Study: Mass Deportations Would Cost California Economy $275 Billion, Decimate Critical Industries

Mass deportation of California's undocumented residents would open a $275 billion hole in the state's economy, cripple industries ranging from agriculture to hospitality, disrupt countless small businesses, and lead to $23 billion a year in lost tax revenue.

Those are the conclusions of a study released June 17 by the Bay Area Council Economic Institute and by UC Merced public health Professor Maria-Elena De Trinidad Young. The study, which relied on numerous data sources and in-depth interviews with dozens of employers, elected officials and community leaders, was supported by the California Health Care Foundation.

Immigrants, both documented and undocumented, are integrated tightly into the California economy through millions of essential jobs that span a range of critical industries, all contributing extensively to the state's $4.1 trillion economy, the fourth-largest in the world.

The study comes amid intensifying immigration enforcement by the federal government that includes expanded operations and swifter deportations of individuals without legal status.

Key points from the study:

• About 1.5 million undocumented residents make up 8% of California's workforce. Mass deportations would cost the state an estimated $275 billion in wages and other direct and indirect economic activity.
• The average undocumented immigrant in California pays $7,000 in taxes. The loss of tax revenue from mass deportations would cost state, local and federal budgets a combined $23 billion annually, potentially impacting funds for a range of public services.
• About 40% of California's small businesses are owned by immigrants; nearly 11% of those are owned by undocumented immigrants. These small businesses generate local taxes, help lease commercial units, and create contracts for local distributors, and cater to a community's specific needs.
• Geographic regions with higher proportions of undocumented residents, including the San Joaquin Valley, San Francisco Bay Area, Inland Empire and Los Angeles, would experience the worst impacts.
• Based on wages alone, undocumented workers generate 5% of the state's overall economic activity, a figure that rises to 9% when the ripple effects of their spending and other contributions are factored in.

Young and her UC Merced team conducted in-depth interviews with nearly 40 people for the study, including business leaders, elected officials and the heads of community-based organizations. Her work added nuance to the study's data by adding voices from people who have seen the early impacts of increased immigration enforcement.

"California has a long and rich history of embracing immigrants and the many valuable contributions they bring to our state, economically, culturally and in so many other ways," Young said. "Understanding how increased immigration enforcement is affecting such a large swath of our population is critical to addressing the fears many in the immigrant community are experiencing and informing how we plan for not only economic and fiscal impacts but the human impacts."

Four UC Merced students worked with Young to conduct the interviews and perform qualitative analyses of transcripts: graduate students Sarina Rodriguez, Sharon Tafolla and Fabiola Perez-Lua, and undergraduate student Samantha Valle Meraz.

"This report is so impactful because it combines the best of both worlds of research," Rodriguez said. "Our partner's economic analysis is complemented by our qualitative interviews that document ​what is happening right now on the ground and what policy changes California's community and business leaders need to protect our state's immigrant communities."

Interview respondents emphasized that these workers bring extensive experience and deep skills to critical roles that benefit all Californians - from growing and cooking food, cleaning homes and offices, building housing, caring for children and the elderly, and ensuring packages are packed and delivered.

The impacts of mass deportations on certain industries and geographic regions would be particularly disruptive, the study found. As the nation's top agricultural producer, California depends heavily on immigrant labor: 63% of the state's agricultural sector are immigrants and almost 26% are undocumented. In construction, 41% of workers are immigrants and 14% are undocumented.

"Immigrants, both documented and undocumented, are deeply and intricately woven into our overall economic fabric," said study co-author Abby Raisz, research director for the Bay Area Council Economic Institute. "The impact of losing 8% of California's workforce would have a crippling effect on the state economy. The impacts would extend far beyond California's borders, with labor shortages contributing to higher food prices nationwide."

California's economy has a strong reliance on undocumented labor, the study said. Nearly half of the state's undocumented population has been in California for 20 years or more and have extensive experience in their respective industries, a crucial addition to the overall workforce even if they perform jobs categorized as "low skilled."

The study found broad support in the business for comprehensive federal immigration reform, a task Congress has struggled with for decades. With consistent immigration policies, business owner would have more certainty in planning workforce needs and how immigrants fit into those plans, the study said.