Tanvi Misra is a staff writer for CityLab covering immigrant communities, housing, economic inequality, and culture. She also authors Navigator, a weekly newsletter for urban explorers (subscribe here). Her work also appears in The Atlantic, NPR, and BBC.
Trump wants to deport 11 million immigrants. Here are the likely economic consequences of that.
California could lose $100 billion of its GDP, annually. Texas could lose $60 billion. New Jersey, $25 billion. All but 5 U.S. states would see at least 1 percent of their GDP disappear each year. The resulting nationwide losses would build up to about $4.7 trillion in ten years.
This gloomy hypothetical scenario isn’t the economic fallout of some Wall Street meltdown or global currency crisis, although it certainly sounds like it. It’s the potential consequence of deporting around 11.3 million undocumented immigrants in the U.S., as Republican presidential nominee Donald Trump plans to do.
The numbers come from a new report by the Center for American Progress, in which researchers from the progressive think tank calculated the short-term and long-term economic impacts of Trump’s mass deportation policy. As far as estimates go, these are conservative ones. The report focuses only on the 7 million undocumented people who are a part of the labor force—the producers of goods and services. It doesn’t include the economic contributions of the 11 million undocumented consumers.
The researchers use a model that takes into account the differences and similarities between undocumented workers and others in the U.S. labor force, such as education, wages, and industries in which they work. The immediate impact? A 1.4 percent drop in GDP per year—and that’s purely from the loss of workers. Eventually, that average annual loss climbs to 2.6 percent, or $434.4 billion (in 2013 dollars). And in ten years, America would be $4.7 trillion poorer.
That impact compounds over time because when 7 million workers leave the labor force, the capital stock (tools and equipment firms invest in to help employees perform their jobs) have to contract. The report explains:
Because capital will adjust downward to a reduction in labor—for example, farmers will scrap or sell excess equipment per remaining worker—the long-run effects are larger and amount to two-thirds of the decline experienced during the Great Recession.
After subtracting 7 million workers, there will also be fewer incomes to tax. (Yes, these folks pay taxes.) It’s also likely that the government will spend more on programs like Social Security and Medicare, which undocumented immigrants contribute to substantially. By 2026, therefore, the federal revenues would shrink by $900 billion and debt will rise $982 billion. “Unsustainably high levels of the debt-to-GDP ratio may ultimately raise interest rates and choke off economic growth,” the report reads.
The hardest hit industries would, of course, be the ones heavily dominated by undocumented labor. Agriculture, construction, and hospitality might see decreases of 10 to 18 percent in their workforces—so, far fewer people to build and staff Trump’s hotels. But the big industries, like financial services, manufacturing, and wholesale and retail, would lose the largest amounts in actual dollars: upwards of $50 billion.
CAP has designed a nifty interactive to show how these losses play out state-by-state. Find out how much your state or industry will lose below:
But wait: Wouldn’t the 7.8 million unemployed native-born workers in the U.S. take up all those vacancies left behind?
This is indeed the scenario trumpeted by right-wing media platforms. The CAP report doesn’t explore this possibility in any detail, but it does note that “current unemployment rates are low in most industries” and that most undocumented immigrants are now doing jobs that offer lower pay. So, the incentives for native-born workers to either work longer hours or take up positions undocumented workers left behind are likely “small and short-lived,” the report reads.
But let’s look closer. In theory, it’s entirely possible that some unemployed Americans might take up the now-open jobs of the deported workers. However, a clean swap of 7 million undocumented immigrant workers with 7 million native-born-but-currently-unemployed ones isn’t really how the labor force works. Most important: The number of jobs isn’t fixed. That false assumption—economists call it the “lump of labor fallacy”—is necessary to make the claim that immigrants are displacing American workers, and that those jobs will fall right back in the laps of Real Americans if those immigrants are forced to leave.
If anything, evidence suggests that immigrants actually increase employment among native-born workers. Why? For one, they’re consumers, and they generate demand for goods and services that native-born workers can provide. Second, they start businesses. Third, they do different types of low-wage jobs than U.S. workers—even within the same industries. In a restaurant, for example, an undocumented immigrant is more likely to take on kitchen jobs that don’t require English proficiency, rather than front-of-the-house ones. With only a few exceptions, economists are largely in agreement about the overall positive effects of immigration. Even undocumented ones can be a complement—not a detriment—to U.S. workers. And the effects of mass deportation appear to be equally unambiguous.