Mass Deportation of Illegal Immigrants Could Have Economic Consequences: Yellen

Treasury Secretary Janet Yellen attends a news conference at the U.S. Ambassador's residence in Beijing on April 8, 2024. Pedro Pardo/AFP via Getty Images

Removing millions of illegal immigrants from the country could have “devastating” unintended economic consequences, Treasury Secretary Janet Yellen said at The Atlantic Festival on Sept. 19.

As part of his 2024 platform, former President Donald Trump has pledged to “carry out the largest deportation operation in American history” if reelected.

Estimates on how many illegal immigrants are in the United States vary. Some estimates put the number at 11 million, while others suggest that it’s closer to 30 million.

Yellen said she thinks the Republican presidential candidate’s deportation proposal “would raise inflation.”

“The influx of workers into the labor market is something that’s helped to bring down inflation and create a lot of jobs,” she said.

After peaking at 9.1 percent in June 2022, the annual inflation rate slowed to 2.5 percent last month in the lowest reading since February 2021.

The senior administration official said the injection of workers since the COVID-19 pandemic has countered the growing number of people withdrawing from the workforce.

Yellen told the audience that the immigrants have contributed to the nation’s ability to produce goods, including agricultural products, throughout the post-crisis recovery.

“I believe that immigrants have always made and continue to make a positive contribution to the U.S. economy,” Yellen said.

A recent Wall Street Journal survey of academic, business, and Wall Street economists and market experts suggests Yellen is not alone.

The poll, conducted July 5–July 9, found that 56 percent of the respondents think inflation would be higher under Trump because tariffs and clamping down on illegal immigration would apply upward pressure on prices.

The GOP nominee has dismissed claims that another term would rekindle the inflation flame.

Trump has promised to combat inflation by revitalizing the domestic energy sector, reining in “wasteful spending,” eliminating excessive regulations, and securing the U.S. border.

“We will defeat inflation, tackle the cost-of-living crisis, improve fiscal sanity, restore price stability, and quickly bring down prices,” the Republican platform states.

Meanwhile, a Scripps News-Ipsos survey conducted Sept. 13–Sept. 15 shows more than half—54 percent—of respondents support the mass deportation of immigrants living in the United States illegally. This included 25 percent of Democrats.

Illegal Immigration, Inflation

Whether illegal immigration has helped to lower inflation is a subject of debate.

A Federal Reserve Bank of Dallas study found that the flood of illegal immigrants may have slightly contributed to inflationary pressures because of their demand for goods and services.

Goldman Sachs chief U.S. economist, David Mericle, said the labor force growth, fueled by illegal immigrants, allowed employers to fill job vacancies. According to him, this eased inflationary pressures.

“Elevated immigration is boosting labor force growth, which means that strong demand growth is unlikely to worsen the supply–demand balance by much, if at all,” he wrote in a note in the spring.

“So far measures of labor market tightness have continued to fall or move sideways, not rise.”

Illegal immigrants pass through coils of razor wire while crossing the U.S.–Mexico border in El Paso, Texas, on March 13, 2024. John Moore/Getty Images

Steven A. Camarota, director of research at the Center for Immigration Studies, said in a January report that any disinflationary impact from illegal immigration might have been minuscule because many employment gains were concentrated in low-paying positions.

“Partly for that reason, these jobs account for only a small share of overall wages and salaries paid to workers in the U.S. economy,” Camarota wrote.

Although the immigration–inflation conversation persists, economists have said higher immigration trends have altered the makeup of the labor market over the past few years.

Bureau of Labor Statistics data show that the number of employed foreign-born workers surged by nearly 1.3 million from August 2023 to August 2024.

Conversely, the number of employed U.S.-born workers declined by more than 1.3 million in the same one-year span.

In addition, the labor force participation rate—a gauge of the number of employed compared with the number of working-age individuals—edged up by 0.2 percent for foreign-born workers.

It fell by the same percentage for U.S.-born workers.

Dallas Fed economists, using data from the Department of Labor’s Current Population Survey, revealed that about 60 percent of newly arrived immigrants in the United States have found jobs.

According to Fed Chair Jerome Powell, one reason that the unemployment rate has increased to above 4 percent is the “influx across the borders.”

“If you’re having millions of people come into the labor force then, and you’re creating 100,000 jobs, you’re going to see unemployment go up,” Powell told reporters at the post-meeting news conference on Sept. 19.

While Dallas Fed economists said “the immigration wave contributed to higher GDP growth,” some critics note that the cost on the government surpassed the gains.

Camarota told lawmakers in January that illegal immigrants have low average earnings and a “large share” qualify for welfare benefits.

“The fundamental reason illegal immigrants are a net drain is they have a low average education level, which results in low average earnings and tax payments,” he said in testimony before a House Judiciary Subcommittee hearing.

“Like their less-educated and low-income U.S.-born counterparts, the tax payments of illegal immigrants do not come close to covering the cost they create.”

A Federation for American Immigration Reform study found that illegal immigration costs taxpayers, on net, $150 billion per year.

That said, according to Michael Ettlinger, senior fellow at the Institute on Taxation and Economic Policy, a mass deportation initiative would substantially impact the U.S. labor market.

Illegal immigrant workers, he said, represent sizable percentages of crucial sectors, including agriculture, construction, child care services, and transportation.