It’s not yet a mass exodus, but it could be a start. In March, Spanish-language newspaper Hoy reported that in January and February, 26 Mexicans living in three southern California counties registered with their home-country consulates to return home under a program that lets them ship household goods back to Mexico without paying import taxes. Among them was the owner of a cleaning business who was closing down her company. Her husband, who’d been working as a driver, was quitting his job. Both had been in the U.S. since 2000. (Neither gave the newspaper their full names for fear of immediate deportation.)
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The departure of long-established but undocumented Mexicans from California is a signal — along with other government data from the southwest border — that the flow of unauthorized immigration is shifting direction, perhaps dramatically.
And that will have implications for Sacramento businesses. Take LF Staffing — the company has 200 offices in seven states, and they’re usually short-handed by a hundred workers for blue-collar jobs paying from $11.50 to $90 an hour, according to the company’s vice president, Rick Kempf. In Sacramento, the company’s office regularly has fewer people than they need — on a typical day in April they were short by eight workers.
Right now, immigration issues impact maybe 10-15 percent of the jobs they’re recruiting for, Kempf says. Still, those positions would be filled if more immigrants had legal documents, since the company can’t hire those who don’t have papers. “It’s frustrating for everybody,” Kempf says.
With a new federal administration has come a promised immigration clampdown. In the Capital Region, the effects of the new policies may be felt most acutely by farmers. But some restaurateurs, builders and labor contractors also say the immigration squeeze will shrink their already-tight labor pool.
The Declining Immigrant Workforce
California farmers have told reporters they worry that they won’t be able to harvest their crops this year if their undocumented workers are deported and fewer immigrants cross the border. A January report from the USC Center for the Study of Immigrant Integration noted that nearly half the agricultural industry’s workers in the state are unauthorized.
Even before this year, the immigrant labor pool was drying up. Layoffs after the Great Recession meant that from 2009 to 2014, 140,000 more Mexicans returned home than entered the U.S., according to a Pew Research Center study.
This year, even fewer people are crossing the southwest border that divides Mexico from Texas, New Mexico, Arizona and California. U.S. Department of Homeland Security figures show that the number of people detained along that border fell by 58 percent for the months of February 2017 to April 2017 compared with the same period last year. Even the number of legal southwest border crossers has dropped slightly — down about 4 percent for February of this year and about 1 percent for March, compared with the same months last year.
As for those already here without papers — the limited number of H-2A, H-2B and EB-3 visas that allow low-skilled workers to be legally employed — many more are now targets for deportation. The Obama administration largely focused on sending home those who posed national security threats or were convicted of crimes. But two Department of Homeland Security memos issued in February make clear that the new policies target anyone here illegally.
The fallout of fewer workers coming from the south will be felt not just in agriculture. Undocumented workers are a bigger ingredient in California’s economy than in any other state — more than 1.7 million of them are employed here, double that of second-place Texas, according to the nonpartisan Migration Policy Institute. One in 5 of the state’s construction workers and 1 in 10 in the workforce as a whole are undocumented, according to the USC researchers. Immigrants, documented or not, comprise well over half of those in the food-preparation and food-serving industries, according to the report.
Who Takes the Hit?
Outside of agriculture, construction contractors seem the most worried about the immigration crackdown. Government data show that nationwide there were an average of 190,000 unfilled construction jobs at any one time last year, the highest level since data collection began in 2001. In a survey last year by the Associated General Contractors of America, almost 1 in 3 California contractors said they were having a hard time filling laborer jobs, more than 1 in 4 were having trouble finding concrete workers and 1 in 6 couldn’t find cement masons. More than 1 in 4 reported increasing their base pay rates in the previous year because they were having trouble filling jobs. (For more on this, read Troubles of the Trade).
In the Sacramento region, the trades most impacted by labor shortages are carpentry, rough framing and sheetrock installation, says Matt DeFazio, executive vice president at Brown Construction in Sacramento.
“We greatly depend on them, and if there’s any trepidation on their part about working in California, then — let’s just say the shortage won’t improve.” Matt DeFazio, Executive Vice President, Brown Construction
There’s fierce competition for those workers — with contractors poaching from rival firms for 20 cents an hour more, DeFazio says. Under the new immigration policies, he’s uncertain what will happen. “There’s definitely trepidation,” he says. “The Mexican crews that come up to support their families are good, strong crews — those guys know what they’re doing. But they’re going to be less inclined to come if there’s greater exposure or risk. We greatly depend on them, and if there’s any trepidation on their part about working in California, then — let’s just say the shortage won’t improve.”
One construction supplier didn’t want his name used because he’s in contract negotiations with a union. But he worries what the new policies will do to labor rates. “I don’t know if any immigration policy is changing things. But the fear is changing things,” he says. “During the [Great Recession], many of my workers went back to Mexico. And many of them didn’t come back.” He doesn’t want to give specific figures on wage increases in his business, but says last year his company doubled the wage increase it had budgeted for employees.
The restaurant industry expects something similar. Immigrant workers tend to fill back-of-house jobs like kitchen prep cook and dishwasher, says Jot Condie, president and CEO of the California Restaurant Association. The tough immigration enforcement policies of previous administrations were already affecting the industry, he says. In 2008, one San Diego restaurant owner was convicted of a misdemeanor for employing undocumented workers and paid a $400,000 fine after a raid. Under the Obama administration, there were few raids but more visits from immigration officials warning restaurants they’d be prosecuted if they didn’t fire undocumented workers, Condie says.
While Condie also says restaurants didn’t see any raids in the first 100 days of the Trump administration, he adds that there is more fear among restaurant workers about being picked up and deported. “We believe that’s been a contributor to some of these employment problems,” he says.
One temporary labor contractor — Rod Miller of Workers.com in Concord, which serves the Sacramento region — has so far seen no difference in his ability to fill jobs. Still, hourly rates for warehouse and production positions have been rising because of the shortage of workers, Miller says. He expects that a crackdown on immigration will further increase wages, which he thinks will be good for U.S.-born workers.
The new immigration climate also won’t likely affect sectors that need blue-collar workers with higher-level skills. Tom Kandris, CEO at PackageOne in Sacramento (and a member of Comstock’s editorial board), says the immigration issue doesn’t come up much for his company. Manufacturers like him need workers that are on average more highly educated with better skills and no language barrier, he says.
Even within construction, sectors that need higher-skilled workers — trades like electrical, plumbing and heavy equipment operation — aren’t anticipating that the new policies will affect them. “We’re not having a lot of trouble finding people,” says Matthew Evans of Barnum & Celillo Electric. In part that’s because electricians can’t hire anyone not enrolled in a state-approved apprenticeship. The guidelines for the program are strict, so someone without language fluency would have a hard time getting in, he says.
Wages, Automation and Adaptation
The laws of economics suggest that policies cutting the flow of immigrant workers should raise wages and so attract more U.S. citizens to hard-to-fill jobs. George Borjas of Harvard University, recognized as perhaps the leading labor economist on immigration, argues exactly that. “Believe me, if the wages were really, really high, you and I would be lining up,” he told the LA Times in March of California’s farmworker jobs.
Indeed, despite the crunch in the construction trades, U.S. Bureau of Labor Statistics data suggest that wages have room to grow. Certain trades have seen big wage jumps: Sacramento-area brickmasons made about $33 an hour on average in the latest survey of contractors in 2016, 32 percent more than in 2010. Drywall and ceiling tile installers were up 28 percent in that period. But carpenters actually saw their wages fall from about $27 an hour to $24. And overall wages in the Sacramento metro-area’s “construction and extraction” sector rose just 9 percent from 2010 to 2016, less than the 14-percent total inflation rate in that timeframe.
In the food service industry, there’s no question that rates are rising. The same government data show that wages grew 23 percent from May 2010 to May 2016 in the Sacramento-metro area for those working in food service.
Spiraling wage rates could end up hurting U.S.-born workers, argues another leading labor economist. If labor costs in construction and food service rise because of the immigration clampdown, investment in those sectors will fall, hurting job prospects for the native workforce, says Giovanni Peri of UC Davis, who also specializes in the economics of immigration. That’s because wage increases can’t keep being passed along to consumers in the form of higher prices — at some point they’ll cut demand, eating out less or buying fewer homes, he argues. Already Condie says that profit margins in the restaurant industry are 3-5 percent, and he worries about what an even-tighter labor market could do to Sacramento as a food destination.
Companies also might control labor costs by automating more. Condie says rising wages are making restaurants look closely at how they can run smarter and more efficiently. That means cross-training workers, retooling food preparation processes, and buying more prepackaged and pre-cut food items.
If there’s a consensus among employers on immigration, it could be on the need for more legal guest workers. Even Miller, who favors the illegal immigration crackdown, says he’d like to see a program that would let more immigrant workers legally take jobs that are tough to fill. And the National Restaurant Association, National Association of Manufacturers and Associated General Contractors of America have come out for immigration reform that includes an expanded guest worker program. And the AFL-CIO and other labor unions favor reform, including a more rational system for granting employment visas and legalization for those here without papers.
In May, Homeland Security Secretary John Kelly said that he’ll likely increase the the number of H-2B visas — granted to low-skilled non-agricultural immigrant workers — beyond the current 66,000 annual cap, which many employers have been asking for. In an April 18 executive order, President Trump ordered a federal review of the H-1B program, which employs highly-skilled workers. But the order made no mention of the H-2A, H-2B or EB-3 programs that affect those with lower skill levels.
“We’d absolutely love it,” Kempf says of a reformed guest worker effort. But absent a grand bargain on immigration, wages, along with food and house prices, could increase as enforcement efforts ramp up. Bigger companies can absorb higher labor costs, but smaller ones won’t, Kempf says: “If you keep putting it on small businesses, they’re just going to close.”