The entire topic of illegal immigration and securing our borders has been on the forefront of the Trump administration’s agenda since the campaign last year. It ranks right up there with the tariff discussion and the uncertainty of our involvement in the Russia/Ukraine conflict, and most recently, the Iran/Israel war.
But the entire subject of illegal immigration is a very sharp, two-edged sword. So now the ICE raids and the substantial effort to round up these illegal immigrants is starting to affect employers who count on this labor in the all-important agriculture, food processing, hospitality and construction industries. Employers from homebuilders to farmers to food-processing companies are grousing over the sudden shortage of hourly labor, which is almost entirely filled by immigrants.
Long History. For centuries now, immigrants (illegal and otherwise) have picked the fruit and vegetables in our vast agriculture industry, have swung the hammers and placed the bricks in commercial and residential construction, and worked in our hotels and restaurants. Illegal immigrants, often referred to as “unauthorized or undocumented immigrants” play a significant role in the U.S. economy, particularly in these key industries. Their contributions are often a subject of debate, with differing perspectives on their overall importance.
Some of the important statistics that underpin illegal immigration are significant. Undocumented workers make up 25% of all farm workers in the United States, where the majority of workers put in at least 10 hours of work per day in arduous conditions to feed American families. Building, grounds-keeping and maintenance rely on undocumented workers, who make up 19% of maintenance employment. These laborers tend to work on low wages for 12-hr shifts, often seven days a week. In the construction industry, 17% of workers are undocumented. And in food preparation and serving, 12% of workers in this occupation are undocumented.
Undocumented immigrants pay billions of dollars in taxes annually. In 2023, households led by undocumented immigrants paid $89.8 billion in total taxes. This includes $33.9 billion in state and local taxes, and $55.8 billion in federal taxes. Immigrants, even legal immigrants, are barred from most social services, meaning that they pay to support benefits they cannot even receive.
Economic Contribution. So it is apparent their economic contributions are significant. In terms of labor force participation, unauthorized immigrants fill crucial labor shortages, especially in the aforementioned sectors like agriculture, construction, food processing and hospitality. Interestingly, economists predict that legalizing the undocumented population would significantly benefit the U.S. economy by boosting GDP and increasing tax revenues.
One study suggested it could add $1.2 trillion to the economy over 10 years. So the alternative of deporting undocumented immigrants would result in a substantial loss of tax revenue, impacting federal, state and local budgets. And remember, immigration can help revitalize communities, particularly rural areas, by slowing population loss and contributing to growth.
And employers worry about the impact of mass deportations, which could lead to significant labor shortages in key industries, increasing costs, inflation and slowing economic growth. Estimates suggest a mass deportation effort could reduce GDP by 2.6% to 6.2% over the next decade.
These ongoing debates and policy changes related to immigration, such as mass deportation plans and restrictions on federal benefits for legal immigrants, are shaping the discussion around the role of unauthorized immigrants. These discussions could have significant economic and social consequences.
In summary, while the presence of unauthorized immigrants is a complex issue with varying viewpoints, economic data and research highlight their significant contributions to the U.S. economy, particularly in terms of labor supply, tax contributions and economic growth.
I worry that mass deportations could have substantial negative impacts on the economy and society, and particularly in the construction trades where they make up a significant cohort of the employment picture. Given the recent moves by the Trump Administration to exempt agriculture and hospitality workers from these deportation mandates, expect further easing on the current deportation policy.
AVP Index. The AVP Pulse Index is down -0.6% for the month, but still up +2.2% year-over-year and +8.2% over the past 36 months. But these positive yearly and 36-month measures are rapidly shrinking, because in the last quarter, the Index was up +4.2% year-over-year, and +10.5% over the prior 36 months. This clearly means the gains in the Index are shrinking with no sign of relief for the overall construction economy on the horizon.
As I said last quarter, “… in a cautionary note, we do not expect the monthly results will change their downward drift for the foreseeable future, so expect the Index to continue to point downhill until we see changes in current policy.”
Three months on since I wrote that, nothing has changed – except that consumer sentiment is starting to recover if last month’s readings are any indicator.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers and acquisitions. He has a career spanning almost five decades, and volunteers his time to educate the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on X @allenvillere.