Economic Judgment on Arizona’s Immigration Law

On April 25, the U.S. Supreme Court will hear oral arguments over the constitutionality of Arizona’s controversial immigration law. But jurisprudence aside, the economic verdict is already in: The law has damaged Arizona’s economy.




The worst example: E-Verify. It’s an electronic verification system that employers are supposed to use to check the legal work status of all new employees. Besides failing to detect unauthorized immigrants 54 percent of the time — thus flunking its core function — E-Verify falsely identifies legal workers as illegal about one percent of the time.

Arizona’s immigration law also expands the so-called “business death penalty,” where second-time offenders who knowingly or intentionally hire unauthorized workers lose their business licenses. This penalty deters businesses from moving to Arizona, expanding within in the state, or even starting up in the first place.

Businesses hire fewer new workers when confronted by expensive and complicated regulations such as Arizona’s. Richard Melman, described as the “Steven Spielberg of the restaurant industry,” halted plans to open an Asian-themed restaurant in Scottsdale after E-Verify became mandatory. He said, “You put in $3 million or $4 million, and you can be shut down for a mistake. Why take a chance? I want to see how it plays out.”

E-Verify and the business death penalty didn’t open up jobs for Americans; it drove entrepreneurs from the state.




Agriculture is a prime example. Farmer Tim Dunn grows black-eyed peas and garbanzo beans near Yuma, but he is having trouble finding enough labor to pick them. “We just don’t see people walking up, looking for jobs like they used to,” he says. Other farmers across the state tell similar stories.

Dunn’s choice is not between paying low or high wages — it is between paying low wages, stopping production, or shifting to more expensive crops that don’t require pickers. As a result, Arizona farmers are shifting from growing profitable crops like alfalfa and tomatoes to less profitable crops like cotton and wheat because they can be harvested with machines. This amounts to government-created labor scarcity — and it does not produce prosperity or greater wealth for Americans at large.

The Supreme Court will ignore the mighty contribution of unauthorized immigrants to Arizona’s economy. Getting rid of immigration laws that restrict the movement of peaceful and healthy migrants would allow them to contribute even more. Arizona should be making it legal for them to work instead of increasing penalties on Americans for hiring the employees they want. Whether or not Arizona’s immigration law is constitutional, it is bad economic policy, and the last thing an economy struggling to create jobs needs.
