The Bear went over the border...

…and this is what he saw.
Bear Stearns Asset Management did a study in January 2005 entitled, “The Underground Labor Force is Rising to the Surface.” It was an attempt to analyze the impact of illegal aliens on the economy. This wasn’t a political analysis, like so many others. This one was about investments and business impact.

Here’s what they learned:

1) That the number is more like 20 million illegals, not 12.
2) The number of new illegals entering each year is 3 million.
3) Illegal aliens make up 8% of the workforce.
4) Four to six million jobs have shifted to the underground market.
5) Many employers are paying illegals in cash, using unrecorded revenue.
6) Technology and cheap air fares have made it easier for illegals to come here and find work.

They go on to say, “We believe most investors are underestimating the magnitude and significance of this theme.”

What is the impact? Why does it matter? Here’s where they say the impact is felt:
1) Distorted economic statistics.
2) Distorted government budget projections.
3) Understated job growth.
4) Artificially low inflation.
5) Average annual income reduced by 4 to 6%.
6) Higher real estate prices.
7) Exaggerated productivity numbers.
8) Long-term growth projections are distorted.
9) $30 billion a year in social service expenses.
10) Income tax is not being collected from those who are paid “off the books”, estimated at $35 billion a year.
11) Retail sales are overstated.

As you look at some of those items listed, you can see why politicians are reluctant to enforce the laws and send them home. Some of the economic recovery they’ve been taking credit for ISN’T REAL. And to pull the plug creates embarrassment and new costs.

And now, as the Senate debates legalization, I offer this quote from the report: “If indeed, the number of illegal immigrants is 20 million people, approximately the equivalent of New York State, any amnesty or legalization and assimilation process will require significant public sector resources.”

And that is what the Bear (Stearns) saw when he looked at the immigration problem.