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11.21.14 9:35 PM ET

Legal but Still Poor: The Economic Consequences of Amnesty

Expanding amnesty to undocumented immigrants without creating new jobs is a recipe for keeping new Americans poor and dependent on social services.

With his questionably Constitutional move to protect America’s vast undocumented population, President Obama has provided at least five million immigrants, and likely many more, with new hope for the future. But at the same time, his economic policies, and those of the progressive wing of the Democratic Party, may guarantee that many of these newly legalized Americans will face huge obstacles trying to move up in a society creating too few opportunities already for its own citizens, much less millions of the largely ill-educated and unskilled newcomers.

Democratic Party operatives, and their media allies, no doubt see in the legalization move a step not only to address legitimate human needs, but their own political future. With the bulk of the country’s white population migrating rapidly to the GOP, arguably the best insurance for the Democrats is to accelerate the racial polarization of the electorate. It might be good politics but we need to ask: what is the fate awaiting these new, and prospective, Americans?

In previous waves of immigration, particularly during the early 20th Century, there were clear benefits for both newcomers and the economy. A nation rapidly industrializing needed labor, including the relatively unskilled, and, with the help of the New Deal and the growth of unions, many of these newcomers (including my own maternal grandparents) achieved a standard of living, which, if hardly affluent, was at least comfortable and moderately secure.

Demand for labor remained strong during the big immigrant wave of the 1980s until the Great Recession. The country was building houses at a rapid clip, which required a large amount of immigrant labor. Service industries, particularly before the onset of digital systems, such as ipads for ordering, that replace human staff in fast-food restaurants, tend to hotels and provide personal services, although often at low wages.

More recently, this wave of undocumented migration has diminished, as economic prospects, particularly for the low-skilled, have weakened. Yet the undocumented population remains upwards eleven million. Largely unskilled and undereducated, roughly half of adults 25 to 64 in this population have less than a high-school education compared to only 8 percent of the native born. Barely ten percent have any college, one third the national rate.

This workforce is being legalized at a time of unusual economic distress for the working class. Well into the post-2008 recovery, the country suffers from rates of labor participation at a 36 year low. Many jobs that were once full-time are, in part due to the Affordable Care Act, now part-time, and thus unable to support families. Finally there are increasingly few well-paying positions—including in industry—that don’t require some sort of post-college accreditation.

Sadly, the legalization of millions of new immigrants could make all these problems worse, particularly for Latinos already here and millions of African-Americans.

African-American unemployment is now twice that of whites. The black middle class, understandably proud of Obama’s elevation, has been losing the economic gains made over the past thirty years.

Latino-Americans have made huge strides in previous decades, but now are also falling behind, with a gradual loss of income relative to whites. Poverty among Latino children in America has risen from 27.5 percent in 2007 to 33.7 percent in 2012, an increase of 1.7 million minors.

Logically, many Latinos and African-Americans might suspect that amnesty won’t be a great deal for them. There are occasional signs of disquiet. A recent Pew survey found that not only half of all whites, but nearly two-fifths of African Americans and roughly even a third of Hispanics approved of increased deportations of the undocumented. A Wall Street Journal-NBC poll found that well less than half of Latinos supported the President’s action.

This ambivalence may reflect the reality that legalization of the undocumented may be felt hardest in those places, such as California, that have attracted the most newcomers, and also have highly developed welfare states. Today public agencies in Los Angeles, with an estimated one million undocumented immigrants, are bracing from large increases in the demand for state provided services.

One LA Supervisor estimates the County, facing “an already impossible fiscal dilemma,” will need to spend an additional $190 million, without hope of federal compensation, on the newly legalized population. Ultimately, the newest migrants will be competing with existing residents—particularly poorer ones—not only for jobs but also social services.

The President’s action on immigration requires a profound shift in economic policy, particularly in the large urban centers where most undocumented are clustered, to avoid creating a squeeze on scarce jobs and services. But Obama’s other big agenda—addressing climate change—has slowed the expansion of fossil fuel development. Meanwhile, it’s the energy sector that creates precisely the kinds of high-paying blue collar jobs, averaging upwards of $100,000 annually, that immigrants might be eager to fill and could give low unskilled workers a foothold into the middle class.

Similarly, efforts by Obama’s allies at Federal agencies like HUD to encourage dense housing and discourage suburban growth means far less construction employment, one of the largest generators of good blue collar jobs and opportunities.

Ironically, the places where the cry for amnesty has been the loudest—New York, San Francisco, Los Angeles, and Chicago—also tend to be those places that have created the least opportunity for the urban poor. This is in part due to the fact that these areas have tended to de-industrialize the most rapidly, discourage fledgling grassroots businesses through high taxes, environmental and housing, regulations.

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Whatever their noble intentions, these cities generally suffer the largest degree of income inequality, notes a recent Brookings study. In fact, according to an analysis by Mark Schill at the Praxis Strategy Group, African-American incomes in New York are barely half those of whites and, in San Francisco somewhat below half. In contrast, cities with broader economies like Dallas and Houston, have black populations earning sixty five percent of white incomes. Similarly, Latinos in Boston, New York, Philadelphia and San Francisco do far worse, relative to incomes, than their Sunbelt counterparts, compared to whites.

These trends could worsen in precisely those areas with the biggest concentrations of undocumented immigrants covered by Obama’s executive order.

Take, for example, the borough of the Bronx in New York City. The most Latino of all New York’s counties, in the Bronx, roughly one in three households live in poverty, the highest rate of any large urban county.

In the country. It’s doubtful that legalization absent job growth will improve conditions , as it adds more potential claimants for local benefits without creating new income sources.

For reasons that can’t be purely economic, most Latino political leaders, and much of the group’s electorate, are in favor of policies that, over time, could doom prospects for Those who receive amnesty. Of course, there are other factors that play into support for these policies, like the emotional pull to reunite families, but whatever their appeal such measures could leave the very people they are meant to help as legal paupers.

My adopted home region of Southern California has seen an almost 14% drop in high-wage blue-collar jobs since 2007. Deindustrialization has continued, and construction employment lagged, even while the country as a whole, sparked by more secure and now cheaper energy supplies, has seen industrial production improve since 2010.

Herein lies the great dilemma then for the advocates of amnesty. In much of the country, and particularly the blue regions, they will find very few decent jobs but often a host of programs designed to ease their poverty. The temptation to increase the rolls of the dependent—and perhaps boost Democratic turnouts—may prove irresistible for the local political class.

So what should we do under these circumstances? Constitutional arguments aside, there do seem to be some better ways to create conditions for upward mobility among newcomers.

Higher minimum wages may help some of the legal residents, but arguably at the cost of new jobs for others including the newly amnestied. However popular with most voters, such redistributive measures will not address the fundamental economic challenge posed by amnesty.

Perhaps a sounder strategy would be to adopt policies that encourage broad-based economic growth, including energy, manufacturing, logistics and home construction. This would, of course, require some moderation of regulatory standards, particularly in reference to climate change.

The President’s recent deal with China, which essentially allows the Chinese to keep boosting emissions until 2030 while we reduce ours steeply, could make things worse. In some states like California, where the global warming consensus is beheld with theological rigidity, “green,” anti-suburban policies largely guarantee that most of the urban poor will never enter the middle class. In San Francisco, Boston and New York, the percentage of Latino and black homeowners is roughly one-third to one-half that seen in redder regions like Houston, Dallas, Phoenix and Atlanta.

In essence, the deepest blue states have created the worst of all conditions for the urban poor, and will be particularly tough on undocumented residents granted amnesty.

All this suggests that, if we are to make new Americans economically successful, we need to concentrate not on racial redress but find ways to spark broad based economic growth. Increasing use of inexpensive natural gas, for example, would not only help continue to reduce emissions but would spark an industrial expansion that would create more blue collar jobs. Similarly, policies that allowed for affordable, energy efficient new homes could create not only more blue collar employment possibilities, but a brighter future for young families, many of whom are themselves immigrants or their children.

The current amnesty could benefit both the country overall as well as recent immigrants if it is tacked to a broad based economic growth strategy. But that doesn’t seem to be in the cards. Instead, continuing policies that inhibit broad-based economic growth are increasing the numbers of Americans who must depend on government, not the economy, to take care of themselves and their families.