April 24, 2013
Host: Ted Simons
Immigration Reform's Economic Impact
- The immigration reform bill being introduced in congress could pump millions of dollars into Arizona’s economy. Arizona State University's Dennis Hoffman will tell us more.
| Keywords: ASU
Ted Simons: The U.S. senate's immigration reform bill includes billions of dollars marked for border security, along with expected spending on everything from drones, to prosecutors, to additional customs agents. Much of that federal money could find its way into Arizona. Here to talk about the overall economic impact of immigration reform on the state is ASU economist Dennis Hoffman. Good to see you again. Thanks for joining us.
Dennis Hoffman: Great to be here.
Ted Simons: There's direct spending, there's indirect, a lot of talk here, but in general the impact of this proposal on the Arizona economy.
Dennis Hoffman: Well, just for basic perspective, and you're absolutely right, you can go out on the web and find numbers all over the place. And there's -- You really have to look at that material very carefully and figure out what is academically credible, and viable. But look. This is more freedom in the labor market. On a very simple level, if you allow more flexibility in the labor markets, in the hiring and firing process and the job search process, in the human capital investment process, this is a win for the economy. You're effectively adding resources to the economy that has to end up as positives for the entire nation, positives for the state.
Ted Simons: Let's go -- I want to get to Mexico and cross border traffic and trade in a second, but back to what you were talking about, does the bill address Arizona labor needs?
Dennis Hoffman: It does. You know, when I think about Arizona labor needs, I think in the way that this particular bill affects them, I think about the lower skill jobs, the jobs in agriculture that we hear about a lot, the jobs in construction, in contracting, I think if you look at our state historically, in the population growth serving sectors, we have leveraged undocumented labor, and again, the numbers are tough to get definitively, but we have clearly leveraged undocumented labor over the years, and we can fill niches in that way with a viable enforceable guest worker piece of this, and also allowing some of the folks that currently reside in the U.S. access to the labor markets. But then we also, if you want to flip this to the high skill jobs, and we did an extensive study a couple years ago for the Arizona technology council, and investigated the needs of our technology businesses. And they're crying for skilled labor. And I see this every day at the Universities. We have hundreds of folks enrolled especially in our graduate programs, that come to us from foreign countries. They fill a lot of these graduate classes, and I've heard a lot of politicians say over the years that we need to, you know, staple a green card to their diplomas. To some degree this legislation is a move in that direction.
Ted Simons: It sounds like the H1BV-- The cap has been raised, and I think that would be positive toward Arizona. But also they would -- I think the legislation calls for these particular workers, that they would have to be paid higher wages. Does that make sense? Again, how does that affect the state?
Dennis Hoffman: You know, from an economic perspective -- I understand there's politics lurking everywhere here. From an economic perspective, I think we're better off allowing the employee and the employer to figure out wages on their own. I'd say the same thing about minimum wage or, you know, wages for this group of folks. The more you can move in that particular direction, I think the better off the economy is going to be. And as far --
Ted Simons: as far as the lower skilled worker, there's an agricultural Visa program for farm workers, again, in terms of Arizona's economy, how does that -- How do the multipliers work? You have more folks employed, more folks employed, not hiding out, spending money. What kind of affects are we seeing?
Dennis Hoffman: So if you look at -- I think one of the best studies I saw, endorsed in the CATO journal, came out after think tank out of UCLA, so it was highly -- It was vetted in the referee process, extensive modeling done, it was done for the entire country, but then the author also focused on California and on Arizona. It looked at three possible outcomes. Three possible scenarios. One was the full immigration reform effectively taking the 11 million folks that are in the country now and unleashing them on the labor market. A second variation was to just focus on this guest worker program for low-skilled people to try to address the agricultural issue. And the third just for simulation purposes, deporting the 11 million, which of course I'm not in favor of, but some folks want to talk about. And the economic consequences to the full reform are really very positive. Excuse me. On the order of 1% GDP growth for the U.S., that translates into a $2 billion increment for the state of Arizona. It's really very, very positive. Now, this is one of the studies that I saw that has the biggest impact. And it was based upon, by the way, the data that he got from 1986 . Which I think is very informative. The last major immigration reform that took place under the Reagan administration, by the way, in 1986 . And you use some of the positive measurable positive impacts on that, and it's really kind of fascinating when you think about that. You think about Arizona in the late 80's early 90's, the economy was not great in Arizona during that particular period. But my thought of course went, wow, I wonder what it would have been like had we not liberalized immigration at that particular point? Over the last five years, Ted, we've had exactly the opposite. As of December in 2007, we imposed the most aggressive employer sanctions bill, law in the entire nation. And we all know what's happened to our labor markets since 2007.
Ted Simons: with that in mind, this bill looks at enhancing e-verify around the country, Arizona has experience e-verify. First, is Arizona ready for this, and has e-verify really worked -- How many employers are being marched in front of magistrates? I don't see too many.
Dennis Hoffman: No, they're not. Here's the challenge. Even if you look back to 86', and people talk about a lot of the successes in the positives that follow the 86' act, the challenge of course is, it didn't stem the tide for another complete generation of undocumented In-migration. So there is certainly interest in terms of fence security, in terms of e-verify on the part of most Americans I think to try to do something about, hey, let's make this process legal, let's fix this poorest border kind of situation. So I think e-verify has to be a piece of that. I know people are mixed on it. It is onerous for some businesses. But in today's technology, my goodness, can't we develop a system where we can authenticate individuals that apply for positions? We have to go through a lot of red tape when we hire folks at ASU as well.
Ted Simons: Sound like a biometric green card is going to be required.
Dennis Hoffman: Can I sign up? If it gets me through the airport security, I will sign up first.
Ted Simons: We mentioned in the intro the fact that border security, drones, fence surveillance, border patrol, judges, prosecutors, defenders, translators, all of these folks are going to be needed are and they're going to be needed to be paid if border security is as strong as this bill proposes.
Dennis Hoffman: Indeed. And there's going to be a lot of jobs here. Some of the folks with some of the business organizations have noted the number much jobs that might be generated by this stepped-up effort in security. I'm amused by all of this when I think about Barry Goldwater's vision for the border today. Have you heard this quote?
Ted Simons: No, I haven't.
Dennis Hoffman: I think it's timely. So back in 1962, when asked to forecast what Arizona of 2012 would look like, so at the 50th anniversary, what will we look at the 100th anniversary, Barry Goldwater was asked this question, what would Arizona look like? And he went down a list of things. And here's one of them. He said, quote -- Our ties with Mexico will be much more firmly established in 2012, because sometime within the next 50 years the Mexican border will become as the Canadian border. A free one with formalities and red tape of ingress and egress cut to a minimum. So that residents of both countries can travel back and forth across the line as if it were not there.
Ted Simons: Well, that seems like a bit of a stretch from the U.S. senate's bill proposal. It's an interesting quote, though. But let's go in that direction. Let's talk about, again, cross-border trade, cross-border traffic, just getting back and forth, maybe not quite as easily as the senator thought there, but what changes --
Dennis Hoffman: we're very different from the vision of interconnected relationship with Mexico. I think we need to work more in that direction to try to improve that. There's lots of costs that will be born now to put all of this border security in place. To incur all of the wait times and security checking that this kind of border security will require. Now, is it necessary? I think it's unfortunately I think it's a necessary political outcome today. Folks do tend to want border security. But we have to figure out ways in my opinion, to immigrate -- Integrate these economies, the economies of Mexico, the economy of Mexico and the economy of the U.S. in a much more sophisticated way than we currently have.
Ted Simons: Do you see that direct business with Mexico increasing or just simply changing, if something like this were to go through?
Dennis Hoffman: Well, I think -- I think there's a lot of momentum for investments in infrastructure, for improved and warming relations on some fronts, especially with respect to certain business sectors in terms of the development, let's say of aerospace. Let's say of doing a better job and I've heard this argument from a number of fronts in Arizona, connecting manufacturing facilities in Mexico with research and development facilities perhaps north of the border and aligning that -- Leveraging, say, less expensive labor and manufacturing with the research and talent that could take place up here.
Ted Simons: De facto outsourcing, in other words.
Dennis Hoffman: Indeed, and doing it in this hemisphere fear as opposed to shipping the jobs to Asia.
Ted Simons: I think you mentioned something along the lines that this is a matter of productivity and not politics. This particular bill. Explain, please.
Dennis Hoffman: Well, the productivity issue is what I think about when I think about immigration reform. Again, it's kind of my -- When you unfetter labor markets, and you hear this from a lot of fronts, you've heard this historically from Senator Flake, way back in his days with the Goldwater institute. When he promulgated open border, open labor types of policies. As many -- This very libertarian, very consistent with Goldwater's original vision, as I've noted here, and with a libertarian kind of concept. You can maximize productivity if you maximize resources if you unfetter markets. And that's very clear.
Ted Simons: OK. We have about seconds left. Talk about what could happen if this thing goes through. What happens to Arizona's economy if nothing changes?
Dennis Hoffman: Well, again, economists debate this. A number of economists will point out that many of these 11 million folks are already employed, they're actually paying taxes, they're underemployed, they're probably not earning the wages they would if they were, quote, legal. They're paying taxes, but they could be doing more. So we are sub optimizing in our current situation, but certainly it isn't disaster, the status quo is not disaster.
Ted Simons: Just could be a little better.
Dennis Hoffman: We could be much better.
Ted Simons: It's good to have you here of the thanks for joining us.
- Editor Jim Small from the Arizona Capitol Times will give us the latest news from the state legislature.
- Jim Small - Editor, Arizona Capitol Times
| Keywords: legislative
Ted Simons: In proclaiming his candidacy, Duval said Arizona needs a strategy terror the 21st century economy. He also criticized Governor Brewer and Republican legislative leaders for education cuts, but praised the governor for her push to expand Medicaid. And speaking of that push, the legislature is still considering Medicaid expansion and a budget and a few other things. Here with our mid-week legislative update is Jim Small of the "Arizona Capitol Times." Good to see you. A few other things that may just be a few other -- It's slowing down a little bit.
Jim Small: They are slowing down. Word came out today next week will begin the first three-day workweek. Normally they work Monday through Thursday, but because they're at a point where the budget isn't really moving anywhere, and everything is really kind of -- A lot of things are hinging around this Medicaid proposal, they don't have necessarily a whole lot to do. So rather than drag everyone down there four days, especially folks from out of town, they're only going to do it for three days, they are going to meet Tuesday through Thursday now, at least for the foreseeable future. It could always change, if there is something that happens and things break free and they need to come back to work on Monday, I'm sure they will.
Ted Simons: Just to make it Official, that 100-day session deadline was yesterday?
Jim Small: Yesterday was the hundredth day, which is kind of the call -- The officially recognized day for the end of session. We're nowhere near the end of session that the moment, so they've -- The legislature has extended that deadline, they're allowed to do that through the rules, to extend another week and I'm sure we'll keep seeing extensions every week until we get to the end of session.
Ted Simons: How common is that extending of a deadline? Does it happen very often?
Jim Small: The last two or three years have been suggestions have gotten -- Sessions have gotten done within 100 days, or 110 days. Which was abnormal the last five years before that. A Republican legislature and a Democratic governor, so sessions dug on into may or even in several cases into late June or early July. Which those were a little more abnormal, so it's not uncommon for sessions, you can look back through history, but they've gone 120-150 days.
Ted Simons: The budget is a retirement as far as adjourning. But things like Medicaid expansion and changing the sales tax, these are big priorities for the governor. Those aren't necessarily priorities but are they de facto priorities this session?
Jim Small: Well, yeah. I think they -- Medicaid has to get resolved. You cannot move forward on a budget plan the way the political landscape is laid out. You can't act on a budget until you get this Medicaid thing sorted out. And if the legislature were to decide it wanted to do a budget without the Medicaid issue, it would be what we saw in 2009 where the legislature tried to do a budget without the governor's sales tax increase issue. We saw what happened there when she rejected the budget.
Ted Simons: Is there any attempt do you think to do that, or is that not there?
Jim Small: There hasn't -- There's been talk about it, but there hasn't been any desire to go down that road. Republican leaders we've talked to feel they've made good progress on the rest of the budget, on everything that's not directly tied to that Medicaid proposal. And they feel confident once a resolution is reached on that issue, they'll be able to get the budget done in short order.
Ted Simons: Things are happening at the capitol, not happening all that quickly, and you could be down there for a while.
Jim Small: Yeah. It's interesting, at the beginning of the year everyone is hopeful this would be another hundred-day, or 110 day session, and, yeah, it took about a month before people started to realize this might take longer. And I think the longer we've gone it's become -- The attitude has become more pessimistic. They do an annual pick the SiNE die day. A lot of people, the most popular day was May 31st. People thinking that deadline of not being here in June will prompt people to come to the table and get stuff done. But we'll see.
Ted Simons: Nature will have its way. We mentioned Fred Duval has made it official, he is running for governor. Everyone -- Every democrat in the state seems like they're lining up behind the guy, at least half the democrats in the state. Who is Fred Duval and what kind of chance has he got?
Ted Simons: You mentioned in your intro, former Clinton aide and most recently the board of regents here. He's been around politics for the last 30 or 40 years. Democratic politics. But he's kind of built an image and built a career out of trying to be the guy who bridges the gap. Not a rigid partisan, but the guy who wants to work to find consensus and find that common ground between Republicans and democrats. He talked about that today in his announcement speech. Talked about his first job in government was working for Bruce Babbitt back in the 80's, and how Governor Babbitt set out to work with the Republican-controlled legislature and find things they could agree on and work for major policies. And he said that's what I want to emulate, I want to find these Republicans who are I think he called interested in common sense solutions and not partisan politics.
Ted Simons: That sounds like someone interested in policy. What kind of experience does he have as far as down and dirty elections?
Jim Small: He's had some forays into elections, the most recent was for Congress a number of years ago. Didn't win, obviously. This is -- About as big a scale as you can get in Arizona. He's running for governor, that's about it. So we'll see. He will almost certainly have a primary against Chad Campbell, the house minority leader.
Ted Simons: Is that a pretty much done deal?
Jim Small: Campbell hasn't come out and said he's going to run, but everyone assumes he's going to be running, and he certainly hasn't been backing down, some of Duval's people have been saying oh, Chad should step aside and should just say he's not going to run and Campbell's response has been, no, that's OK, I'm fine doing what I'm doing.
Ted Simons: The Republican side, we have another official candidate for governor, Senator Al Melvin from the Tucson area. A bit of a surprise?
Jim Small: Yeah. He announced on Monday that he is forming an exploratory committee for governor, though it sound like the committee was a pro forma thing to do to make sure he does haven't to resign from office. Sounds like is he fully committed to running for Governor. A Republican from the Tucson area, in his third term in the state senate, and he's -- Someone who is certainly going to have to raise his profile in order to run for an office of this caliber.
Ted Simons: What's he known for at the capitol? I remember he thought Arizona should look at nuclear disposal sites within state boundaries, those sorts of things. Interesting thing to run on, though it sounds like he's a jobs guy.
Jim Small: It's one of his focuses, yes. A lot of Republicans talked about jobs in the last couple years and he's tried to find areas he thinks Arizona can do better. One thing he's talked about a lot in his time in the legislature is building a deep water port in the sea of Cortez, in Mexico and turning Arizona into a shipping corridor for that kind of stuff. Instead of -- So folks wouldn't have to go to L.A., they could come into Mexico and Arizona could benefit from the nuclear recycling, waste recycling you mentioned, another thing he's been big on.
Ted Simons: Hugh Holman making it official, Al Melvin announcing he's going to explore, but explore very hard, Bennett, Ducey, Scott Smith, Christine Jones -- This is shaping up to be as crowded as everyone expected.
Jim Small: You're right, I think the fact you had a vacancy and no incumbent I think is going to attract a lot of people. We'll see how many who can stick it out to the end. A year from now, how many will these people will still looking at this race or still in this race.
Ted Simons: And there will be a vacancy. Correct? Is the governor still making noises about running again, or trying to run again?
Jim Small: The governor hasn't officially said she's not going to seek the chance to run again. But I think the last thing we heard about this was a joke about it. She kind of joked about the fact that I don't know why these Republican legislators think they're going to be done with me in two years, because I got five more years before I'm out of here. I think most people have come to the conclusion that she is probably -- Probably not going to challenge.
Ted Simons: She's having fun with it, but that's as far as it goes for now.
Jim Small: For now.
Ted Simons: That will be good enough for now. Thanks for joining us.