Being Legal Doesn’t End Poverty

Published on July 22nd, 2013

July 20, 2013

LOS ANGELES — THOSE pressing for change in the country’s immigration system like to say that creating a path to citizenship will bring the estimated 11 million undocumented immigrants “out of the shadows.” It is taken as a given that legal status will help them climb the economic ladder.

But in this city, and in urban areas across the country, it seems clear that even with full citizenship, many could remain in the shadow economy, earning cash for low-wage jobs.

Millions of workers in the United States — those who sew clothes, mow lawns, care for children, construct homes, clean offices and serve food — function almost entirely in a cash economy. For undocumented immigrants, working for cash tends to be the most reliable way to earn an income while avoiding any attention from the government.

Advocates of the immigration bill have used economic mobility as an argument for legalizing the millions already living here. They enthusiastically embraced a Congressional Budget Office report last month that said the Senate’s immigration bill would increase the size of the labor force and lead to greater productivity, which would raise average wages in the long term and have broad economic impact. Last week, business groups continued to pressure House Republicans to consider similar legislation.

But it is hardly a given that citizenship is a route to better jobs.

“Having legal status takes away one threat that people held over their workers, but it doesn’t do much more than that,” in the workplace, said Victor Narro, the project director for the Labor Center at the University of California, Los Angeles.

When the Labor Center studied wage violations in 2009, it found that foreigners in general were more likely than native-born workers to be paid less than the minimum wage and that undocumented immigrants, particularly women, were even worse off. But the study also found that foreign-born workers who were legal residents were almost twice as likely to be paid less than the minimum wage as American-born employees.

“Until you have the government stepping in and creating real enforcement of worker protections, we’re going to have the same kinds of problems we have now. Employers are not going to start doing that voluntarily,” Mr. Narro said.

Countless workers earning a low hourly wage — regardless of their legal status — are paid in cash. Some are keen to avoid paying taxes on their modest income, while others feel trapped by a conundrum: work for cash, or don’t work at all.

Many of these workers are domestic employees in informal settings, like a day laborer picked up on a street corner or a nanny found through a social network, with homeowners who are reluctant to think of themselves as employers who are legally obliged to file for taxes, or reluctant to take on the cost and paperwork that taxes entail. Others work for businesses with dozens of employees that have come to rely on cash paydays as a way to cut costs.

“We see employers in a number of industries act as if there is a third-class labor market that is paid below the minimum wage and are made to suffer all manner of violations of labor law,” said Nik Theodore, an associate professor in urban planning and policy at the University of Illinois, Chicago. “For many employers it is a calculated risk that they are willing to take. They trust that their employees aren’t going to report them and that nobody from the government is actually going to come check. When you have workers in desperate need of work, they are going to be willing to do a lot of things.”

Over all, unreported income amounts to roughly $2 trillion annually, but cash wages make up only a portion of that estimate, according to Edgar L. Feige, an emeritus professor of economics at the University of Wisconsin, Madison, who has spent decades examining underground and cash economies, in part by using information on how much cash is in circulation at any given time. There is no way of knowing how many workers are earning their salaries in cash, Professor Feige said.

“Whatever unreported economy that exists, it goes well beyond immigration,” he said. The cash economy is particularly important in California, which has more undocumented immigrants than any other state and the eighth largest economy in the world. The sheer size of the immigrant work force and economy allows business owners to create a norm of paying off the books that would be unthinkable in another time or place, said Ruth Milkman, a labor expert and professor of sociology at the City University of New York Graduate Center.

“Employers have really gotten into the habit that this is the normal way of doing business,” Professor Milkman said. “They don’t particularly want to change, and nobody is making them do it. The immigration bill certainly doesn’t change much for employers who take the low road.”

Day laborers, those men standing in front of Home Depots and on street corners looking for whatever work comes their way, are perhaps the most widely recognizable stream of cash workers. Often, these men were mechanics, engineers or even architects and doctors in their home countries. The vast majority are undocumented immigrants. But in recent years, with the economy struggling, more of these immigrants have been standing in lots next to citizens, who are equally eager to find work, said Chris Newman, the legal director for the National Day Laborer Organizing Network.

“We see people who rotate in and out, they come find work for the day and go to another job at night,” Mr. Newman said. “You lose a foothold in the formal economy and it’s a natural place to go.”

Last month, the Labor Department reported that there are 2.7 million temp workers, more than ever before. As more large companies rely on temp agencies to fill their ranks, it is possible that more American workers, legally or not, could be treated like day laborers — who can be employed one day and out of a job the next. Mr. Newman repeated something that he has said to himself over and over again amid the debate in Washington: “Immigration laws are malleable, but the law of supply and demand is immutable.” The way he sees it, as long as there is growing demand for an informal labor market, there will be people to supply that work force.

Jennifer Medina is a national correspondent for The New York Times.

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