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Center for the U.S. and Mexico | Research Paper

Left on the Table: The Unrealized Economic Potential of the Undocumented Population

July 8, 2021 | Jose Ivan Rodriguez-Sanchez

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Jose Ivan Rodriguez-Sanchez
Research Scholar
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To access the full paper, download the PDF on the left-hand sidebar.

Introduction

Undocumented immigrants living in the United States have been an important and often unrecognized driver of the economy for decades. These residents are fully engaged in economic activities that produce wealth and contribute to the well-being of American society. They play an especially vital role in the construction and agriculture sectors of the U.S. economy, as well as the entertainment, arts, recreation, accommodation, and food service industries. Undocumented immigrants are also frequently business owners, and nearly all are taxpayers, paying income and sales taxes to the local, state, and federal governments. However, much of the immigration debate centers on the costs of providing public services to these individuals and ignores the benefits they generate.

Several studies have already shown that the economic benefits produced by undocumented immigrants are greater than their cost to society at large. Studies have also shown that deporting undocumented immigrants would have a negative impact on the U.S. economy. Even limiting their participation in key economic activities, such as the financial sector, would restrict their economic contributions. For example, a major ceiling on the economic potential of undocumented immigrants is their lack of access to the banking system to obtain credit and mortgages. Having access to credit would provide them with financial stability to further their own wealth as well as that of the country, since they could make financial plans to buy homes, vehicles, or pay for their children’s higher education. Tapping into these resources would result in a further expansion of the U.S. economy and boost economic growth in the mid- and long-terms. By limiting what this population can do economically and financially, we are also limiting additional growth in the U.S. economy.

The objective of this study is to estimate the economic impact that undocumented immigrants would have on the financial system and the economy at large if they had access to credit and the U.S. banking system. This paper will also analyze the impact of their inclusion in the health care system and housing market and will project these impacts on the overall U.S. economy. There is a double urgency to calculating these impacts. First, there is a crucial need for a more informed political debate over the fate of the 10.7 million undocumented immigrants living in the United States. Second, given that the United States is faced with an increasingly older workforce and stagnating population growth, the country will need immigrants to stay and work in the U.S. and may even need to increase immigration in the future. Deporting undocumented workers—who tend to be young, economically active taxpayers with the potential to create new jobs and businesses and to generate new products and technology—could be counterproductive.

This paper further hypothesizes that the legalization (temporary or permanent) of undocumented immigrants and their inclusion in the banking system, the health care system, and the housing market would produce a positive ripple effect in the economy, leading to a “win-win” outcome for both the unauthorized population and the United States as a whole. Therefore, the central question of this paper is, “Will the U.S. economy benefit from the inclusion of undocumented immigrants in the banking, health care, and housing sectors?”

© 2021 by Rice University’s Baker Institute for Public Policy
https://doi.org/10.25613/R9EA-ZS45
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