Regulation Isn't Free

Justice Brandeis, call your office! States are indeed "laboratories of Democracy" and in the absence of a Federal immigration solution, states are passing their own legislation.

The Wall Street Journal news pages -- not my wingnut buddies on the Editorial board -- report on the business community's preparations for a new law

PHOENIX -- Arizona businesses are firing Hispanic immigrants, moving operations to Mexico and freezing expansion plans ahead of a new law that cracks down on employers who hire undocumented workers.

The law, set to take effect on Jan. 1, thrusts Arizona into the heart of the national debate on illegal immigration, which has become a hot topic on the presidential campaign trail. Republican candidates, in particular, have been battling to show how tough they are on the issue.

Arizona's law, believed to be the strictest in the nation, is shaping up as a test of how employers will react when faced with real sanctions for hiring undocumented labor. It is being closely watched by businesses across the country. While proponents say the crackdown will save the state money on services for illegal immigrants, some businesspeople fear Arizona's economic growth may be at risk.

Businesspeople should fear. The law is having its intended effect. Immigrants are leaving the state and employers are very cautious about the status of new hires. But my Friends at ThreeSources (F@TSs) who would rightly scream about unintended consequences for subsidies or CAFE standards, still do not recognize the massive consequences of such a crackdown:

A University of Arizona study released earlier this year concluded that economic output would drop 8.2% annually if noncitizen foreign-born workers were removed from the labor force. Researchers estimate about two-thirds of the workers in that category are in the state illegally.

"Getting rid of these workers means we are deciding as a matter of policy to shrink our economy," says Judith Gans, an immigration scholar at the university's Udall Center. "They're filling vital gaps in our labor force."

Sheridan Bailey, president of steel-beam manufacturer Ironco, said he has fired several Hispanic employees in anticipation of the sanctions law. "This law has the potential of sinking a business," he said. Mr. Bailey, who has formed a business group to address the issue, said Congress's inaction has allowed "policies to be generated on the fringe."

Ironco recently sealed a deal to outsource some production to a Mexican company. "The labor market is tight, and I face fines if I don't meet my commitments," said Mr. Bailey. Pacing his company's steel-fabrication bay, where welders and fitters build columns, he asked rhetorically: "Who will work here in 112-degree heat, come the summer?"

Dora Cardenas, who owns a small Mexican restaurant in Phoenix, has lost six out of 12 employees since late November. They moved to other states. "They say they were afraid to be here," said Ms. Cardenas. "I'm even afraid to be here, and I am a legal resident." She said business is down almost 40% since the summer at her restaurant, which caters mainly to a Latino clientele.

Jason Levecke, the grandson of the founder of the Carl's Jr. fast-food empire and the state's biggest franchisee, has put on hold plans to open 20 more outlets statewide. "That's $30 million that could blow up in my face," he said. "The risk is too great."

I do not claim that my F@TSs are inconsistent, hypocritical, or fat. The country has a legitimate right to regulate immigration which it lacks for energy mix, toilet water use, or washing machine design. And F@TS is just an unfortunate acronym.

But I'd ask them to consider these consequences and to refrain from calling for a crackdown until there is some method to ameliorate these effects.

Immigration Posted by jk at December 14, 2007 10:58 AM