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Does illegal immigration hurt staffing? A data deep dive seeks the answer

Industrial Staffing Report

Does illegal immigration hurt staffing? A data deep dive seeks the answer

Michael Schultz
| September 17, 2024
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Immigration

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Several staffing firms have expressed concern that increased illegal immigration, combined with cost-exhausted clients, may be enabling unethical competitors to engage in illegal employment activities. That could result in a loss of business and contribute to the ongoing downturn in the staffing industry.

I previously reviewed data that may shed light on the situation in SIA’s Industrial Staffing Growth Assessment: May 2024 Update report, concluding that available information could neither support nor dismiss these concerns.

Inquiries to SIA about this topic began shortly after the Brookings Institute published a piece arguing that higher-than-expected immigration could provide an answer to how employment growth was maintaining such a rapid pace in the post-pandemic era, despite demographic headwinds (Note that, with the preliminary benchmark revisions recently released by the US Bureau of Labor Statistics, average monthly employment growth for the 12 months ended March 2024 is reduced to 174,000 from 242,000 — dramatically closer to the range quoted by Brookings for sustainable monthly employment growth of 60,000 to 140,000).

The Brookings article relied upon updated Congressional Budget Office estimates of net immigration, published in January. These estimates departed significantly from prior CBO estimates and from other estimates of immigration. These discrepancies primarily reflect the CBO projecting higher rates of unauthorized immigration as the driver for their increased immigration figures, but the CBO also notes that these estimates are extremely uncertain.

Interestingly, it appears that in developing these estimates, the CBO relied upon the Department of Homeland Security’s Enforcement Encounters figures without adjusting to reflect available data on repatriations/deportations or other enforcement actions.

Figure 1 below depicts estimates of net immigration from the current CBO demographic outlook, as well as estimates from the Census and the Social Security Administration. Separately, the Department of Homeland Security estimate of the unauthorized immigrant resident population is charted in Figure 2. These data, with the most recent available data point covering 2022, indicate that the total population of unauthorized immigrants remained slightly below its prepandemic level.

Figure 1. Estimates of net immigration, by agency

Chart contains estimates of net immigration by agency.

Sources: CBO presentation of own-agency, SSA, and Census projections, as well as vintage 2023 Census net international migration estimates from the Census for 2023 and earlier.

Figure 2. DHS estimated unauthorized resident population

Estimate of unauthorized resident population by the DHS.

Source: Department of Homeland Security

After entering the United States and finding work, new immigrants often economically support family in their country of origin, sending funds home to relatives. These international transfers are referred to as remittances. Growth in remittances are charted in Figure 3, with both year-over-year and quarter-over-quarter figures provided.

Figure 3. Remittances growth

Growth in amount of remittances sent abroad.

Source: Bureau of Economic Analysis

Finally, research from the Cato Institute suggests that illegal immigration into the US is largely responsive to labor market conditions — specifically, how rapidly wages are growing, how tight the labor market is, whether that be measured by the number of unfilled jobs or the unemployment rate. The image painted from this perspective is similar to what is provided from the look at remittances growth above: The early post-pandemic period likely saw historically high levels of unauthorized immigration, which declined significantly as the economy cooled but remained elevated into 2024.

While it remains impossible to definitively state whether unethical clients and competitors have leveraged increases in undocumented immigration to violate federal employment law and undercut lawful staffing firms, the remittances data and the correlation with job vacancies documented by the Cato Institute suggest that the era of greatest disruption to staffing most likely occurred near to when labor markets and staffing were just starting their retreat from all-time highs.