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Testifying before the Senate Judiciary Committee on immigration reform in July, New York City Mayor Michael Bloomberg said his city's economy would collapse if its undocumented immigrants were deported and suggested the same holds true for the nation. New research shows he may be right. And no more will the impact of immigration legislation be felt than in California, where up to 30 percent of the estimated 12 million undocumented immigrants reside.

Bloomberg's testimony was a sharp break from much of the rhetoric in the immigration debate, which has sought to criminalize undocumented workers and accused them of watering down U.S. culture and sapping taxpayer resources. Though it is difficult to gauge the exact impact of undocumented immigrants on the economy, research by Raul Hinojosa, a professor of political economy at UCLA and former Clinton advisor, suggests that undocumented workers provide huge benefits. For one, the majority — up to 7.2 million — are employed in the labor force, largely as low-cost workers filling shortages in industries including the construction trades and agriculture.

For retail real estate, the impacts of legislation would be twofold. It could hurt retail sales, especially in states that have large immigrant populations including California, Florida and New York. Moreover, given the role undocumented workers play in the construction industry, it could exacerbate labor shortages and end up raising the cost of development.

“It would have a substantial impact on our industry” if the pool of undocumented workers diminishes, says Michael Mugel, owner of California-based Red Mountain Retail Group, which redevelops shopping centers and owns 4 million square feet of retail space in eight states.

Arturo Sneider, a principal at Los Angeles-based PrimeStor Development, Inc., a developer of both neighborhood shopping and power centers in primarily Latino neighborhoods, says illegal immigrants comprise a large segment of his tenants' customer base. “This group is a loyal customer following and important to the success of our retailers,” he notes.

All told, undocumented workers earn between $450 billion and $500 billion — about 90 percent of which is spent annually within U.S. borders (in contrast to about $50 billion that gets wired to family members in their home countries).

And that may understate the impact. Hinojosa contends that the actual financial impact of illegal immigrants is about $800 billion when buying power is combined with what they produce for their employers. Undocumented workers typically earn 20 percent less in wages than legal workers, he says. Since goods and services cost less to produce, consumers enjoy lower prices and employers higher profits than would otherwise be possible.

Hinojosa also says that companies are finally waking up to how this is largely an untapped market and one that is increasingly buying all types of goods and services. He says retailers view this as a growing segment of the population that traditionally has paid cash and been outside the credit system.

Buying power

In fact, Hinojosa is such a believer in the economic potential in the undocumented immigrant community, that he founded No Borders, Inc. to provide a debit-card service for immigrants where they can store cash to send money home, make phone calls and pay for purchases. He believes if this group of consumers is brought into the credit worthy fold, the impact would be tremendous. He estimates that if undocumented families could be approved to buy homes, for example, their buying power would qualify them for $75 billion in new mortgages.

In California, the impact is especially sharp, “because of the high concentration of illegal immigrants in California, this group has substantial buying power,” says Hans P. Johnson, a research fellow at the Public Policy Institute of California in San Francisco. This is true despite median household income for undocumented immigrants averaging $28,000 annually — almost half as much as the state average of $50,000.

Dee Dee White, vice president of the Economic Research Bureau at the San Diego Chamber of Commerce agrees.

“Illegal immigrants are buying gasoline and groceries and paying for rent and utilities, so they have quite a bit of impact on the economy, especially in San Diego,” she says.

White points to the May 1 demonstrations, during which millions of immigrants in dozens of cities around the U.S. walked off their jobs and refused to spend money as part of one-day boycott meant to illustrate their impact. White says traffic patterns in San Diego decreased noticeably that day, particularly hampering the city's restaurant and retail industries.

Legislation logjam

White, in fact, is worried about the potential impacts of proposed legislation that has been discussed in Congress. Although no bill is likely to emerge before the Midterm elections in November, there has been ongoing debate on the emphasis of any immigration legislation. The most stringent legislation would call for a wall to be built at the U.S./Mexican border, an increase in border security and for all undocumented immigrants to be deported.

More moderate legislation would treat immigrants differently based on how long they have been in the country, with those here more than five years being allowed to stay after paying a fine while newer immigrants would be deported. The legislation would also include “guest worker” provisions and a offer a “path to citizenship,” though details of those programs have not been hashed out.

In the meantime, the debate on undocumented workers and immigration reform will continue to play out in the streets and workplaces.

Johnson notes that California's undocumented construction workers are not necessarily paid less than U.S.-born workers with similar job skills, but rather suggests that construction companies hire them because they are a readily available, flexible, hardworking pool of workers.

Employers in service industries hire them for similar reasons. “I hear all the time from my members that the biggest problem they face is not being able to find enough workers,” said Scott Vinson, National Council of Chain Restaurants director of government relations responding to President Bush's support for limited amnesty for undocumented workers, in an article published in the Nation's Restaurant News. (NCCR has officially endorsed a proposed Senate bill supporting a guest worker program.)

An analysis of various studies on the impact of illegal workers suggest that over the long term they help our economy run more efficiently, says Julie Murray, an associate analyst at the Washington, D.C.-Immigration Policy Center, and not just in the border states. “They go to places that have a high demand for labor, which makes the economy more flexible,” she says.

Undocumented or Latino?

With the majority of undocumented immigrants hailing from Central and South America — about two-thirds according to most estimates — there has been a broader demonization of all Latinos.

Kenn Morris, director of the University of California San Diego Cross Border Innovation program at San Diego, points out that other one-third of undocumented immigrants are Asians, Canadians and Europeans, most of whom came into the country legally, but overstayed their visas. “So if sanctions are imposed, this should be done equally,” he says, noting that nobody appears concerned about the non-Latinos here illegally.

Anti-Latino sentiment could come back to bite the retail sector. California's foreign-born Latino population is 10 million. About 20 to 30 percent of those are undocumented. And there is a similar number of native-born Latinos in the state. All told, Latinos as a group represent $108 billion in spending power, according to a 2005 study from the Tomás Rivera Policy Institute at the University of Southern California.

Carlos Lopez, director of Urban Realty for the Los Angeles-based brokerage firm of Reza Investment Partners, notes that the Latino population is the largest minority population in California and growing. The U.S. Census Bureau projects the nation will add 32 million Hispanics over the next 25 years, half of whom will reside on the West Coast.

Noting that the Latinos comprise 34.2 percent of the 18- to 34-year-old market, he says, “I sell a lot of shopping centers, and this is the fastest growing young market from the standpoint of disposable income. If anything retailers are gearing up for the density that already exists in this (young Hispanic) market, and not one developer I work with who is developing in these markets is concerned this business is going to go away.”

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