These 4 Sectors Would Be Hurt Most by Trump's Deportation Plan
In response to an executive order issued in January by President Donald Trump, the Department of Homeland Security (DHS) has laid out an implementation plan that could result in the mass deportation of undocumented immigrants.The memo, sent by DHS Secretary John Kelly, details how various federal agencies would go about removing from the United States people who do not currently have legal residency status. Kelly calls for an increase in resources (judges, agents, officers, and other people involved in the enforcing of immigration laws) and more detention centers.
Trump's plan, unlike previous policies, targetsallillegal immigrants, rather than focusing on those who have committed crimes beyond being in the country illegally.And while there will be a significant political reaction, there will also be a real-world impact on the United States workforce. Of the estimated 11.1 million unauthorized immigrants living in the U.S. in 2014, 8 million were either working or actively looking for work, according to a research report from self-described "nonpartisan fact tank"Pew. That's 5% of the total U.S. workforce.
Putting politics aside, if DHS and the president follow through with mass deportations, a number of industries will be impacted. Lost workers will have to be replaced from a smaller pool of available people. That will likely push labor costs higher and could create a shortage of available employees in certain professions.
Farming is the industry with the most unauthorized immigrants in its work force. Image source: Getty Images.
Which industries will be hurt?
While there is some debate over how the unemployment rate is calculated, the long-standing method used by the U.S. Bureau of Labor Statistics places the current rate at 4.8%. That number only factors in people who are actively looking for work (not those who may have given up) -- and it's also right around the percentage of our workforce that could be deported under Trump's plan.
Removing that many people from the workforce will have a ripple effect across all industries, but there are four occupations that will be hit the hardest. These are areas that, according to a 2012 Pew Report, have unauthorized immigrants making up more than 10% of the total workforce.
If Trump's executive order is fully carried out, farming would be hit hardest, as 26% of its workers are here illegally, according to Pew. Industries like cleaning and maintenance (17%), construction (14%), and food preparation and service (11%) would also take big hits.
It's also worth noting that in most cases the jobs being held by workers who do not have legal status in the U.S. are generally not great jobs. Here's how Pew puts it:
What happens in a labor shortage?
"Labor shortages mean increased costs," wrote Donald M. Atwater, Ph.D., and Heather Klass in a 2007 edition of Pepperdine University's peer-reviewed business school journal. Atwater, a professor of economics at the university's Graziadio School of Business and Management, wrote that "shortages are said to exist when cost-effective workers in a local or national market are not enough to meet demand."
It's also worth noting that jobs in farming, cleaning and maintenance, construction, and food preparation and service cannot be practically exported in most cases. That could make a shortage of workers more pronounced, forcing costs higher. Some of these jobs -- food preparation, for example -- could be automated. But that too comes with a significant cost.
What does this mean for business?
The shrinking pool of cheap labor won't affect each industry or company in a predictable way. If a construction company, a restaurant chain, or a farm has work that needs to be done, but no workers, then it has a number of options. It can raise wages until someone takes the job; that, of course, makes the cost of doing business more expensive. It can also increase automation, which is expensive in all cases and impractical in some. Lastly, the company/eatery/farm could simply decide that the work is not worth the cost. That could mean buildings not being built, farms lying fallow, and restaurants closing their doors.
The effects of mass deportation wouldn't be limited to industries that employ undocumented immigrants. There would be a ripple effect that reaches all industries, as there simply wouldn't be enough bodies to go around. That could be good for workers -- especially those willing to do less-desirable work. It could also have unintended consequences such as rising prices for everything from (but not limited to) food and housing -- two areas that are basic needs.
That said, we can't know know what will come next until we see whether Trump's order is fully implemented -- and, if so, whether it goes according to plan.
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Daniel Kline has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.