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#Arizona-Style Immigration Laws Hurt the Economy

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With the “papers please” portion of Arizona’s recent immigration law SB 1070 going into effect, civil rights and watchdog groups are in overdrive readying for the litany of purported abuses and complaints. Lydia Guzman, president of Respect Respeto. a civil rights group in Arizona that records abuses at the hands of police, said, “Our hotline has been receiving hundreds of calls a day since the law was implemented.”

Forcibly removing peaceful unauthorized immigrants from the U.S. separating them from their families, property, and jobs, to satisfy arcane labor market regulations created by Progressive politicians, is an appalling indecency. It also inflicts significant economic harm. Arizona’s immigration laws have drastically damaged its economy since mid-2007. The humanitarian arguments may leave those who complain the loudest about unauthorized immigration unmoved, but the supporters of Arizona style immigration laws might be persuaded by the economic costs.

In a new Policy Analysis by the Cato Institute called “The Economic Case against Arizona’s Immigration Laws,” I analyze the economic carnage inflicted by Arizona’s immigration laws.

The Legal Arizona Workers Act (LAWA or employer sanctions) was the first such law, and it tried to regulate unauthorized workers out of the market. Its chief tool is E-Verify, an electronic employment eligibility verification system used to weed out unauthorized immigrants when they apply for a job.

E-Verify has three major problems. It is very expensive, discourages investment and increases unemployment.

Just to run an employee through costs around $147. Compliance, however, also requires additional human resources and legal services, increasing the financial burden on firms.

The second problem is that E-Verify scares away businesses, investment, and workers. E-Verify is tied to what then-Governor Janet Napolitano called the “business death penalty.” Businesses that knowingly hire unauthorized immigrants have their licenses revoked on a second offense, killing the business.

Despite the fact that application of the business death penalty has been relatively rare the prospect has scared investors and businesses out of the state. It was largely responsible for a shocking business formation rate decline of 14.3 percent in the third quarter of 2007 in Arizona, rates of business formation in California and New Mexico increased over the same time.

Entrepreneur Richard Melman halted plans of opening a restaurant in Arizona after LAWA passed said: “You put in $3 million or $4 million, and you can be shut down for a mis take. Why take a chance? I want to see how it plays out.” He wasn’t the only one.

The third problem with E-Verify is that it increases unemployment. Supporters of E-Verify like Kris Kobach. the Secretary of State of Kansas and author of many different state level anti-immigrant bills, claim that E-Verify will force unauthorized immigrants out of jobs so Americans can fill them.

In reality, some unauthorized immigrants are forced out of jobs, which then mostly remain unfilled. In the immigrant heavy farming industry, crop production employment dropped by 15.6 percent in the first 4 years after LAWA was passed. American workers did not fill the gaps. In neighboring New Mexico and California, crop production employment increased over the same time period. E-Verify explains much of that difference.

Two and a half years after LAWA was passed, Arizona created a more controversial law called SB 1070 to enforce immigration laws outside of the workplace. The combined effects of LAWA and SB 1070 forced about 200,000 people out of Arizona, most of them from the Phoenix area.