HR Pros – Significant & Varied Effect of Mass Deportations

Mass deportations could have significant and wide-ranging economic effects on labor markets, wages, and tax revenues. The specifics depend on the scale and nature of the deportations, as well as the industries and regions most affected. It’s unclear how successful the new Administration will be in implementing deportations or the citizenship status of those who may be deported. While there may be some early gains in terms of wages as employers struggle to fill jobs, the lasting shortages will be difficult to address over the long-term.

1. Labor Market Effects

• Labor Supply Reduction: Deporting large numbers of undocumented workers can shrink the labor supply, particularly in industries that heavily rely on immigrant labor, such as agriculture, construction, hospitality, and domestic services. But, these are not the only jobs that will be effected. The top 10 jobs for immigrants, including software development, healthcare professionals, data analysists and electrical engineers. Healthcare industries are already taxed by primary care labor shortages due to a desire for better working conditions and a beginning trend to Direct Patient Care models.
• Skill and Experience Gaps: Contrary to some assumptions, many undocumented workers have years of experience in specific roles. Their removal can create gaps that are not easily or quickly filled by native-born workers.
• Increased Costs for Employers: Employers may face higher costs as they struggle to recruit and train replacements or offer higher wages to attract domestic workers.
• Opportunities: Some companies and NGOs who might be involved in detention, transportation and deportation administration and operations could benefit financially from this initiative. It would be wise to ensure the source and sustainability of funding before bidding or investing in these activities. Immigration legal services could also flourish with what is expected to be significant litigation activities as this matter unfolds.

2. Wage Impacts

• Potential Wage Increases in Low-Skill Sectors: A reduced labor supply might lead to higher wages for native-born workers in affected sectors. However, this effect is often limited by factors such as automation or employers relocating jobs to other regions or countries and may not be sustained in the long term.
• Reduced Economic Productivity: In sectors where deported workers are not easily replaced, production may decline at least initially, reducing overall economic efficiency.

3. Tax Revenue

• Loss of Tax Contributions: Undocumented immigrants contribute to local, state, and federal tax revenues through income taxes, payroll taxes (often paid even if they do not receive benefits), and sales taxes. Their removal reduces these contributions. Immigrants do not need a social security number to be employed. They can apply for an Individual Tax Identification Number which allows for withholding.
• Decreased Consumer Spending: Deportations lower overall consumption as affected households stop spending in the economy, reducing sales tax revenue and impacting businesses.
• Increased Costs for Social Services: The costs of enforcement, detention, and deportation processes can strain public resources, diverting funds from other areas. Many questions remain regarding how a mass deportation would be funded and what agencies would be involved. If these agencies are public sector, those costs will rise putting an increasing burden on remaining tax payers.

4. Broader Economic Effects

• Disruption of Supply Chains: Key industries like agriculture and food processing may face disruptions, leading to higher prices for goods and potential shortages.
• Population Decline and Economic Contraction: Large-scale deportations can lead to regional population declines, weakening housing markets and reducing demand for goods and services. A weakened housing market could have a positive effect if prices for  smaller homes become available but this is not assured as housing stocks are significantly lower than the demand.
• Entrepreneurial Losses: Many undocumented immigrants are business owners. Their removal can diminish small business activity and local economic diversity especially in certain geographic locations.

Evidence from Past Studies

• California Agriculture: Studies have shown that immigration crackdowns in California have led to labor shortages in agriculture, reducing output and increasing food prices, including eggs!
• Local Economies: A 2017 study by the Center for American Progress estimated that removing all undocumented immigrants in the U.S. would reduce GDP by 2.6% ($434 billion annually).

Policy Considerations

Mass deportations can create ripple effects that harm not only undocumented individuals but also the broader economy. Policymakers should weigh these economic risks against other goals, such as immigration enforcement, human rights and national security concerns. Comprehensive immigration reform is frequently proposed as a more balanced alternative. Unfortunately an opportunity for a comprehensive approach to bipartisan immigration reform was lost in February of 2024 and seems politically unlikely in the near future.

There is a chance the deportations will be limited in scope or unsuccessful but it’s essential to begin your analysis now and have contingency plans in place for monitoring markets, recruitment, wage increases, operational efficiencies and internal career ladders to attract and develop a supply of unskilled labor.

Follow me here:

Bluesky –   @hrsociology.bsky.social

Twitter –  https://x.com/HRSociology