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October 22, 2014

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Immigrants boost economy — but how much?

A study could help state avoid more surprises, but politics preserve willful ignorance

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Leila Navidi

Construction worker Juan Rodriguez stands outside Los Paisanos Bus Co. last month after saying goodbye to two friends who are going back home to Mexico.

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Roberto Alvarez sits after services at Ebenezer Christian Church last month in Las Vegas. Alvarez has three brothers in the construction business who, like many immigrants in the area, are out of work.

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Jose Pepe Hernandez gets a hug before boarding a bus bound for Mexico. He is going back because he can no longer find work in residential construction in Las Vegas. The effect on Nevada's economy of the departure of many immigrant workers has taken officials by surprise.

Nevada’s invisible workers are causing trouble for the state.

After dozens of interviews, the Sun concluded in an April 6 story that 60 percent to 80 percent of the Las Vegas Valley’s residential construction workers are illegal immigrants. Tens of thousands of these immigrants who have lost construction jobs are no longer feeding money into the economy. Many are leaving Las Vegas.

Because these workers live and work under the radar, economists did not foresee the effects of their lost wages and spending on state revenues.

The result is “we plan in the dark,” says Jeremy Aguero, principal of Applied Analysis, a Las Vegas consulting company whose clients include Clark County, the Wynn resort and the Legislative Counsel Bureau, the state’s research arm.

And now that the state government is lurching forward with steep spending cuts midway through its budget cycle, some say flawed revenue projections are partly to blame.

As Assemblyman Moises Denis, D-Las Vegas, explained: The 2007 state budget “didn’t take into account the true impact immigrants have on the economy, so we underestimated how (the downturn in homebuilding) would affect our economy. Things are worse than they might have been because immigrants are leaving.”

Aguero and Denis say the lesson for the state is that if it wants to avoid stumbling from budget year to budget year, it must find a way to count the entire workforce and calculate the effect of illegal immigrants on the economy.

Others in politics and business remain unconvinced of the merits of such a study. They don’t think it would be unbiased, and they doubt the results would convince both sides of the polarized debate on immigration.

Denis says he tried to float the idea of funding research on the issue before the 2007 legislative session. One of three Hispanics in the Legislature, he has a district that’s about 70 percent Hispanic. At the time, he spoke of the need to “have information to make informed decisions.” But most of his colleagues didn’t get it.

“Most people I talked to thought it was a good idea from an economic point of view, but not from a getting-elected point of view,” he recalls. Denis says he plans on reviving the idea, seeking support this time from the private sector.

Aguero says there’s “no question” the issue needs to be looked at. “They’re an essential element to an essential part of our economy — and maybe multiple parts of our economy,” he said.

Denis, who has lived in his Las Vegas neighborhood for more than 30 years, says the way immigrants are undercounted in the economy reminds him of what he faced as PTA president at C.C. Ronnow Elementary School in the mid 1990s. For years, he says, the School District would assume that his children’s school’s population would shrink based on incomplete information about the apparently aging demographics of the surrounding neighborhood. He kept trying to point out that the school was growing because of the influx of Hispanics. Finally, the district began taking into account the growing Hispanic student body at C.C. Ronnow and surrounding inner-city schools, he says.

As for economic impact, Texas is the only state to have completed a study focusing on illegal immigrants. Private groups in Iowa and Oregon have recently issued reports as well. In Nevada, the Progressive Leadership Alliance of Nevada looked at immigrants as a class, legal and illegal, in a 2007 report. That report didn’t look at costs to local and state governments.

The 2006 Texas report, compiled by the state comptroller, concluded that undocumented immigrants added $17.7 billion to the gross state product and $1.58 billion to state revenue in 2005, while “taking away” $1.16 billion in state services.

Mark Sanders was then spokesman for Texas Comptroller Carole Keeton Strayhorn and helped write the report. He says that “it was such a hot potato that quite frankly some people didn’t want it done.”

A lot of people in that state’s government “had a preconceived notion of the impact of illegal aliens on society,” Sanders says. So the results proved to be an “eye opener ... that probably lowered some of the rhetoric against illegal aliens.” The study took about six months to complete and cost the state nothing because the comptroller’s staff already did research on taxes and state revenue.

But in the end, Sanders says, “the report got caught up in politics,” meaning its results were dismissed by Strayhorn’s opponents and by those who believed illegal immigrants are inevitably a drain on the economy. This is what Aguero calls the “passive racism of low expectations.”

State Sen. Bob Beers says, “It would be nice to know if immigrants produce a net gain or not ... but I would be concerned with the methodology of such a study” and how it would be seen.

“There’s no way to do such a study that one side isn’t going to question the other side’s methodology, assumptions and work,” he says.

Cara Roberts, spokeswoman for the Las Vegas Chamber of Commerce, says studying the economic impact of immigrants is not one of her group’s priorities. Instead it is focused on lobbying the federal government to create a guest worker program “so that employers can find and legally hire workers.” The chamber, Roberts adds, “is opposed to the hiring of undocumented workers.”

Beers says time may have a way of answering questions about undocumented workers and Nevada’s economy if those workers continue to leave.

“Perhaps we’ll see what the impact of immigrants would be through observation of the local economy after they’re gone.”

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