This tightening would induce increases in wages, as indicated by a rise in average annual compensation rate. Wage rates would rise by 0.6 percent in the first year and stay above the forecast rate throughout the entire 20-year period.
While pay increases can be viewed as a positive social and economic development, when they rise due to labor shortages they affect economic compe iveness. In this case, it would be expressed as a modest decline in the value of Texas’ exports.
The remaining broad economic measures all point to an initial impact of undo ented immigrants of about 2.5 percent in terms of the value of production and wages in the Texas economy. Eliminating 1.4 million immigrants would have resulted in a 2.3 percent decline in employment, a 2.6 percent decline in personal income and a 2.8 percent decline in disposable personal income in 2005. This change also would generate a 2.1 percent decline in the gross state product (GSP), the broadest measure of the value of all goods and services produced in Texas.
While none of these changes are surprising, the one finding that may appear unusual is the persistence of the decline. If no in-migration were possible other than from natives or authorized immigrants, employment would remain 2 percent below the baseline forecast 20 years later. The impact lessens over time, but remains sizable throughout the 20-year forecast period.
The primary adjustment the model makes to compensate for the loss of these undo ented migrants is initially a rise in the wage rate, which would induce some new in-migration into Texas and some additional participation in the labor force from current residents. Moreover, with wages rising relative to capital, there would be some subs ution of capital for employees so the need for additional workers is lessened through productivity increases. But the fact that the Texas economy cannot adjust completely to the loss of this labor through these changes and retain its compe iveness ultimately means that relative to the rest of the world the cost of production in Texas is higher, making our goods less compe ive in the international marketplace and decreasing the size of the Texas economy.