As the crackdown on undocumented workers in California nears its third month, researchers are warning of significant repercussions on the state’s economy.
Since early June, Los Angeles has been unsettled by the immigration sweeps enforced by President Donald Trump’s administration.
Entire neighborhoods in the city have been left nearly deserted, with local businesses closing their doors and fewer customers venturing out due to fears of being targeted by immigration authorities.
Economists are voicing concerns that ongoing disruptions could severely impact businesses that rely heavily on immigrant labor, while others may also experience ripple effects due to a lack of available workforce, leading to reduced productivity that could lower California’s gross domestic product and increase food prices nationwide.
Giovanni Peri, an international economics professor at UC Davis, highlighted the potentially massive impact if many workers are deported or too afraid to work.
California’s economy is vast and resilient, akin to the world’s fourth-largest economy, meaning it would require significant disruption to destabilize it.
However, the raids are targeting a crucial component of the state’s economic engine, prompting economists and business leaders to begin tracking the actual impact.
Todd Sorensen, a professor from UC Riverside, noted a palpable concern: “My gut check is, this is bad.” Economic implications will be closely monitored as the summer months progress.
An analysis by researchers at UC Merced’s Community and Labor Center indicated a striking 3.1% reduction in the number of individuals reporting for work in California’s private sector around late May and early June, a decline reminiscent of the reported absences during COVID-19 lockdowns.
Conversely, in the rest of the United States, working rates increased during the same period.
Among those affected, noncitizen women showed the largest decline, with an 8.6% drop, translating to about 1 in 12 women not reporting to work.
Citizens also displayed noticeable decreases in attendance, raising alarm bells among economists.
Edward Flores, an associate professor of sociology and faculty director at UC Merced’s labor center, explained the critical connection between consumer presence and economic vitality, stating, “If people are afraid to leave their house, they aren’t spending money, which generates less business.”
This concern paves the way for potential downstream effects on the economy.
Economists emphasize that undocumented immigrant labor has a significant multiplier effect on the economy; their productivity bolsters job creation in various sectors.
For instance, if immigrant workers fill roles such as bricklayers on construction sites, their employment indirectly supports roles for supervisors, engineers, electricians, plumbers, and more.
When the undocumented workforce diminishes, opportunities for U.S.-born workers may also decline, potentially leading to wage deflation, according to findings from past studies on the ramifications of such mass raids.
Michael Clemens, an economist at the Peterson Institute for International Economics, succinctly stated that “Immigrant workers are the backbone of the economy.”
A report by the Bay Area Council Economic Institute found that undocumented workers contribute nearly 5% to California’s GDP solely based on their wages, a figure that increases to 9% when considering ripple effects.
With approximately 2.28 million undocumented immigrants residing in California, they constitute about 8% of the state’s workforce.
This population is deeply rooted in the community, with nearly two-thirds residing in the state for over ten years, and they contribute an impressive $23 billion annually in local, state, and federal taxes, according to the same report.
If California were to lose its undocumented workforce, studies predict dire consequences: a potential contraction of 14% in the agricultural sector and nearly 16% in construction, translating to an upper limit of $278 billion in economic loss.
While these figures represent a worst-case scenario, the actual extent of the impact remains uncertain, allowing for speculation about the future.
Abby Raisz of the Bay Area Council Economic Institute remarked, “That’s the million-dollar question.”
Economists also suggest that the duration of the raids will significantly influence the economic landscape.
Christopher Thornberg of Beacon Economics illustrated this dynamic by comparing it to a power outage: a couple of days without power may lead to deferred activities but is not a permanent loss in economic output.
However, if disruptions linger for months, the results may translate into genuine losses, which can precipitate a broadened economic fallout.
Certain industries have already reported negative effects, such as the car wash sector, which has faced multiple raids.
Early accounts from farmers have not been reassuring, as they are experiencing substantial labor shortages during crucial harvesting periods for various crops.
Bryan Little from the California Farm Bureau recounted a situation where a strawberry producer in Ventura County lost a significant portion of his crop due to labor absences, signaling a trend of increasing labor shortages that could lead to sharp price increases on California-produced food products reaching the rest of the nation.
Little remarked on the public’s reaction to rising prices, recalling the frustrations surrounding egg prices and speculating how similar price increases could impact a wide variety of grocery items in the near future.
Tourism-related businesses are also preparing for challenges ahead, as visitor numbers may decline due to fears surrounding the raids.
Visit California, the state’s tourism marketing agency, had previously projected a 9.2% drop in international visits by 2025, attributing this decline to the adverse sentiments tied to President Trump’s trade policies.
Assemblymember Sharon Quirk-Silva (D-Fullerton), representing areas of northern Orange County, has noted dwindling attendance at local summer events and festivals, describing eerily quiet urban centers, particularly in Santa Ana and in areas like Little India in Artesia.
Artesia’s mayor, Ali Taj, forecasted a “horrific” impact on the city’s sales tax revenue stemming from these declines.
“The message here is please stop, stop, stop,” he urged during a press conference, where local officials and business leaders convened to discuss the repercussions of the raids.
Nella McOsker, president and CEO of the Central City Association, representing over 300 businesses, echoed sentiments of relief at the prospect of reduced ICE operations, believing this could encourage residents and visitors to return to downtown areas.
In light of the ongoing challenges, the Hispanic Construction Council reported a pre-existing nationwide construction worker shortage of 500,000 individuals, with George Carrillo, the council’s CEO, noting delays in construction project timelines exacerbated by fears linked to the Trump administration.
As another consequence of ongoing labor shortages, the progress of wildfire recovery efforts in Los Angeles and other essential infrastructure projects—such as expanding airports and medical centers—could stall.
With 61% of the construction workforce being immigrants and 26% undocumented, the possible fallout in the construction sector is looming large.
Carrillo emphasized that businesses reliant on undocumented labor need to advocate for recognition of their contribution to the economy to better appeal to the federal government.
He pointed out an important parallel: similar pressure from the automotive industry resulted in President Trump withdrawing tariffs that were damaging to them, suggesting that collective voices from affected businesses could similarly prompt a reevaluation of immigration policy.
The pressing question remains how to address these economic challenges while recognizing the significant role that undocumented workers play in California’s ongoing economic success.
image source from：latimes
