The U.S. immigration system could be broken but immigrants are crucial to growing the labour force and supporting economic output. Immigrants have helped expand the labour supply, pay nearly $580 billion a year in taxes and possess a spending power of $1.6 trillion a year.
The Trump administration has started mass deportations. Depending on how many immigrants are deported, these mass deportations would:
· Reduce real gross domestic product (GDP) by as much as 7.4% by 2028,
· Reduce the supply of workers for key industries, including by up to 225,000 workers in agriculture and 1.5 million workers in construction,
· Push prices up to 9.1% higher by 2028, and
· Cost 44,000 U.S.-born workers their jobs for every half a million immigrants who are removed from the labour force.
This is the assessment by the Joint Economic Committee of U.S. Congress.
Estimates from the Peterson Institute for International Economics show that if 8.3 million undocumented immigrants are deported, GDP would be 7.4% lower and employment would be 7.0% lower by 2028. This 7.4% reduction in GDP over four years would likely mean that the U.S. economy would not grow at all during President Trump’s second term. Even if 1.3 million undocumented immigrants are deported, GDP would drop by 1.2% and employment would drop by 1.1% by 2028.
The American Immigration Council has estimated that a long-term deportation—deporting one million people each year until there is no undocumented population—could amount to a 4.2% to 6.8% loss in GDP (totalling $1.1 to $1.7 trillion in losses), with the effects felt most acutely in California, Florida, and Texas. To put this in context, the economy shrank by 4.3% during the Great Recession.
The researchers also find that this deportation plan would cut $23 billion in funds for Social Security and $6 billion from Medicare each year because these workers would no longer pay into these programs.
The effects of mass deportations could be greater if additional documented immigrants or U.S. citizen family members also leave the country. People in mixed-status families who are either U.S.-born children or green card holders may be caught up in deportation sweeps or leave themselves if undocumented members of their family are deported.
Evidence also shows that deportations reduce employment for U.S.-born workers. Deportation initiatives from past administrations actually led to net reductions in employment and earnings in the short- and long-term for U.S.-born workers, with the worst impacts falling on the least educated and most vulnerable. An analysis of past deportation operations estimates that for every half a million immigrants removed from the labour force due to enforcement, 44,000 U.S.-born workers lose their jobs.
Undocumented immigrants make up a relatively small share of the overall labour force—between 4.4% and 5.4% since 2003—but they have outsized roles in industries like construction, agriculture, health care, and hospitality. They grow, pick, and process Americans’ food; build homes in communities across the country; and provide in-home care to seniors and others. Without immigrant labour, these industries would face labour shortages, further exacerbating their need for labour. In addition, the United States would lose workers that were educated in the U.S. Over 15% of undocumented workers have a bachelor’s degree or higher, and nearly half a million are currently enrolled in U.S. colleges and universities.
Many industries already face labour shortages or are projected to face a shortage of workers in the coming decades. There were 282,000 job openings in construction in September 2024, and one study estimated the construction industry will need an additional 454,000 workers above the normal pace of hiring to meet the demand for labour in 2025. The American Immigration Council estimates that mass deportations would remove up to 1.5 million workers from the construction industry, 225,000 from agriculture, one million from hospitality, 870,000 from manufacturing, and 461,000 from transportation and warehousing.
The labour shortages that result from mass deportations would raise costs for all Americans. With unemployment near a historic low, employers in sectors like agriculture and construction would produce less, resulting in shortages and higher prices. Economists at the Peterson Institute for International Economics estimate that deporting 1.3 million immigrants would raise prices by 1.5% by 2028, while deporting 8.3 million immigrants would raise prices by 9.1%. Additionally, mass deportations would reduce consumer spending, as undocumented workers are not just workers but also consumers. If demand for certain goods and services slows enough, demand for workers in those sectors may also slow, and some businesses may be forced to lay off workers.
Importantly, both immigrant and U.S.-born workers between the ages of 25 and 64 are employed at higher rates now than they were before the pandemic (see graph below), signalling that the strong labour market in recent years has benefitted both immigrants and U.S.-born workers alike. Evidence from the last few decades shows that immigrants do not take jobs from U.S.-born workers or bring down wages for similarly-skilled workers. This is especially true when there are lots of job openings, like there were during the post-pandemic recovery. A recent analysis from the Brookings Institution estimates that U.S.-born and immigrant employment actually increased more than expected in 2023, despite previous data pointing to a decrease in U.S.-born employment. A recent study even showed that immigrants can actually boost wages and employment for U.S.-born workers.
While immigrants make up about 14% of the U.S. population, they represent about a fifth of the self-employed workforce and account for a quarter of start-up founders. Many immigrants find success in their entrepreneurial pursuits: 55% of the companies valued at or above $1 billion in the United States were founded by immigrants and more than 40% of the Fortune 500 companies in 2021 were founded by an immigrant or the child of an immigrant.
Immigrants are also more likely to work jobs that have a job-multiplier effect, meaning that their employment facilitates the entry of other workers into the labour force. For example, workers in sectors like education and health services, where immigrants make up about 1 in 5 workers, help parents and caregivers of all backgrounds enter the labour force and grow the economy. This is particularly true for women, who perform a disproportionate share of unpaid care work.
Immigrants tend to be younger, and with their high employment rates, they pay taxes into Social Security and Medicare with most not receiving benefits until many years in the future, if they are eligible at all. One study found that each foreign-born person pays on average $1,300 more each year and $237,000 more over their lifetime in taxes than they receive in benefits from federal, state, and local governments. Another showed that between 2012 and 2018, immigrants contributed $166 more per capita, on average, to the Medicare Trust Fund each year than what was spent on their behalf. Conversely, Medicare spent more on U.S.-born Americans than they contributed with an average cost of $51 per capita. Immigration can help preserve Social Security, while reforms to immigration policy could help extend Medicare solvency. Immigrants contribute to many social programs with their taxes, despite many being ineligible to receive most government benefits. In 2022, immigrants had a spending power of $1.6 trillion, and they collectively paid $579 billion in local, state, and federal taxes.
President Trump’s mass deportation proposals will strip the United States of the many contributions of immigrants to the U.S. economy. Deporting immigrants will not only upend their lives, but also harm the U.S. economy through reduced economic growth, a smaller labour force, lost jobs, and higher costs to the detriment of all Americans.
We have been there before! Malaysia under PM Abdullah Ahmad Badawi deported Indonesians and others in 2004/5. In 2005 alone, Malaysia deported 400,000 undocumented migrant workers as part of an enforcement campaign. Our economy went into a “pause”. Badly affected were construction, agriculture, manufacturing and services. Diplomatic relations were strained while the harsh methods used affected public sentiment. The problem for us now is that when the U.S. is affected, it will impact us– but this time it is not our doing.
Reference:
Mass deportations would deliver a catastrophic blow to the U.S. economy, Senator Martin Heinrich, Joint Economic Committee Democrats, 11 December 2024
