Undocumented immigrant workers in Colorado play an important role in the state's economy
The number of undocumented immigrants in Colorado has increased enormously during the past 20 years. While that number has gone down since mid-decade, the issue of undocumented immigration continues to be controversial, as Colorado struggles with the effects of the worst recession since the Great Depression and the budget woes that have followed.
In that debate, some argue undocumented immigrants cost Colorado by taking jobs and enrolling in state programs. This analysis shows, however, that far from being an economic drain, undocumented immigrants who live and work in Colorado contribute significantly to the state’s economy.
For every job in the state occupied by an undocumented immigrant, another 0.8 jobs are created. And for every dollar of wages an undocumented immigrant worker collects, another 80 cents of wages are generated. Colorado lawmakers ought to keep those factors in mind as they consider immigration policy.
The latest data show unauthorized immigrants make up 5 percent of the state workforce and 3 percent of incomes. Working in the state, unauthorized immigrants create economic impact and jobs beyond their own employment as their earnings are re-spent, and their production spurs business-to-business activity.
Undocumented immigrant population in Colorado
Colorado is home to roughly 2 percent of all undocumented immigrants in the nation, or 180,000 people, according to the most recent estimates by the Pew Hispanic Center.1 Of those, an estimated 120,000 are in the state labor force (working or looking for work), including 107,500 who are working.2
Colorado’s undocumented population has grown enormously during the past 20 years. However, the total number of undocumented immigrants in Colorado has decreased from peak population levels in the mid-2000s. (Figure 1)
Undocumented employment in Colorado
According to national data, undocumented immigrants work most in construction, services and manufacturing (Figure 2), where they are over-represented compared all U.S. workers. On the other hand, undocumented immigrants work less in education, health, financial services, and wholesale and retail trade.3
Undocumented workers in Colorado’s economy
Undocumented immigrants produce goods, provide services and earn wages. That activity creates a "ripple effect" of economic stimulus that moves through the state economy. Production by immigrants requires inputs from other businesses, which increase inventories and employment to compensate. In addition, sales of goods produced by immigrants generate income for employers, which is reinvested in the business, spent by the business proprietor and paid to workers in wages. Using economic impact modeling software, the effects of those activities can be quantified.
The results are noteworthy. Undocumented immigrants make up 5 percent of Colorado’s workforce, earn 3 percent of the state’s personal income, and produce 7 percent of Colorado’s economic output. (Figure 3) Through that activity, undocumented immigrants in Colorado create an additional 91,000 jobs, $4.7 billion in personal income, and $15 billion in industry output within the state. (Figure 3)
The economic role of undocumented immigrants in Colorado is presented in terms of employment, personal income, and economic output. For each area, effects are presented in stages of impact, including direct impact, induced gain and total impact.
Direct impact: Represents the primary wave of employment, income and production. The direct employment impact is the number of undocumented immigrants employed in the state. The direct personal income is the amount of wages they receive. The direct economic output is the value of the goods and services undocumented immigrants produce.
Induced gain: Measures secondary and tertiary spending. The stage captures the "ripple effect" of the direct impact. For example, it includes the impact of increased production of concrete used by an undocumented construction worker and the impact as that worker spends wages on groceries. "Induced employment" tracks the jobs created in this process, "induced (personal) income" tracks earnings gains and "induced output" tracks output generated.
Total impact: The sum of the direct impact and the induced gain.
Multiplier: The ratio of total impact to direct impact; a way of quantifying the per-dollar and per-job impact. For example, the 1.85 employment multiplier for undocumented immigrants means every undocumented immigrant working Colorado results in another 0.85 jobs in the state.
Impacts by industry
A wide variety of industries experience increased employment and production as a result of Colorado’s undocumented immigrants. (Figures 4 and 5)
Contact: Alec Harris
303-573-5669, ext. 316
Released April 22, 2011
Estimates for economic output and employment gains associated with undocumented immigrants in Colorado are created using IMPLAN (IMpacts for PLANning) economic impact modeling software. The software uses empirically derived regional input-output accounting to enable modeling of local industry changes. For more information, see the IMPLAN website: http://implan.com/v3/.
Estimates are derived in six steps:
1. Begin with the number of undocumented immigrants in the Colorado labor force in 2010. Courtesy of the Pew Hispanic Center (PHC).4
2. Calculate the number of undocumented immigrants employed in Colorado. We combine (1) with a PHC estimate of the (national) unemployment rate of undocumented immigrants.5 (Employed = labor force x (1 – unemployment rate).) Because there are no state-level estimates of undocumented immigrant unemployment rates, we assume Colorado’s undocumented immigrant population conforms to the national rate of unemployment for undocumented immigrants.
3. Determine undocumented immigrant employment in major industries. Next we use PHC figures6 showing the share of the (national) undocumented immigrant labor force employed in each of the major industries—as defined by the 2007 Census Industrial Classification system—and apply these percentages to (2). This gives us the number of undocumented immigrants employed in each major industry in Colorado.
4. Apportion major industry totals to detailed IMPLAN sectors. First we convert Census major industrial codes to ranges of NAICS codes. (The IMPLAN software is only compatible with NAICS industrial codes.) Next we convert NAICS ranges to ranges of detailed IMPLAN sectors. Third, we use IMPLAN study area data of Colorado sector employment to calculate each sector’s share of employment within its major industrial code group/range. Finally, we apply that percentage to the employment totals from (3). (We assume that within major industries, the distribution of undocumented immigrant employment mirrors Colorado’s overall labor force distribution.) This gives us the number of undocumented immigrants employed in each of IMPLAN’s detailed sectors.
5. Convert IMPLAN sector employment totals to IMPLAN industry activity levels. We rely on IMPLAN to convert employment totals in each sector into industry activity levels (in dollars) for each respective sector.
6. Model the effects of combined industry activity. Finally, we have inputs — by IMPLAN sector — associated with undocumented immigrants employed in Colorado. We run these inputs through the IMPLAN model to estimate impacts.
1 Passel, Jeffrey and Cohn, D’Vera, ―Unauthorized Immigrant Population: National and State Trends 2010,‖ Pew Research Center: Pew Hispanic Center, Feb. 1, 2011.
2 Analysis of: Passel, Jeffrey and Cohn, D’Vera, ―U.S. Unauthorized Immigration Flows Are Down Sharply Since Mid-Decade,‖ Pew Research Center: Pew Hispanic Center, Sept. 1, 2010; And ―Unauthorized Immigrant Population: National and State Trends 2010,‖ Pew Research Center.
3 Passel, Jeffrey and Cohn, D’Vera, ―A Portrait of Unauthorized Immigrants in the United States,‖ Pew Research Center: Pew Hispanic Center, April 14, 2009.
4 Pew Hispanic Center, 2011.
5 Pew Hispanic Center, 2010.
6 Pew Hispanic Center, 2009.