The economics of immigration reform

The U.S. Senate Judiciary Committee’s recent efforts to develop a broad revision for our nation’s immigration laws was welcome _ and long overdue. This makes the Senate’s failure to put forth a bill for passage particularly disheartening.

What must not be lost in our country’s politicized debate on illegal immigration is the enormous, positive role that undocumented immigrants play in our workforce, and the impact that they have on our economic growth.

The bipartisan bill forged by Sen. Edward M. Kennedy, D-Mass., and John McCain, R-Ariz., provides hope to the 11.5 million undocumented immigrants in America, and the long-term future of our economy may depend on its passing.

Almost all sectors of the American economy _ banking, health care, education, service sector, construction and high technology _ have prospered in part because of immigrants.

Certain segments of the workforce are dramatically dependent on currently undocumented workers. According to the Pew Hispanic Center’s study on the “unauthorized population,” 29 percent of all roofers, 27 percent of all butchers, 26 percent of all maintenance workers, 24 percent of all farmers and 17 percent or all food-preparation workers are undocumented.

Has this job growth come at the expense of American workers? No. Over the past two decades, the increase in the immigration to America has been accompanied by a drop in unemployment, from 7.1 percent to 4.8 percent.

Immigrants are also the drivers of inner-city economic growth. A study by Prof. Michael Porter, of the Harvard Business School, found that half of the largest inner cities in America had job growth between 1995 and 2003.

The cities that lost jobs had many similarities to those that gained jobs; the one significant difference was percentage of immigrants in the community. On average, inner cities that gained jobs had populations that were 31 percent immigrant, while those that lost jobs had populations that were just 12 percent immigrant.

Porter noted, “Immigrants clearly and more readily identify the unique business conditions and opportunities that inner cities can offer, and are able to capitalize upon them.”

The Latino population’s effect on small-business growth is another example: In 2005, the U.S. Small Business Administration estimated that small businesses employ half of all private-sector employees and have generated 60 to 80 percent of net new jobs annually over the last decade. Data from the 2000 Census shows that Latino-owned businesses grew at three times the national rate from 1997 to 2002.

All told, according to the Census data, there were almost 1.6 million Latino-owned businesses generating $222 billion in revenue in 2002. The Pew Study estimates that the percentage of undocumented workers who are Latino is 78 percent of the total of all undocumented workers.

Just think of the profound entrepreneurial possibilities if those workers had full citizenship with enhanced access to capital and more substantial social networks.

As a banker, I can’t help but see the opportunities in and for the immigrant community. Overwhelmingly, today’s immigrants are savers, though often in untraditional and economically inefficient ways.

As of 2005, only 45 percent of Latino immigrants had bank accounts, and because of it they often lack critical access to credit and capital. This is a huge lost opportunity both for the financial-service industry and to the would-be immigrant entrepreneur.

Immigrants also take great pride in their ownership of homes. According to a 2001 study on home ownership by Georgetown University’s Institute for the Study of International Migration, immigrants are three times as likely to value home ownership as their native-born counterparts, and yet only 49 percent of America’s foreign-born population actually own a home, as opposed to 74 percent of native non-minority Americans. Again, an enormous unrealized opportunity.

At Citizens Financial Group, more than 13 percent of our 26,000 employees are bilingual, most of them speaking English as a second language. Employees at our Citizens Bank and Charter One branches in 13 states speak at least 75 different languages among them.

In Quincy, Mass., predominantly Irish 30 years ago, we speak five dialects of Chinese. If we didn’t speak Spanish in the Pilsen community in Chicago, if we didn’t speak Portuguese in Framingham, Mass., if we didn’t speak Vietnamese in the Eastwick neighborhood of Philadelphia, we would be missing enormous business opportunities. It is profoundly important that our branches look, sound and feel like the communities they serve. It’s simply good business.

By providing citizenship and lawful employment in a safe way to millions of undocumented workers and offering work visas to hundreds of thousands of new guest workers on the road to citizenship, proposed immigration-reform legislation can provide powerful economic stimulus. It will have a profound positive economic effect to move undocumented workers fully into the official economy and entirely onto the tax roles.

A 2005 Congressional Budget Office paper on the role of immigrants in the labor market underscored the growing importance of immigrant labor as the Baby Boom generation approaches retirement. As our native-born labor pool shrinks through retirement, thoughtful immigration reform is necessary to meet this demographic challenge to our nation’s workforce.

We need undocumented immigrants to be legally welcomed, and to succeed. If these newcomers succeed, we all succeed. The prospects for long-term prosperity and growth for America depend on it.

Congress should act and act decisively to enact immigration reform of which we can all be proud and from which we can all benefit.

(Lawrence K. Fish is chairman and chief executive of Citizens Financial Group Inc., based in Providence, R.I., and the 8th largest U.S. commercial-bank holding company.)