Immigration and Construction: An Analysis of the Impact of Immigration on Construction Project Costs

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There are an estimated 11 million illegal immigrants currently residing in the United States. The construction industry is heavily dependent on immigrant labor, legal and illegal, for production. The construction industry, nationally, employs approximately 1,000,000 illegal immigrants; almost one in five illegal immigrants works in construction (Passel, 2006). Immigration reform legislation will undoubtedly reduce the supply of illegal immigrants by encouraging enforcement of current laws and by enacting new legislation with harsher penalties for illegal immigration. Immigration reform may also guarantee a supply of legal immigrant labor by enacting amnesty for some illegal immigrants and by enacting a guest worker provision allowing employers to recruit and hire foreign-born workers. Depending on the form of the legislation, the cost of employing these immigrants may increase.

There is wide speculation among industry executives regarding the impact of immigration reform legislation on the construction industry. In response to industry concern, the aim of this research is to analyze the impact of immigration and immigration reform legislation on construction project costs. The main objectives of this research are to 1) to analyze the current makeup of construction industry workforces, native-born versus immigrant and legal versus illegal immigrant in the Washington, D.C. metropolitan region, 2) to predict possible effects of immigration and immigration reform legislation on worker wages, and 3) to assess the likely wage increase due to decreased supply of immigrant labor.

In the Washington, D.C. metropolitan region, the construction workforces for low-skilled trades such as concrete, masonry, drywall, painting, flooring, and roofing are comprised of approximately 55% illegal immigrant. Based on four factors evaluated in this research: 1) prevailing wage provision in legislation, 2) forced tax compliance of the workforce, 3) market correction from currently depressed wages due to immigrant penetration into the workforce, and 4) a labor shortage resulting from a depleted supply of immigrant labor, proposed legislation could increase the cost of trade labor up to almost 70% in this geographic area. Overall labor costs for projects could increase by almost 18%, and total project costs could rise almost 12% in the Washington, D.C. metropolitan region.