Immigration has affected the U.S. economy by increasing the supply of both skilled and unskilled labor, elevating demand for low-cost retail consumer goods and services, and suppressing labor costs. In addition, many immigrant laborers send money back to their country of origin, resulting in significant international cash flows.

Like a number of countries, the United States is largely a nation of immigrants. North America’s indigenous peoples were forcibly displaced by European immigrants, mostly from Great Britain, during the colonial period. Following American independence, plantation agriculture gradually took hold in the southern United States, fueling the massive importation of Slaveryslave laborers from Africa. During the first half of the nineteenth century, successive waves of European immigration continued alongside of the growth of slavery. A great number of Irish people immigrated to the United States during the 1840’s-1850’s, in large part because of potato crop failures in Ireland. Many Germans immigrated following the political fallout of a failed revolution in 1848.Immigration

African slaves provided labor for plantation agriculture and to a lesser extent for mining. After slavery was abolished in 1865, African Americans worked in agriculture and other manual labor. The newly immigrated Irish and Germans served as domestics and manual laborers in a variety of industries. Chinese immigrants were employed to build the expanding railroad system. These sources of cheap, imported labor are thought to have provided the foundation for industrialization by ensuring that there were enough workers to fill the growing number of factory production jobs. As the industrial economy expanded, the demand for cheap labor grew, paving the way for new waves of immigration. In the second half of the nineteenth century, many immigrants came from southern and eastern European countries such as Italy, Poland, Greece, and Russia, as well as Asian countries such as Japan and China.

A rise in anti-Asian sentiment in the final decades of the nineteenth century led to restrictions being imposed on immigration from Asia, resulting in decades in which much of the immigration was from southern and eastern Europe. At the same time, immigration across the southern border of the United States added to the existing Latino population.

During the early 1920’s, the federal government began to enact legislation designed to restrict overall immigration. Until that time, U.S. public opinion had generally favored an open immigration policy as synonymous with the conditions of modern liberty. The shift toward placing federal restrictions on immigration in the form of quotas was in large measure a response to the growing power of U.S. organized labor. Industrial trade Unions;immigrant laborersunions demanded protection from the threat posed by the influx of immigrant laborers, who were generally willing to work for lower wages. Immigrant laborers not only undercut the ability of trade unions to negotiate higher wages and better working conditions but also were often hired by U.S. business owners as strikebreakers.

During World War I and World War II, the combination of U.S. soldiers fighting overseas and factory production running at full capacity created serious labor shortages. In both wars, Washington looked to immigrant labor to solve the problem. Because most of Europe was embroiled in war, most of the immigration was from Mexico. As each war came to an end, however, the slowdown in factory production, coupled with the return of troops, led to sharp rises in unemployment and tight competition for work. This inevitably created the conditions for social conflict and presented new dilemmas for immigration policy makers.

For example, during the intense 1921-1922 recession, Mexican laborers who had come to the United States during World War I quickly were seen as unwelcome by more established American immigrants. The anti-Mexican climate resulted in a large-scale repatriation program that was orchestrated to show government concern for rising unemployment and the economic downturn. Thousands of Mexicans were deported. Although the campaign soon eased along with the recession itself by 1923, the Great Depression that set in at the end of the 1920’s would once again lead to a renewed drive to repatriate Mexican immigrant laborers.

For its part, the Mexican government consistently protested aggressive U.S. moves to deport its citizens, often at moments when its own country was experiencing an economic slowdown and a reduced capacity for reabsorbing laborers. Although the Mexican government cooperated with U.S. authorities in facilitating the repatriation of its citizens, it urged Washington to legislate a more orderly institutional arrangement for handling the U.S. demand for foreign immigrant labor. This call went mostly unheeded until the 1940’s, when the U.S. moved to formalize a large-scale contract labor program.

As World War II intensified, the stage was set for another critical labor shortage in the United States. When factory production reached full capacity in 1942, Washington responded by introducing the Mexico;laborMexican Contract Labor Program, which later became commonly known as the Bracero programbracero program. Over a three-year period beginning in August, 1942, around 300,000 Mexican laborers were contracted to work in agriculture and railway construction under conditions negotiated with the Mexican government.

The accord was bitterly opposed by Mexican business owners who complained that the program artificially raised the price of labor in Mexico. Throughout the remainder of World War II, the Mexican government asserted its authority by enforcing certain minimal protections of its workers in the United States. For example, the Mexican government enforced a ban on labor contracts with the state of Texas that was in place because of previous abuses in the treatment of Mexican laborers. Mexico resisted pressure from the United States to lift this ban over the life of the program, thus creating a new pattern in which U.S. and Mexican authorities jointly negotiated immigration in accordance with their respective national interests.

Although the bracero program was suspended after World War II, it was resumed during the Korean War and continued to bring hundreds of thousands of mostly Mexican laborers into the United States each year until the program was terminated in 1964. By that time, it had sponsored the entry of more than 4 million Mexican laborers, which in turn had largely shaped the face of modern U.S. agriculture.

Increased cooperation between Mexican and U.S. authorities failed to alleviate persistent tensions over Mexican immigration. After the Korean War, a rise in unemployment resulted in widespread complaints about Mexican laborers remaining in the United States after their contracts had ended, thus putting renewed pressure on Washington to act. In April, 1954, President Dwight D. Eisenhower authorized a military-like operation designed to deport Mexican laborers. Dubbed “Operation WetbackOperation Wetback,” the repatriation program rode on the crest of racist sentiments that blamed Mexican immigrants for labor strife and a host of other social problems.

U.S. Agriculture;laboragricultural producers saw their cheap supply of migrant labor abruptly shrink as federal authorities concerned themselves with reassuring the public that immigration was firmly under their control. Operation Wetback had a traumatic and stigmatizing effect on Mexican American communities and legal residents, some of whom were mistakenly deported. Although this repatriation program was short-lived, it had the effect of further weakening the already slim protections offered to immigrants under the bracero program.

By the 1960’s, U.S. immigration laws and border control policies had emerged as Washington’s chief policy instruments to help synchronize the flow of immigrants with the larger business cycle. The federal government sought to exert control over an increasingly globalized labor market with an eye to managing potentially harmful domestic political and social conflicts. New immigration surges beginning during the 1980’s saw the influx of Mexicans, Central Americans, and other Latin Americans, along with Caribbean and Asian immigrants. This influx renewed the public debate over how to address the strain on public services posed by both legal and illegal immigrants.

As the American public became aware that undocumented immigrants were being routinely hired for agricultural and food-processing work, people began to pressure the government to enact sanctions on employers. The Immigration Reform and Control Act of 1986Immigration Reform and Control Act (IRCA) of 1986 made it a crime for businesses to knowingly hire illegal immigrants. The new law required employers to demand proof of U.S. citizenship or legal residence before contracting with laborers. Business owners failing to comply and who knowingly hired illegal immigrants faced thousands of dollars in fines and in some cases even possible prison sentences. However, the debate did not end there, nor did illegal immigration. The flow of illegal immigrants into the United States continued, keeping immigration reform in the public spotlight.

In the twenty-first century, the debate about immigration had come to center on undocumented immigrants. In 2005, the number of undocumented workers in the United States was estimated at around 12 million. If these undocumented workers were forced to leave in accordance with the existing law, the U.S. labor force would shrink by 5 percent, and the low-skilled portion of the national labor force would decline by at least 10 percent. About a quarter of all undocumented workers work in agriculture, 17 percent in domestic work, 14 percent in construction, and 12 percent in food preparation industries. Any dramatic change in their availability would have a disproportionately adverse effect on businesses in these areas, as wages for low-skilled laborers would inevitably rise.

In strictly economic terms, the costs of aggressive border control may exceed the costs incurred by illegal immigration. Various cost-benefit studies have shown that the net fiscal drain on public finances caused by illegal immigration remains relatively low, at around 0.07 percent of the gross domestic product, and the cost of measures proposed to heighten control over immigration would be greater, at around 0.1 percent of the gross domestic product. Although analysts and experts disagree, many think that the American business community generally benefits from higher immigration levels (legal or illegal), and organized labor is the most adversely affected.

Also significant has been the rapid growth in the money that many immigrant workers send to their home countries. Since the late 1990’s, the steady pace of increase has fueled a thriving industry that handles these financial transactions. Annual family remittances, estimated at more than $20 billion in 2000, had more than doubled by 2008, making it an extremely lucrative market for banks and electronic transfer firms. Abuses caused by unscrupulous practices that take advantage of a vulnerable clientele have led to increased governmental regulations over fees and charges assessed against this high volume of remittance transactions. Some developing countries have come to view these financial inflows as important sources of national finance capital that compensate for the absence of its laborers.

• Baddour, Ann, and Sonja Danburg. Creating a Fair Playing Field for Consumers: The Need for Transparency in the U.S. Remittance Market. Baltimore: Center for Financial Services Innovation, 2005. Offers a good explanation of the role of the remittances sent to foreign countries by immigrants to the United States. Discusses the issue of consumer protection measures as well as other financial and regulatory aspects of the remittance market.
• Calavita, Kitty. Inside the State: The Bracero Program, Immigration, and the INS. New York: Routledge, 1992. A sociological analysis of U.S. policies aimed at Mexican immigrants and the mechanisms developed by immigration authorities. Particular attention is given to immigration law as a means to regulate the demands presented by U.S. business interests and organized labor.
• Cervantes, Esther. “Immigrants and the Labor Market: What Are the Jobs Americans Won’t Do?” Dollars and Sense (May/June, 2006): 30-32. Written from the perspective of organized labor, the book shows how the U.S. labor market is degraded by abuses of immigrant laborers. It is argued that the best remedy for this problem is increased unionization of the American economy.
• Hanson, Gordon H. The Economic Logic of Illegal Immigration. New York: Council on Foreign Relations, 2007. An economic analysis of the policy issues and their implications regarding illegal immigration. The author argues that illegal immigration causes little net harm to the U.S. economy, thus making expensive border control proposals counterproductive.
• Shanks, Cheryl. Immigration and the Politics of American Sovereignty, 1890-1990. Ann Arbor: University of Michigan Press, 2001. An historical overview of changing public conceptions of immigration. The author draws attention to issues of national sovereignty and relates them to immigrant reform issues as viewed from civil society.

Bracero program

“Coolie” labor

Farm labor

Food-processing industries

U.S. Department of Homeland Security

Internal migration

Labor history

Meatpacking industry

Mexican trade with the United States

Wars