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Cost-Benefit Analysis of the New Alabama Immigration Law

Published: Feb 1, 2012 1:45 pm

Samuel Addy, Ph.D. of the University of Alabama's Center for Business and Economic Research, Culverhouse College of Commerce and Business Administration, has conducted a study analyzing the cost-benefit of the Alabama immigration law.

Here is a summary of the findings:

• This report presents an initial cost-benefit analysis of HB56, the new Alabama immigration law. Potential economic benefits of the law include (i) saving funds used to provide public benefits to illegal immigrants, (ii) increased safety for citizens and legal residents, (iii) more business, employment, and education opportunities, and (iv) ensuring the integrity of various governmental programs and services.

• The law’s economic costs include implementation, enforcement, and litigation expenditures; increased costs and inconveniences for citizens, other legal residents, and businesses; fewer economic development opportunities; and the economic impact of reduced aggregate demand as some illegal immigrants leave and therefore no longer earn and spend income in the state. The annual economic and fiscal impacts of the reduction in aggregate demand caused by 40,000-80,000 unauthorized immigrant workers who earn between $15,000 to $35,000 a year leaving the state are reductions of about (a) 70,000-140,000 jobs with $1.2-5.8 billion in earnings, (ii) $2.3-10.8 billion in Alabama Gross Domestic Product (GDP) or 1.3-6.2 percent of the state’s $172.6 billion GDP in 2010, (iii) $56.7-264.5 million in state income and sales tax collections, and (iv) $20.0-93.1 million in local sales tax collections.

• Some of the law’s costs and benefits are qualitative and others are quantifiable, but difficult to estimate. While the law’s costs are certain and some are large, it is not clear that the benefits will be realized. From an economist’s perspective, the question Alabama and its legislature have to ponder is this: Are the benefits of the new immigration law worth the costs?

Click here to read the full report.

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