Underground economy knows no bounds - East Valley Tribune: Business

Underground economy knows no bounds

Font Size:
Default font size
Larger font size

Posted: Sunday, December 4, 2005 5:46 am | Updated: 9:06 am, Fri Oct 7, 2011.

LAS VEGAS - Each morning, Israel Gonzalez rises before dawn and heads to the sidewalks around the city’s plant nurseries to wait for a job. There, alongside other men, he watches for pickup trucks that slow down, hoping today he will be chosen for work.

It’s a morning ritual played out regularly in cities and towns as day laborers, mostly illegal immigrants, scramble for work in a country that comfortably accepts their work while disavowing their right to be here.

The work is steady, the money is good, and when Gonzalez gets picked up for a job, no one asks for documents or identification.

‘‘The bosses don’t care if the papers are real or not,’’ he said, wearing a navy hat with an American flag on it.

Gonzalez, 31, lives with his three brothers in an apartment; none of them is legal.

They are among millions of illegal immigrants who work in obscurity, in the shadows of the economy, quietly bringing home wages from people and companies more than willing to hire them.

On paper, many don’t exist. Fake Social Security numbers and birth certificates make sure of that. They are nannies, housekeepers, landscapers, construction, farm and food service workers. Cash is paid under the table, or fake documents are accepted without question.

Illegal immigrants may number as high as 20 million, and they are gaining a larger share of the job market, according to Bear Stearns in New York.

More and more, they are spreading beyond traditional immigrant states like California and Texas. They are spreading through the West and South, where there is tremendous growth, affordable housing and family networks. They are increasingly found in states like Utah, Washington, Pennsylvania, Tennessee, Georgia and the Dakotas. And they’re heading to suburbia.

This is America’s underground economy, and it generates billions of dollars worth of labor each year. Illegal workers come for the jobs, and always find companies eager to hire them.

‘‘The toleration of illegal immigration undermines all of our labor,’’ said Vernon Briggs, a Cornell University labor economics professor.

‘‘It rips at the social fabric. It’s a race to the bottom. The one who plays by the rules is penalized. It becomes a system that feeds on itself. It just goes on and on and on.’’


For years, the immigrant population mainly stuck to six destination states — California, Texas, New York, Florida, Illinois and New Jersey. But in the past five years, the most rapid growth has taken place in states once of little interest to immigrants — Tennessee, Mississippi, the Dakotas, Ohio and Pennsylvania, said Bill Frey, demographer at the Brookings Institution in Washington, D.C.

They are following rapid growth, going where the jobs are and where the cost of living is low. Suburbs now attract more new immigrants than cities.

In the West, the immigrant population in the Mountain states is growing faster than the rest of the region. In the South, the interior Southeast has higher immigrant growth than the more glamorous coastal states, Frey said.

The way Bob Justich sees it, America is hooked on cheap, illegal workers.

As a senior managing director for Bear Stearns, he has spent the last two years meeting with immigrants, business owners, police and real estate agents to determine the size of the underground economy and its effect on the real economy.

This he knows for sure: There are way more illegal immigrants in the country than the government estimates. The government puts the number at around 8.5 million; Justich says it is more than double that — closer to 20 million, mainly because illegal immigrants don’t bother to respond to Census Bureau forms.

‘‘If everybody was deported tomorrow, it would be like emptying the equivalent of New York state,’’ he said.

Illegal immigrants hold about 12 million to 15 million jobs in the United States, or about 8 percent, according to Justich. That may seem a small percentage, but the pressure of its presence helps keep wages for unskilled jobs low. And many of the jobs are off the books, meaning the government may be foregoing $35 billion a year in income tax collections, he said.

That figure, however, is partially offset by employers withholding taxes for illegal workers who never file returns or seek benefits, said Marti Dinerstein, a Center for Immigration Studies fellow.

An analysis by Barron’s estimated the size of the shadow economy at about $970 billion, or nearly 9 percent of the goods and services produced by the real economy.

The service sector employs the most illegal immigrants with 33 percent, followed by the construction industry, production and food processing and farming, according to the Pew Hispanic Center.

The hotel and restaurant businesses and construction are the big employers. More than 1 of every 4 drywall installers and landscape workers are illegal, the center estimates. About 1 in 5 workers in meat and poultry packing are illegal, as are about 1 in 6 in the leisure and hospitality industry or construction.

Illegal immigrants make far less than the rest of the population.

Their average family income of $27,400 is more than 40 percent below the legal immigrant or native family income of about $47,700, the Pew Hispanic Center found.

That’s because illegal immigrants work cheap and don’t complain; those that do complain are easily replaced.

‘‘We’re seeing the wage bases in these industries erode simply because there is a glut of low-skill labor flooding the low-skill market,’’ said John Keeley, spokesman for the Center for Immigration Studies. ‘‘The business community has become addicted to it. It’s a way for them to keep their business costs down.’’

Enforcement is lax, especially in a post-9/11 world.

A Government Accountability Office report in August found worksite arrests were down from 2,849 in 1999 to 445 in 2003.

In 1999, 417 civil notices of intent to fine employers for hiring illegal workers were issued, not counting civil settlements; in 2003, there were just four. Part of that may be due to employees using false documents, making it harder for employers to be held accountable.

But since the Immigration and Naturalization Service disbanded and Immigration and Customs Enforcement was created in 2003, the focus has switched to criminal investigations of national security sites instead of civil fines.

From 2004 to 2005 the number of work site criminal indictments, mostly from national security investigations, were up from 67 to 140.

But with the government occupied with national security sites, the numbers show the practice of hiring illegal workers is not only tolerated, but largely ignored.

Nowhere is that more evident than in communities across the country where thousands of illegal immigrants wait for work on street corners. With the federal government paying little attention, many cities have been forced to create daylabor sites, where job seekers can congregate at a central location without loitering near businesses and bothering citizens.

  • Discuss

[Sponsored] Terri's Consignment: Divorce the sofa

'EV Women in Business'

A PDF of the Tribune special section, featuring a mix of sponsored content from our loyal advertisers and newsroom coverage of the East Valley business community.

Your Az Jobs