Undocumented Immigrants: An Inseparable Part of California’s Economy

Arts and Media June 2024 PREMIUM

Despite significant contributions to various sectors, undocumented immigrants are often wrongly viewed as burdens due to unfounded perceptions. Many hold degrees and work in diverse industries, boosting the economy significantly. They pay taxes without benefiting from many services because of their illegal status. We should promote their inclusion and path to citizenship.

Immigrants have made significant contributions to the arts, sciences, business, society, educational system, and cultural fabric of the United States. 

However, the prevailing opinion about immigration and undocumented immigrants often overlooks these important contributions. Indeed, public opinion is commonly based on unsound and unproven perceptions about national security, employment competitiveness, and cultural assimilation. It’s similar to the early 20th-century anti-immigrant sentiment. 

Undocumented immigrants are often thought of as low-educated, working in informal roles as gardeners or nannies. The realities are unambiguously different from the perceptions: about 15% of undocumented immigrants, or 339,000 individuals, have a bachelor’s, graduate, or professional degree, while 1,098,000 immigrants have a high school diploma or higher educational attainment, making up 48.3%. 

While undocumented immigrants make up 46% of farmworkers in California, this only accounts for 15.5% of all undocumented immigrants working in various industries. They have substantial shares in Retail Trade, Construction, Manufacturing, and other services. Some 172,870, or 10.9%, work in Professional, Education and Health Services. 

In 2019, the median wage of the undocumented was half that of the U.S.-born in California. The same gap exists among other categories of wage earners, to different degrees, which in part may have also been influenced by low wage levels for undocumented immigrants. Wage gaps based on race, ethnicity, and gender reduce the well-being of workers and their families, violate the principle of equal wages for equal work, and end up reducing the GDP of our economy. 

Economic well-being is negatively affected by discrimination. 

Still Immigrants?

It was not until 2010 that the number of native-born Californians surpassed those who migrated from elsewhere. The foreign-born comprise 27% of the total population and over one-third of the entire labor force in California. Putting together the number of foreign-born and their children, they form nearly 50% of the workers in the state (California Budget and Policy Center in 2024). They make an extensive contribution to our communities that benefits all Californian residents. 

Based on 2019 data published by the Immigration Policy Institute, there were more than 2.7 million undocumented immigrants in California. Around 865,000 have lived in the U.S. for over 20 years, and 1,972,000 have lived here for over 10 years. This begs the question: How long will it take to call a place home? Some 17.4% of all children in California live with undocumented immigrants. This ratio is as high as 29.2% for Hispanic and 13.3% for Asian children.

Economic Impact

We used IMPLAN (a regional economic analysis software modeling platform) to conduct our economic assessment of undocumented immigrants in California. It allowed us to estimate the impact or ripple effect of a given economic activity or the contribution of some existing activity within a specific geographic area. The findings of our study present strong evidence to debunk the prevailing false narrative about the undocumented. 

Undocumented immigrants are the source of the creation of state products worth over $512 billion. This does not mean that undocumented immigrants produce such products, but their work brings such an amount in direct, indirect, and induced production levels. The indirect effect results from business-to-business supply chain purchases, and the induced impact is employee expenditures in the region. 

Undocumented immigrants in California generate around $152 billion in direct value-added within the state economy. This forms 4.9% of the state’s GDP. If we add the indirect and induced impacts, the total impact comes to 9.6% of the state’s GDP. 

Undocumented immigrants comprise a relatively young population, which the State of California, as a rapidly aging population, needs to improve its dependency ratio for the economy and long-term care. According to the Migration Policy Institute (MPI), almost 1,700,000 undocumented immigrants worked in various jobs within California in 2019.  

Undocumented immigrants have a higher rate of labor force participation and form a comparatively higher proportion of the employed while suffering from a higher rate of unemployment. Our study shows that due to the work of undocumented immigrants, some 1.25 million additional jobs are created within the State of California. This is a clear indication of the interdependence between the economic existence of undocumented immigrants and the rest of the state’s workers and general population. 

Tax payment is one of the most contentious issues when it comes to undocumented immigrants. Unfortunately, a large number of people have been led to believe that undocumented immigrants abuse or take advantage of the system, do not pay any taxes, and benefit from government spending in all areas of social safety and other entitlements. The truth is far from this misperception. Several reports from tax authorities and other studies indicate that undocumented immigrants, like other people who live and work in the country, pay their taxes. 

Undocumented immigrants in California in 2019, in total, paid some $22 billion directly (themselves and the Social Security contribution of their employers) towards various tax channels. Out of this amount, some $9.3 billion have been paid as Social Security by themselves and their employers, which they can never see a dime of because of their immigration status. 

In brief, undocumented immigrants collectively subsidize citizens through the tax system because they pay many of the same taxes but are not eligible for many benefits — including social security entitlement, refundable tax credits, Pell grants, student loans, and nutrition programs. 

Economic Inclusion

 The concept of “Social illegality” can negatively influence the decisions of hiring managers, landlords, and other public members, potentially affecting access to jobs, housing, health care, and education for people who happen to “fit the profile.”

The greatest tragedy is that many have unconsciously assimilated the idea that undocumented immigrants are criminals, unproductive, and a burden to society. However, empirical facts do not support this perception. Therefore, even if creating a logical path to citizenship seems politically complicated at this moment, we should focus our efforts on tearing down false stereotypes and misperceptions and finding ways to improve the social and economic inclusion of undocumented immigrants. By doing so, we not only uphold our values of fairness and opportunity but also strengthen our society and economy. 

About the author

Jamshid Damooei is a professor and director of the Economics Program, and executive director of the Center for Economics of Social Issues, at California Lutheran University. In the last 30 years, his research has been focused on the economics of social issues, what he calls ‘economic studies with a human face’.  


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