A major theme in Donald J. trump’s immigration reform policy is his proposal to remove 11.3 million undocumented immigrants living in the U.S.
A report by Moody’s Analytics predicts that “the economy will suffer as Mr. Trump’s deportation policy acts like a negative supply shock, requiring millions of undocumented immigrants to leave the country and resulting in a reduction in the size of the labor force.
The deportation of 11.3 million undocumented immigrants will also have significant negative demand side impact on the economy as the purchasing power of these immigrants also leaves the country.
As undocumented immigrants leave the country; the labor market will tighten with the contracting labor force. Labor costs will skyrocket as employers struggle to fill the open job positions.
Recent research has shown that native U.S. workers are imperfect substitutes for immigrants due to different occupation choices and skills. For example, where undocumented immigrants work as manual laborers in agriculture, it is unlikely that many natives are interested in performing these labor-intensive jobs even at modestly higher wages. It is even the case that farms that struggle due to labor shortages may prompt native job losses in upstream and downstream industries.
Mr. Trump’s immigration policies will thus result in fewer jobs, potentially severe labor shortages, and higher labor costs. This will also ultimately cause businesses to more aggressively raise prices for their products.”
