NEW YORK CITY (By Jessica Bennett, Newsweek) May 4, 2006 — They marched in big cities and small towns. They boycotted work and businesses, and withdrew their children from school. Some walked out of their jobs. And as hundreds of thousands of illegal immigrants took to the streets yesterday, they hoped for a dramatic impact: to prove to America that their work was significant to the successful function of the U.S. economy.

In certain industries, they made their case. In the West and Midwest, a number of meatpacking companies were forced to close. In California and Arizona, produce fields were absent of migrant pickers. And in Los Angeles, Chicago and New York, a number of businesses lacked sufficient staff to operate.

But the protests didn’t bring the economy to a halt, as some organizers had hoped. And that, says one economist, is because Americans overestimate the actual impact undocumented workers have on our economy. “It’s a positive benefit, but it’s not the be-all end-all of the economy,” says James P. Smith, an economist at the Rand Corporation who specializes in immigration labor. He spoke with Jessica Bennett about the relationship between the U.S. economy and the nation’s 11 million undocumented workers. Excerpts:

NEWSWEEK: Is it possible at this point to gauge the economic impact of Monday’s protests?
James P. Smith: At most, part of workers lost part of a day, but there’s no real effect on consumption. Whether it had a political effect or not—that’s a different question. But the economic impact was zero.

How would you assess the overall importance of undocumented workers to the U.S. economy?
Immigration, documented and undocumented, brings in about $10 billion a year more income for the native born. All immigrants are about 15 percent of the labor force, and illegal immigrants are about 5 percent. So it’s a positive effect—an important effect—but relative to a $10 trillion economy, it’s not driving the economy by any means.

If the United States were to lose their labor, due to strikes or possible deportation, which industries would be most affected?
If you take farming in California, 80 percent of the labor in farming in the San Joaquin Valley is undocumented workers. In the textile industry, also 80 percent of the workforce is undocumented. So there are specific industries in specific places that may not be able to exist without undocumented labor. There are other industries—such as meatpacking, construction trade, and tobacco—that are heavily dependent on it, and those industries would be impacted as well. So you have a very small overall effect, but when you get the microscope down to particular places and particular industries at particular points in time, then the impact would be quite large.

How large?
Well, you may not have a textile industry in the United States without undocumented workers. There are sets of industries that are heavily dependent on undocumented workers and they would be threatened by this. And I think some of them would not be sustainable. In the narrow sense of a particular type of work in a particular place it can have a big impact, [though] the overall impact is quite modest.

How would the loss of these low-wage workers impact consumers?
Well, prices would be higher. That’s the benefit we get from undocumented workers: their wages are low so we can produce things more cheaply, and the prices are low. So [our] prices would be higher because we’ll be mainly importing products like textiles and produce, which we currently produce here.

But would it benefit consumers in any way—like a decrease in taxes?
At the federal level, undocumented immigrants turn out to be a net-positive benefit because immigrants are young and the federal government is spending money on programs for the elderly, like Medicare and Social Security. At the state and local level they tend to be a tax burden, not because of welfare and not because of health, but because of education. In California, we estimated that the native-born households were paying about $1,200 more in taxes than they received in benefits in order to pay for immigrants.

What’s the biggest misconception about the impact of undocumented workers on the U.S. economy?
I think people overstate their importance. It’s a positive benefit but it’s not the be-all end-all of the economy.

If a strike or deportation were to occur, would anyone be willing to fill these roles?
I don’t think there’s a supply of domestic labor that’s willing to do some of the jobs—like working in the fields—at a price that’s economically feasible for that industry. So I think that industry might go out of existence. But there are other fields where undocumented immigrants work—like cab drivers—where we also have a lot of native-born Americans. All that’s going to happen there is that the price of taking a taxi is going to go up.

What’s the pay scale like for an undocumented worker?
I thing the average income is about $15,000 a year.

Does that have anything to do with skill-gaps between undocumented and documented workers?
Undocumented immigrants tend to be very low skilled and also receive extremely low wages in their home countries, so they’re willing to work for quite low wages in the United States relative to our standards. Most Americans in those kinds of jobs are not going to work for those wages—and that’s the niche that the undocumented tend to fill. They work in low-skilled jobs at wages way below what domestic workers would be willing to work for, and those are the industries they tend to dominate. And we all benefit from that in lower prices for the services we buy.