Will A Housing Recovery Reignite Hispanic Immigration?

Hispanic immigration is slowing down and being replaced by immigration from Asia.  In 2009, for the first time, more Asians immigrated to the U.S. than Hispanics.  Besides their origins, the two groups are very different.  For instance, Asians are more than 3 times as likely to immigrate with employment based (EB) green cards that favor skills.  In contrast, Hispanic immigrants are more likely to rely on family reunification and unauthorized entry due to historical ties, proximity, and the dearth of visas for lower skilled workers.

The two groups also react differently to labor market opportunities.

Unauthorized immigrants, more than three-quarters of whom are Hispanic, react more quickly to U.S. labor market opportunities than legal immigrants.  Unauthorized immigrants can move without getting permission from a bureaucracy – they just have to spend resources evading U.S. immigration authorities and then labor in the informal economy.  In contrast, the legal immigration process can take decades, is expensive and cumbersome, inflexible, and does not adjust to domestic labor market conditions.

Unauthorized immigrants are drawn to American jobs.  The graph below compares the number of annual apprehensions of unauthorized immigrants along the southwest border (an estimation of market demand) and the U.S. unemployment rate.  As economic theory predicts, a higher U.S. unemployment rate results in fewer unauthorized entry attempts and a precipitous decline in apprehensions.

Source: Customs and Border Protection and Bureau of Labor Statistics

Increased American demand for goods produced by unauthorized immigrants incentivizes their entry.  During the housing boom from about 2002 to 2006 the number of housing starts drew in an enormous number of unauthorized immigrants (see the next graph, below).  The demand for housing factors inputs was largely filled by Hispanics and unauthorized immigrants.

For example, in 2007 Hispanics were 19 percent of all construction and maintenance workers nationwide.  Male Hispanics were 31 percent of that gender’s construction and maintenance workers.  In Arizona in 2006, 28 percent of all construction workers were immigrant non-citizens – a group that includes unauthorized immigrants.  The popping of the housing bubble beginning in 2006 collapsed housing starts and shrunk quantity demanded for construction workers leading to less demand for unauthorized workers, fewer unauthorized entries, and fewer apprehensions along the southern border.

Source: Customs and Border Protection and U.S. Census Bureau, Historical Data of New Residential Construction

All of this begs the question, if the housing market recovers will Hispanic immigration recover with it?  We might find out very shortly.  In the last 8 months, housing prices across 20 metropolitan areas have stabilized and begun to rise ever so slightly.  Construction payroll, weekly hours, and earnings are up for every month of this year over last year.  Housing construction is also picking up, with 24 percent more housing starts in June, 2012 than June, 2011.  Estimates of unauthorized apprehensions and entries are not yet available for 2012, but a rebounding housing market could kick-start Hispanic immigration and the heated debate over immigration reform.