Question

What benefits do undocumented workers bring to the state economy? What costs do they bring? Do you believe they are a net economic gain or drain for the state?

Answer 1

Undocumented workers are the migrant workers who participate in the state economy without a legitimate work permit. This prevents them from getting recognized as workers and they are not eligible to get any benefit as workers interms of health, pension, insurance etc. They usually engage themselves in informal works with verbal contracts. The employers, once realising the condition of the workers and realising that they have little bargaining power, tend to exploit them, giving them less than minimum wages and burdeing them with tough working conditions failing which they are quickly replaced. Being so vulnerable and unable to stand up to the demands of the employers, these workers become a cheap option to the profit hungry employers who find it gainful to employ them inplace of the documented legal workers, who cost more with the compulsory benefits that they are granted. So as an implicit cost, the undocumented workers can cause some degree of labour displacement albiet, at the low skilled jobs levels mostly. They are hardly a threat to the high paying blue collar jobs in the state economy as these jobs do not bend the rules and allow undocumented workers to enter their payrolls. Now it can be argued that this displacement might not cause an overall loss but just a re distribution of surplus as the producers/ employers greatly benefit. By engaging the undocumented workers at lower pay and benefits, these small businesses and employers are able to reduce their labour costs and thus make more profits. They may be able to increase production and produce cheaper goods and services for the economy, which stands to increase the welfare of all. If the state economy can absorb the labourforce of undocumented workers without increasring unemployment, which is likely to happen if the economy is not operating at its full capacity then the economy can have a net economic gain.
The producers get cheap labour and increase profit. The consumers are also able to get more surplus by getting better product and services at a cheaper price. The state economy gains as they over work and under pay the undocumented workers. The gain is obvious: the loss suffered by the undocumented goes undocumented as well!