Feature

How immigration reform would affect small businesses

Part of our series on the future of Main Street

Immigration reform has long been a divisive issue, as politicians, advocacy groups, and pundits fight over whether Congress should grant legal status to the 11 million undocumented immigrants living in the United States. But there's at least one group that has for the most part reliably remained in favor of taking action: the business community.

Most — though not all — experts agree that comprehensive immigration reform, if it ever passes, and the president's executive action, if it's ever implemented, would have a beneficial effect on the economy. Either one could add billions to the gross domestic product over the next two decades while increasing the tax base and reducing the federal deficit. At the same time, bringing more legal workers into the system could help improve the Social Security Trust Fund's fiscal solvency.

"It's hard to see how either comprehensive immigration reform or the president's executive action can be anything other than positive," said David Kallick, a senior fellow with Fiscal Policy Institute (FPI), a nonpartisan and nonprofit research organization. "You'd be allowing people to find better jobs that match their talents and capacities better and be in compliance with the law."

As more unauthorized people come out of the shadows and find legitimate employment, we may even begin to see some of these previously undocumented immigrants open up mom and pop stores of their own. "Maybe they go from being street vendors to opening a restaurant," Kallick said. "It would help to take a lot of very marginal small businesses and turn them into stronger small businesses. It's a good thing for them and a good thing for the local economies."

Reform, whether through legislation or executive order, would also provide a boost in wages to undocumented immigrants. The FPI estimates that the workers eligible for legal status would see a 5 to 10 percent increase in their earnings. That bump, in turn, means greater buying power, which means consumers will have more money to spend at businesses big and small.

There are other benefits to small businesses, many of which struggle to pay the fines that come along with employing undocumented immigrants. And for those who have been following the law, immigration reform would level the playing field. They would no longer be competing with businesses that take advantage of vulnerable workers by paying them below minimum wage or don't spend the money to take care of dangerous working conditions because their employees have no legal recourse.

"The president's executive action is good for those businesses who play by the rules," said Daniel Costa, the director of immigration law and policy research at the Economic Policy Institute in Washington, D.C. "It will help the employers that are not using undocumented workers."

Though a comprehensive immigration reform bill passed by Congress and signed by the president would be a permanent fix for many of these problems, the business community — along with the millions of undocumented immigrants in this country — will have to wait. Instead, they are hoping that the president's executive action, which gives roughly five million people relief from deportation, will make it through a lawsuit brought by 26 states that are claiming Obama doesn't have the authority to make such sweeping changes to the immigration system.

If the executive order survives the legal challenge, Costa cautions there may be one area that businesses will have to navigate.

"There is a murky gray area in terms of compliance with existing law," he said. "Let's say a worker shows up and says, "Hey, I am now legally authorized, and I would like to update my paperwork.' Does that mean the employer has to fire someone who has been working illegally? There is a lack of clarity there."

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