The Underground Labor Force Is Rising To The Surface
Robert Justich and Betty Ng, CFA
January 3, 2005
Illegal immigrants constitute a large and growing force in the political, economic, and investment spheres in The United States. The size of this extra-legal segment of the population is significantly understated because the official U.S.Census does not capture the total number of illegal immigrants. In turn, the growth of the underground work force is increasingly concealing the economic impact of this below-market labor supply.
Our research has identified significant evidence that the census estimates of undocumented immigrants may be capturing as little as half of the total undocumented population. This gross undercounting is a serious accounting issue, which could ultimately lead to government policy errors in the future.
Though we cannot conduct an independent census of the United States population, as investors, we need not accept the accuracy of the official census immigration statistics, which are widely recognized as incomplete. There are many ancillary sources of data that provide evidence that the rate of growth in the immigrant population is much greater than the Census Bureau statistics.
School enrollments, foreign remittances, border crossings, and housing permits are some of the statistics that point to a far greater rate of change in the immigrant population than the census numbers. At the risk of appearing dogmatic or taking a leap of faith, we have applied the rate of growth from these other areas and have drawn several conclusions about the current immigration population:
1. The number of illegal immigrants in the United States may be as high as 20 million people, more than double the official 9 million people estimated by the Census Bureau.
2. The total number of legalized immigrants entering The United States since 1990 has averaged 962,000 per year. Several credible studies indicate that the number of illegal entries has recently crept up to 3 million per year, triple the authorized figure.
3. Undocumented immigrants are gaining a larger share of the job market, and hold approximately 12 to 15 million jobs in the United States (8% of the employed)
4. Four to six million jobs have shifted to the underground market, as small businesses take advantage of the vulnerability of illegal residents.
5. In addition to circumventing the Immigration Reform and Control Act of 1986, many employers of illegal workers have taken to using unrecorded revenue receipts. Employer enforcement has succumbed to political pressure.
6. Cell phones, internet and low-cost travel have allowed immigrants easier illegal access to the United States and increased their ability to find employment and circumvent immigration laws.
We believe that immigration is becoming one of the most significant economic themes of this decade. The investment implications for 2005 and 2006 will hinge on the forthcoming government policy decisions in amnesty, employer enforcement, and monitoring systems, as well as the effective enforcement of the laws. Over the coming year, we intend to monitor and analyze the benefits and costs of assimilating a demographic group the size of New York State into the financial and legal mainstream. Though this challenge is not quite the magnitude of, say, German reunification, we believe most investors are underestimating the magnitude and significance of this theme.
That link screwed up my system. May be as high as, isn't as high as. It's a speculative argument. Got some data to support this, or just some pdf file that doesn't open in my system?