner supplemental funding is counted. That excludes all capital spending and funding from other state and local sources. Illegals would, of course, pay part of the local contribution, but since such revenues are derived principally from property taxes, which skew toward business, not much.

The Udall report cites a figure of $544 million for the overall cost of educating the children of illegal immigrants. The true pro rata share of all state and local taxpayer costs would be closer to $1 billion.

National studies increasingly indicate that low-wage workers consume more in public services than they contribute in taxes. There's nothing in the Udall report to suggest that Arizona is any different.

According to the study, illegal immigrants are responsible for about 8 percent of Arizona's economic output. It asserts that, if the illegal workforce were to dry up, most of that output would disappear as well.
That's because illegal workers tend to be poorly educated compared with legal workers, so the assumption is that their labor is not substitutable.

However, the occupation analysis in the study belies that conclusion.
Illegal workers are reported to constitute 48 percent of the Arizona farming workforce and 44 percent in landscaping. The next highest figure is only 31 percent. That means that for most jobs currently being done by illegals, at least two-thirds of the workers in that occupation are legal.

If the illegal workforce went away, wages would probably increase, attracting a larger number of legal workers to Arizona. The true substitution effect would likely be substantial.

However, let's assume the entire 8 percent contribution evaporated. Since 1990, when illegal immigration began to surge, Arizona's economy has increased by 235 percent, 78 percent faster than the national average. In fact, during this period, Arizona has had the second fastest-growing economy in the country, ranking behind only Nevada.

If today's economy were 8 percent smaller, removing the increment the Udall report attributes to illegal immigration, Arizona's economic growth still would have been 58 percent faster than the national average and still would have ranked fourth highest among the states.

This is not to sugarcoat the potential economic consequences of the employer-sanctions bill. More workers mean more output. Cutting off access to illegal workers will result in a smaller economy. Reducing access to an estimated 12 percent of the existing workforce will make for a very difficult transition.

Overall, however, the state's business community has the relationship in reverse. Arizona does not have a strong economy because it has a large number of illegal immigrants. Arizona has a large number of illegal immigrants because it has a strong economy.

Reach Robb at or (602) 444-8472. His column appears Sundays, Wednesdays and Fridays. Read his blog at
Edition: Final Chaser
Section: Opinions
Page: B5