The Ethics of Doing Business with Illegal Immigrants.

• Author: Powell, Benjamin

Immigration policy has been a highly contentious topic in American political discourse for more than two decades. Perhaps the most contentious aspect of immigration in the United States involves addressing what should be done about people who immigrate to the United States illegally. This is an important question because roughly 10.5 million of the 44 million foreign-born people in the United States reside here illegally. (1)

For decades politicians have been unable to reach agreement on immigration reform laws that would address illegal immigration. The 1986 Immigration Reform and Control Act (IRCA) was the last comprehensive law to address immigrants already residing in the United States illegally. That act provided temporary and eventual permanent legal resident status to 2.7 million illegal immigrants and provided an eventual path to citizenship. (2) Since that time, most of the current 10.5 million illegal immigrants came to the United States.

The most serious attempt at passing laws to deal with the illegal immigrant population occurred between 2005 and 2007. The Secure America and Orderly Immigration Act (the McCain-Kennedy Bill) was introduced in 2005, and it contained provisions for legal status for undocumented immigrants, guest worker programs, and increased border enforcement. The bill was never voted on, but its major provisions were incorporated into the subsequent Comprehensive Immigration Reform Act (2006), which passed in the Senate but never became law because it could not be reconciled with the immigration bill passed by the House of Representatives, and into the Secure Borders, Economic Opportunity and Immigration Reform Act of 2007, which never made it out of the Senate.

The Dream Act of 2017 was the most recent attempt to provide a path to legal status for a portion of the undocumented immigrant population in the United States. It applied only to illegal immigrants who came to the United States as children. It would have mostly applied to the approximately 700,000 immigrants partially protected by the Deferred Action for Childhood Arrivals (DACA) executive order. Various versions of the Dream Act have been introduced since it was first proposed in 2001, but none have become law despite the fact that these illegal immigrants are among the least controversial. A 2018 Gallop poll found that 83 percent of the U.S. population approved of allowing DACA immigrants to become citizens. (3)

Although there was increased news coverage of deportations after President Trump took office, actual deportations decreased. Annual deportations averaged 383,000 per year during President Barak Obama's administration and fell to 275,725 per year during President Trump's first two years in office. (4)

Thus, businesses find themselves in a situation in which 10.5 million immigrants reside in the United States illegally. As a matter of law, it is generally illegal to hire undocumented or illegal immigrants. This creates an ethical problem for businesses. Is it ethical to do business with these immigrants? Is it ethical to hire illegal immigrants? Currently approximately 7.6 million of these illegal immigrants are employed by U.S. businesses. (5) Is it ethical to rent housing to illegal immigrants? To contract with them? To serve them as customers? These are important questions to consider, given the current status quo in the United States. (6) Answering these questions requires both economic and philosophical analysis. We believe that the argument we make in this article helps answer these questions with regard to all of the 10.5 million immigrants currently residing in the United States regardless of whether they migrated here illegally in search of a job, were brought here as a child, or overstayed a legal visa.

Law and ethics are not the same; the mere fact that something is illegal is not sufficient to demonstrate it is wrong, just as the fact that something is legal is not sufficient to show it is right. In some cases, it may be pragmatic to comply with unjust laws. Whether it is pragmatic to break an unjust law will depend on the probability of being caught, the severity of the punishment, and the degree of the unjustness of the law. Our purpose in this article is not to pass judgment on whether any given person or business should break immigration laws. Our purpose is to argue that they are justified in breaking these laws if they choose to do so. To anticipate the argument that is to follow, we will show that, in light of the economic consequences of immigration, every major ethical theory finds that existing immigration restrictions are unjust. Then we will argue that immigration restrictions do not tail into the special circumstances where philosophers have argued that there is an independent duty to obey the law. Thus, we conclude that it is ethical for people and businesses to interact with illegal immigrants in violation of the law.

Economic Impact of Immigration

Immigration creates economic gains through two principal channels. The first is through international trade in labor driven by the forces of comparative advantage. The second is through the productivity differences between countries due to their different formal and informal institutions, geographies, and other sources of place-specific (rather than person-specific) productivity. We review each of these channels in turn and then review estimates of the global economic gains that could be achieved by eliminating global barriers to immigration. (7)

Trade creates economic gains because different people in different places have different comparative advantages because they differ in their opportunity costs of production of various goods and services. Shipping goods across international borders is one way to attain some of these gains from trade. But not all gains from international trade can be realized by shipping goods. In some cases, gains from trade through comparative advantage can be realized only through the movement of laborers. If laborers in Mexico have a comparative advantage in construction or landscaping in the United States, then they need to be able to move to where the service is demanded. Geography and climate often dictate where food is best grown. If the laborers with a comparative advantage in agricultural work are not free to move to these locations, then food will be inefficiently produced by the wrong laborers, with the wrong quantity and type of capital, and in the wrong places. The economic case for free trade in labor (migration of workers), based on comparative advantage, is fundamentally the same as the standard and widely agreed-upon case for international free trade in goods (Freeman 2006). However, in the case of the movement of people, this standard case is incomplete.

In an (unrealistic) world where all people had identical opportunity costs, there would not be economic gains realized by moving goods across borders, but there would still be gains from moving workers across borders because places differ in their productivity. When humans living in low-productivity countries are allowed to move to countries with relatively better governance, more physical capital, and people who have accumulated more skills and education, they are instantly better able to make use of their own skills and creativity. These gains are often substantial.

A recent study by economists Michael Clemens, Claudio Montenegro, and Lant Pritchett (2019) provides the best available evidence for the differences in wages (implicitly productivity) of identical workers in different countries. They examine individual wage data from forty-two poorer countries and the United States, focusing on prime-age, low-skilled males educated outside the United States to compare real wages (adjusted for purchasing power parity) between workers in the origin country and identical workers from that origin country in the United States. They control for observable differences in these workers (age, education) and use "theory and evidence on migrant self-selection to bound the real wage gap for fully equivalent workers, adjusted for both observable and unobservable characteristics" (201). The "place premium" they measure is the increased real wage a worker could expect to earn by emigrating from his origin country to the United States. This increase is, essentially, the gains from place-specific productivity in the United States. The place premiums are massive. Their lower bound estimate is an average gain in wages of $13,700 for the 1.5 billion working-age people from these forty-two countries if they moved to the United States. The massive wage differentials we observe today would surely decrease if more people immigrated. However, we have good reason to believe that the global gains from (mostly) unrestricted immigration would remain massive.

A small literature has attempted to estimate the overall global gains in output that could be achieved by eliminating immigration restrictions, and it finds even more massive numbers. Clemens surveyed this small literature in an aptly titled article, "Economics of Emigration: Trillion-Dollar Bills on the Sidewalk?" (2011). The methodologies and assumptions in the studies varied. (8) As Clemens summarizes, "Differences among the models' conclusions hinge critically on how the effects of skilled emigration are accounted for; the specification and parameters of the production function (and thus the elasticities of supply and demand for labor); assumptions on international differences in the inherent productivity of labor and in total factor productivity; and the feasible magnitude of labor mobility. Assumptions on the mobility of other factors matter a great deal as well" (87). Regardless of the different assumptions in these models, they all have one thing in common: they estimate massive global increases in economic output that could be achieved by abolishing immigration restrictions. They range from a low of 67...