Unfortunately, it is all too common that we rely on anecdotal data when making arguments. It has become nearly universal that someone begins an argument with “I know at least 20 people that…” This is one of the poorer ways of assessing the truth.
In this article, I will analyze the economic benefits of immigration in Kern County relying solely on verified data. This data are incontrovertible; it does not listen to biases. However, it is the interpretation of the data that people may dispute. In my learned opinion, immigrants in Kern County are a vital contributor to our local economic GDP, and Kern County would enter a significant recession if harsh immigration policies were to be put into place.
As of the most recent data, Kern County is comprised of 882,176 persons, with roughly 344,626 individuals employed in the labor force. Nearly 40,000 individuals are employed in farming and agriculture, almost 25,000 in resource extraction and construction, nearly 14,000 in cleaning and maintenance, and almost 20,000 involved in the food service sector. The Migration Policy Institute has estimated that these comprise a sizable fraction of the industries that immigrants enter into.
In Kern County, nearly 20 percent of residents are classified as foreign-born. Roughly 56 percent of all foreign-born individuals are employed in the labor market. This is contrasted to about 40 percent of all individuals employed in Kern County in total (including both native-born and immigrants). Among those of working age (18 to 65), out of the 382,900 working age native-born individuals, about 244,000 are employed, imputing a labor force participation of 64 percent. The numbers are 149,200 and 100,000 for immigrants, imputing a prime-age labor force participation rate of 67 percent.
In 2017, construction laborers earned $17.45 per hour on average; cleaning and maintenance workers earned $14.77 per hour on average; and farmworkers earned $10.89 per hour on average. This means that, in terms of labor income, all immigrants earn about $3,234,296,000 ($3.2 billion) annually. Contrast this to total labor income in Kern County of about $16.8 billion. This indicates that immigrants contribute about 10 percent of Kern County’s GDP annually. Think about it this way: Every hour, between 8 and 5, immigrants are contributing nearly $1.5 million towards Kern County’s GDP.
Assuming the highest possible values for tax evasion on the part of immigrants (wholly unrealistic), this means that immigrants contribute about $45 million in tax revenues to the state annually, an effective tax rate of 1.4 percent. Although this seems low, according to the State of California, about two-thirds of state residents face an effective state income tax rate between 0 and 1.5 percent (to calculate the effective tax rate, divide state income taxes paid by your total income on your W-2).
Although immigrant entry may lead to small wage decreases for native-born workers (from the increase of 7,459 working age immigrants from 2014 to 2015, the average wage in Kern County of $23 per hour would fall by $0.36 to $0.43 per hour). This is an income loss of 1.9 percent per year.
This, however, is offset by price decreases from immigrant-intensive goods. In fact, we would expect the prices of each good to fall by 1 percent (maintenance, foodstuffs, construction, etc.). It is likely that, at best, the average native-born worker will see no decrease in their purchasing power and, more likely, see a slight increase (this net benefit will only increase the more that you earn).
This piece exposes only a fraction of the benefits and costs to immigration. It does not explore the costs of business compliance, the cost of tax evasion, the benefits of innovation, or the benefits of having a multi-cultural county. But it begins to explore the necessity of crafting smart immigration policy that benefits our county. Immigrants play an incredibly vital role here in Kern County, and eliminating even a small fraction of them would depress economic activity considerably.
Richard Gearhart is an assistant professor of economics at CSUB. He specializes in labor, public-sector and health economics.