Immigrant Bill's Benefits May Be Elusive

By David Streitfeld

April 1, 2006 12 AM PT

Times Staff Writer

To understand landscape contractor Barbara Alvarez’s position on illegal immigration, it helps to know she has an employee with his own chauffeur.

A key, longtime worker confessed a few months ago that his driver’s license renewal had been rejected. In other words, he was in this country illegally.

Alvarez’s solution: hire an $11-an-hour driver to take the worker to his lawns throughout the day. What else could she do? “My clients love him,” the San Dimas, Calif., entrepreneur said.

Like much of the business community, Alvarez is solidly behind the immigration proposal that emerged from the Senate Judiciary Committee this week. It would offer the estimated 11 million illegal immigrants here a path toward citizenship while bringing in 400,000 guest workers annually.

These changes -- which are also endorsed by organized labor, most Democrats and some Republicans -- are described by supporters as benefiting just about everyone. The undocumented will no longer have to live in fear. Companies will get a more stable workforce. Society as a whole will be helped when the underground economy emerges into daylight. Tax revenue will rise.

Yet this prediction of good times all around rests on the most slender of assumptions, economists say.

It presumes that the flow of illegal immigrants will shrink from a torrent to a trickle, they say. It takes for granted that the government will have the resources to find the illegal workers who get through as well as the money and political will to enforce the laws that forbid their hiring.

Unless these things come to pass, economists say, the proposed legislation will increase the pool of legal workers while hardly denting the underground economy. Some employers will still choose to hire illegal workers at wages lower than those for new legal immigrants.

The result: an entrenched, two-tier labor system in which workers on the bottom rungs compete to drive wages down.

Los Angeles is believed to have the nation’s largest underground economy, the result of its proximity to Mexico. Researchers at the Economic Roundtable used government data to calculate that the city has about 300,000 “informal” workers, two-thirds of whom are undocumented. That would make illegal immigrants 11% of L.A.’s workforce.

“A lot of restaurants only take cash now,” reflecting the widespread employment of illegal immigrants who must be paid in cash, said Roundtable President Daniel Flaming. The same for auto-repair shops and beauty salons. Remodeling your house? There’s one price for checks and one for cash.

Changing that dynamic won’t be easy. “The risk of hiring undocumented workers has to exceed the benefit,” said Ross DeVol, director of regional economics at the Milken Institute in Santa Monica. “Otherwise, there’s a substantial possibility we could end up in a worse situation” as legal workers compete with a replenished pool of illegal immigrants.

Laws against knowingly hiring illegal workers have been on the books since the 1986 immigration overhaul. But as Government Accountability Office official Richard Stana testified to a House subcommittee last year, “Work-site enforcement has been a low priority.”

Fraudulent worker documents were so plentiful and of such high quality, Stana said, that companies could convincingly claim they had no idea that their workers were illegal. The number of U.S. firms that were warned that they would be fined for hiring illegal workers declined from 417 in 1999 to three in 2004.

“Enforcement won’t happen unless we make it happen,” said the Economic Roundtable’s Flaming. “For everybody to make progress, there needs to be a rule of law in the workplace.”

As they enter the larger economy, many newly legalized workers will have greater workplace protections and bargaining power, economists say. One result: They’ll earn more. Meanwhile, if enforcement indeed increases, businesses will have to clear more regulatory hurdles.

Companies, in short, will pay upfront for the legislation. Many of these costs will be passed on as higher prices for restaurant meals, groceries, child care, car repairs and house remodeling.

That, in turn, could reignite demand for the off-the-books economy.

“People have dual interests,” said Jared Bernstein, an economist who supports the legislation. “Ask them, do you want your lawn to be mowed as cheaply as possible? They’ll say yes. Ask if they want to control the border. They’ll say yes. Ask them if controlling the borders means they’re willing to pay more for lawn care, they’ll say how much? And that’s what we’re going to find out.”

The Judiciary Committee bill had its roots in a measure co-sponsored by Sen. Edward M. Kennedy (D-Mass.). By making illegal immigrants legal and giving them “a fair day’s pay for a fair day’s work,” Kennedy said last year, “we are protecting American workers’ rights and wages, too.”

The notion that these changes are the right thing, not only morally but also economically, has been picked up by employer groups.

The Judiciary measure will bring illegal workers “out of the shadows,” said Sharon Hughes, an executive with the National Council of Agricultural Employers. “They’d be able to join unions. They wouldn’t be afraid to go to the authorities if there is a problem. And their wages would be better.”

So what’s in it for the growers? “A stable, legal workforce,” Hughes said. Because so many farmworkers are illegal, the managers “can’t sleep, wondering when they’re going to be audited.”

The United Farm Workers backs the measure. But AFL-CIO President John Sweeney issued a statement saying he was “deeply troubled” by the prospect of 400,000 guest workers.

Guest worker programs “encourage employers to turn good jobs into temporary jobs at reduced wages,” Sweeney said.

Lower-middle-class American workers are not going to benefit from a guest worker program, said Gordon Hanson, a professor of economics at UC San Diego. “You raise the supply of something, you drive down the price,” he said.

Legalizing immigrants who are already here will move some of that competition up the labor ladder. Hanson offered the example of hotel workers. Many are illegal, which means they’re typically stuck in the worst jobs in that industry. As their legal status changes, so will their positions. The result is that more people will compete for the post of, say, assistant manager.

Instead of legalization leading to higher wages, as its backers maintain, it could put downward pressure them, opponents of legalization say. In recent years, wages have struggled to keep up with inflation while productivity -- and corporate profits -- soared.

Ira Mehlman, a spokesman for the Federation for American Immigration Reform, which opposes the Judiciary measure, forecasts a bleak future “where everyone is forced to work for the lowest possible pay. The minimum wage will be a ceiling as well as a floor.”

In San Dimas, Alvarez’s enthusiasm for legalization doesn’t blind her to the toll it could exact. Her firm, Golden State Landscaping, has about 40 commercial clients, including homeowners’ associations and a hospital. The company has 13 employees, all Latino.

Last year, she had to drop three workers after the Social Security Administration notified Golden State that their numbers were invalid. Such disruption is hard on a small business. Then she had to hire the chauffeur.

“If legalization pushes wages up, that would be fine,” Alvarez said. “Those companies that can’t make it work will go out of business.”

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Hidden economy

These sectors used the largest numbers of undocumented workers in L.A. County in 2000, according to estimates by the Economic Roundtable.

(In thousands)

Restaurants: 34.4

Construction: 30.8

Cutting and sewing apparel: 14.7

Household help: 10.7

Landscaping services: 9.6

Car repair: 8.3

Grocery stores: 7.6