Undocumented Workers: Boosting the Economy, Curbing Inflation?

Some days, it feels like this economic boom can’t continue. What is holding it up? Why doesn’t
inflation continue to rise and cause a recession? I decided to look at illegal immigration to see how it
affects the economy. Illegal immigration is a complex issue with both social and economic
ramifications. Recent economic data suggests undocumented immigrants might be playing an
unexpected role: mitigating inflation while boosting the economy.

Many industries, particularly agriculture, construction, and hospitality, rely heavily on immigrant
labor. These jobs are often physically demanding, have lower wages, and may not attract enough
native-born workers. Undocumented immigrants fill this gap, keeping these sectors functioning and
contributing to the overall economic output. With more workers available, businesses can produce
more goods and services, leading to lower prices for consumers.

A recent analysis by Goldman Sachs points to a rise in immigration as a reason why the US
economy has experienced strong growth without significant inflation. The increased labor force helps
meet consumer demand without causing a wage-price spiral, a key driver of inflation.

Undocumented immigrants pay taxes, both directly through payroll deductions and indirectly
through sales taxes. A study by the Institute on Taxation and Economic Policy estimates that
undocumented immigrants contribute billions in federal, state, and local taxes annually. Crucially,
most undocumented immigrants are of working age. This means they are less likely to utilize social
programs like Social Security or Medicare, which are funded in part by payroll taxes they themselves
contribute to. This further reduces the potential strain on social safety nets.

While illegal immigration remains a contentious issue, its impact on the US economy can be seen
in a positive light. Undocumented workers fill crucial labor gaps, potentially contributing to economic
growth and mitigating inflationary pressures. While we need a political solution to solve the illegal
immigration crisis, we can look on the bright side of how it is boosting the economy today.

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