What is the estimated economic impact of undocumented immigrants on U.S. GDP and labor markets?
Executive summary
Studies show removing large numbers of undocumented immigrants would cut U.S. GDP markedly in many models: Peterson Institute scenarios range from a 2.7% hit from removing 1.3 million workers (2025–28) to a 7.4%–7.7% decline by 2028 if roughly 8.3 million are deported; other estimates place cumulative 10-year GDP losses from mass removal in the trillions (e.g., $2.3T to $5.1T depending on assumptions) [1] [2] [3] [4]. Research also finds immigrants bolster labor-force growth, fill essential low‑skill roles, and pay sizable taxes — implying both short‑term disruption to specific industries and broader macroeconomic losses from mass deportation [5] [6] [7].
1. Big‑picture GDP estimates: widely varying scenarios, consistently large costs
Macro estimates differ by scale and method, but they agree that removing millions of undocumented workers would shrink GDP substantially. A Peterson Institute working paper projects a 2.7% reduction in real GDP from 2025–2028 if 1.3 million unauthorized workers are removed [1]. The Peterson Institute and related summaries have also been cited for a scenario in which deporting roughly 8.3 million undocumented immigrants would lower U.S. GDP by about 7.4% by 2028 [2]. Independent reports using different baselines estimate even larger cumulative losses: the Latino Donor Collaborative flagged a potential $2.3 trillion (7.7%) one‑year GDP decline in 2025‑dollars under a mass‑deportation scenario, while the Center for Migration Studies cited a $5.1 trillion GDP reduction over ten years from a large‑scale removal plan [3] [4]. These outcomes hinge on how many people leave and how quickly labor and supply chains adjust.
2. Mechanisms: why deportation trims output
Economists point to three channels. First, undocumented workers make up a nontrivial share of labor in agriculture, construction, hospitality and other sectors; losing them creates immediate production shortfalls and raises costs [5]. Second, tax revenue and consumer demand fall when workers are removed — analysts report undocumented households paid about $90 billion in taxes and held roughly $299 billion in spending power in 2023, numbers that support jobs and output [6] [2]. Third, enforcement itself is expensive: models that combine detention, removal and legal costs put per‑deportee estimates in the tens of thousands and tens‑to‑hundreds of billions over a decade, further offsetting any fiscal gains [8].
3. Labor‑market effects: uneven, industry‑specific, but macro‑significant
At the industry and local level the pain is concentrated. Undocumented workers are heavily present in field and crop work (about half of hired farm workers) and in construction and service occupations — sectors where replacements are not instantaneous [5]. Macro studies show immigration surges lifted GDP growth and job creation in recent years; conversely, declines in net migration have reduced labor‑force growth projections and are linked to weaker job growth in 2025 [7] [9]. Fed and regional studies caution that immigration changes explain some — but not all — of recent slower job gains, and impacts differ by skill and local labor market [10] [11].
4. Wages, winners and losers: small aggregate effects, localized disruption
Aggregate empirical work often finds modest effects of immigration on native wages overall, but larger impacts on specific groups and occupations; some studies cited by regional Fed outlets argue effects on incumbent workers are small at the national level, while employers and some native workers in affected occupations can experience meaningful shifts [11] [7]. Models of mass deportation sometimes forecast short‑term wage increases for authorized low‑skill workers but broader productivity losses and lower wages for higher‑skill workers through disrupted supply chains — findings depend heavily on modelling choices [8].
5. Policy alternatives and upside from legalization
Researchers also model the positive flip side: pathways to legalization and retained immigration boost GDP. UC Davis and other policy teams estimate legalization of large undocumented cohorts would increase cumulative GDP (e.g., $1.7 trillion over a decade for 10 million legalized) and create jobs by raising wages and labor participation [12]. Advocates emphasize that many undocumented households already contribute taxes and consumer spending that sustain public finances and demand [6].
6. How to read the numbers: assumptions drive results
Every headline GDP number rests on strong assumptions: the size of the undocumented population removed, assumed labor‑market adjustment speeds, whether firms can substitute capital or legal workers, enforcement costs, and baseline growth. The Penn Wharton and other modelers explicitly average different deportation‑cost estimates and vary deportation rates, producing wide fiscal ranges tied to those choices [8]. Readers should treat point estimates as scenario outputs, not deterministic forecasts.
Limitations and competing views: studies cited here diverge on magnitude and method. Some Fed and academic pieces emphasize small aggregate labor‑market effects but note important local disruptions [11] [10]. Advocacy and academic groups highlight large fiscal and GDP losses from removal or gains from legalization [4] [12]. Available sources do not mention long‑run demographic effects beyond the cited 10‑year windows unless specifically noted in each report (not found in current reporting).