November 12, 1999

Undocumented Workers Now Integral Part of Los Angeles Economy, UCLA Study Shows

Los Angeles -- Undocumented Latino immigrants and others working in Los Angeles County's informal labor markets are now an integral part of one of the world's most advanced economies, according to a study from UCLA's Lewis Center for Regional Policy Studies.

While informal labor activity is traditionally associated with underdeveloped economies without fully functioning labor markets, the new study published in the September issue of the Journal of Economic Issues concluded that informal workers are found in occupational categories throughout the Los Angeles County economy.

The hundreds of thousands of people working not only as domestics and busboys but as administrative assistants and health technicians appear to create new job opportunities and boost wages for those working in the formal 9-to-5 sector, Enrico A. Marcelli and his colleagues found.

But data drawn from a sophisticated new analysis of 1990 census data and a 1994 household survey of Mexican-born county residents also shows that education and job experience, while important to individual economic success, aren't as critical as we may think they are, Marcelli said.

"Our data suggests that there are institutional barriers that make it more difficult to move out of the informal labor sector and its lower wages and job opportunities into the formal sector," said Marcelli, a research fellow at the School of Public Policy and Social Research's Lewis Center and the UCLA Drug Abuse Research Center.

"Just as we ought not to assume that a booming economy will cause the informal sector to shrink or even disappear, our study shows that we shouldn't assume that education and job experience are a universal ticket to success," he said.

Marcelli, a political economist, co-authored the study with Manuel Pastor Jr. of UC Santa Cruz and Pascale M. Joassart of the University of Southern California.

Informal labor is generally defined as involving legal goods and services in which the production or exchange is not effectively covered by government regulations. Thus, selling oranges in a grocery store is considered a formal economic activity, while selling oranges by a freeway off-ramp is considered an informal activity.

Because no official statistics exist for the informal labor market, and because undocumented workers consciously seek to avoid detection, researchers have long relied on indirect estimation measures to gauge the numbers of undocumented workers and the extent of the informal labor sector.

Marcelli and his colleagues estimate that there were more than 473,000 non-Cuban, foreign-born, undocumented Latino workers in Los Angeles County in 1990, or 11 percent of the total labor force.

"We do not pretend that this estimation is representative of all undocumented immigrants, nor do we believe that all informal workers are undocumented Latinos," the authors caution. "However, while the resulting measures are imperfect, they do conform to most expert opinions and ethnographic micro-level studies."

The researchers arrived at this estimate by correlating the occupations of the county's foreign-born Mexican population identified in the 1990 census with data derived from a random household survey of foreign-born Mexicans in the county conducted in 1994.

"The survey data including the number of years since a person's first arrival in the United States, the number of years of formal schooling completed, their age and sex&hibar;provide a fairly reliable series of indicators as to legal status," Marcelli said.

Because of their status, undocumented Latino workers are most likely to be found working outside the formal economy, and the level of their presence in a particular occupation provides a strong indication of that sector's role in the informal economy.

Marcelli and his colleagues found that undocumented workers were most likely to be found working in 10 specific census occupational categories, including domestics, machine operators, farm workers, construction laborers and food service.

However, the researchers also found that informal workers are present in such jobs as retail salesperson, computer operator, typist, health services worker and other positions not traditionally associated with informal labor.

Workers in the informal labor market generally receive lower wages and experience a higher incidence of poverty, less education, and a higher likelihood of being employed by others rather than as a self-employed entrepreneur.

However, an increase in informal workers in any given industry generally yields a wage boost to formal workers in that industry, the study found. The positive effect is greater for those in intermediate-level occupations with a smaller percentage of informal workers in the health service, retail, precision production, and other sectors than those with larger or even smaller percentages.

Take, for example, the Los Angeles County construction industry, where an estimated 18 percent of the labor force is made up of undocumented Latinos.

"An increase in the percentage of informal construction workers would cause the demand for foremen and other mid-level managers to rise more rapidly than the demand for architects or engineers," Marcelli said.

"Meanwhile, those in direct competition with informal workers, such as laborers, could lose from the increase in their numbers," he said.

The study was funded with grants from the John Randolph and Dora Haynes Foundation and the U.S.-Mexico Science Foundation.

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