Rational Middle of Immigration Video: The Shadow Workforce and the Path to a Stronger Economy

A new episode of the Rational Middle of Immigration video docuseries examines challenges associated with underground economies that have manifested in several critical US industries as a result of workforce shortages and the broken US immigration system. In order to combat inflation and shrinking GDP, business leaders and immigration experts call on lawmakers to pass an ID and Tax policy that would allow unauthorized immigrants to earn legal status and work permits so that they can increase their economic contributions and work for tax paying employers.   

Speakers discussed how critical US industries like food processing, agriculture, construction, and retail have suffered from workforce shortages for many years. With Americans unavailable or unwilling to fill those jobs, and an immigration system that provides very limited pathways for immigrants to come fill those jobs legally, a resulting jobs magnet has attracted many immigrants without legal status to fill those jobs.   

“For the last 50 years, the immigration system has been insufficient in providing the kinds of workers that the country needs. So for 30 to 40 years, we’ve seen waves of undocumented immigrants come to the country to fill in the labor market needs that legal visas do not fill in,” said Tony Payan, Director of the Rice University Baker Institute’s Center for the US and Mexico.

“When you look at the restaurant and textile industries, undocumented workers represent a huge portion of the workforce, and of course in agriculture, where an estimated 50-75% of all workers are immigrants and just 5% are on temporary farmworker visas,” said Jeremy Robbins, Executive Director of the American Immigration Council.

Speakers explained that a lack of a pathway for unauthorized immigrant workers to earn work permits has encouraged them to work under the table or as independent contractors for employers that are able to avoid paying employment taxes.

“ICE audits have taken millions of people off payrolls who were paying into social security for benefits they will never receive and dumped them into the underground economy. In some cases they went to work as independent contractors where they didn’t pay taxes. Legitimate employers are the only companies that have payrolls. All the employers that cheat, they hire independent contractors or labor brokers, it’s a terrible system,” said Stan Marek, President and CEO of the MAREK.

“The unscrupulous employer is the only one winning, because they are pushing down the wages and protections of the undocumented immigrant, the immigrant who is here legally, the native-born worker who is trying to make a go of it, but also the business owner trying to play by the rules,” explained Ali Noorani, President and CEO of the National Immigration Forum. “We have to level the playing field so that everybody is competing for the same job, ostensibly the same wage, and every business owner is competing for the same business in the same way. If we don’t get this moment right, we as a country are going to lose our competitive edge,” he added.  

The speakers called on lawmakers to pass an ID and Tax policy that would allow unauthorized immigrants to earn legal status so that they can work for legitimate tax-paying employers and help to alleviate workforce shortages. Such a solution would include background checks and the payment of more taxes without raising taxes, and it would level the playing field for law-abiding American businesses and workers. It would also help to alleviate the increasing costs of goods produced by industries that are short on workers. 

“Estimates are 70-80 percent of the undocumented have been here over ten years. Legal status could greatly improve their productivity, safety, and earning capacity, and they could take better care of their families. An ID and Tax bill would help control all that because if people could qualify and improve their lives, they would,” said Marek.

“The question of the undocumented is about as simple as it gets. You just create a system that allows them to regularize, vet them, ensure back taxes, and then give them a path that is fair and systematic. What is hindering us is not how complex that policy challenge is, what is hindering us is our politics,” said Justin Gest, Associate Professor, Schar School of Policy and Government, George Mason University.

To learn more, view the full Rational Middle of Immigration video Episode 14: The Shadow Workforce and the Path to a Stronger Economy. Watch Below. 

Also check out the rest of the free Rational Middle of Immigration video docuseries that examines more challenges associated with the US immigration system and their solutions on rationalmiddle.com.