Nederlands
English
Deutsch
Français
Español
Português
ICE Deportations Threaten US Economic Growth in 2026
A new economic study reveals that mass deportations by U.S. Immigration and Customs Enforcement (ICE) could significantly threaten America's economic growth in 2026 and beyond. The research, analyzing what would happen if the United States deported half of its undocumented workforce, shows complex effects on wages, inflation, and long-term economic vitality that challenge conventional wisdom about immigration enforcement.
What is the ICE Deportation Study?
The study examines a hypothetical scenario where ICE removes approximately 50% of undocumented workers from the U.S. labor force. Researchers focused on three key economic indicators: inflation rates, nominal wages for American workers, and real wages (income adjusted for inflation). With undocumented workers comprising an estimated 3% of the total U.S. workforce, this represents a significant labor market disruption that could reshape the US labor market dynamics for years to come.
Key Findings from the Economic Analysis
The research reveals several counterintuitive outcomes that challenge traditional economic assumptions about immigration enforcement:
- Real Wages Decline Nationally: Overall real wages would decrease by approximately 0.3 percentage points nationwide
- Sector-Specific Wage Increases: Construction wages would rise by nearly 1%, while agriculture wages would jump by 3.5%
- Limited Inflation Impact: Overall inflation would increase between 0.5% and 1%
- Immigrant Wage Gains: Legal immigrants' incomes would rise by over 3%, while remaining undocumented workers could see income increases exceeding 12%
Who Benefits from ICE Deportations?
Contrary to popular belief, the study shows that American workers aren't the primary beneficiaries of mass deportations. Instead, immigrant workers—both legal and undocumented—stand to gain the most economically. 'The conclusion feels counterintuitive, but it's clear: immigrants themselves benefit most,' notes macro-economist Edin Mujagić, who analyzed the study's implications. Legal immigrants, concentrated in construction and agriculture sectors where deportations would occur, would see their incomes rise as labor shortages drive up wages.
Undocumented workers who avoid deportation face an even more dramatic outcome: their incomes could surge by over 12% as they become scarcer and more valuable to employers who previously paid them lower wages without benefits. This creates a paradoxical situation where immigration enforcement could actually increase the economic value of remaining undocumented workers.
Long-Term Economic Growth Concerns
The most significant concern emerging from the study isn't short-term wage effects or inflation, but rather the long-term impact on America's economic growth potential. 'I'm particularly worried about the growth capacity of the American economy in the long term,' warns Mujagić. The research highlights several critical factors:
- Entrepreneurial Impact: Immigrants and foreign students start a disproportionate number of new businesses in America
- Success Rates: Immigrant-founded businesses have higher success rates than those started by native-born Americans
- Productivity Contributions: Immigrant-founded companies contribute significantly to overall labor productivity growth
- Corporate Leadership: Half of Forbes 500 companies were founded by immigrants or their immediate descendants
Comparison: Short-Term vs Long-Term Effects
| Aspect | Short-Term Impact | Long-Term Impact |
|---|---|---|
| Wages | Mixed: Some sectors gain, others lose | Potential decline in overall wage growth |
| Inflation | Limited increase (0.5-1%) | Could accelerate with reduced productivity |
| Economic Growth | Minimal immediate effect | Significant reduction in growth potential |
| Entrepreneurship | No immediate change | Major decline in new business formation |
Geographic and Sector Concentration
Undocumented workers in America are heavily concentrated both geographically and by industry sector. The US immigration workforce distribution shows that construction and agriculture employ the highest percentages of undocumented labor. Geographically, California, Florida, Texas, and New York contain the largest populations of undocumented workers, meaning these states would experience the most significant economic disruptions from mass deportations.
This concentration creates regional economic vulnerabilities that could ripple through local economies. Construction projects might face delays and cost overruns, while agricultural production could decline, potentially increasing food prices beyond the modest inflation predicted in the national study.
Policy Implications and Economic Trade-offs
The study raises important questions about the US immigration policy economic trade-offs that policymakers must consider. While immigration enforcement might achieve certain political or social objectives, the economic costs could be substantial. The research suggests that policies discouraging immigration could have unintended consequences for America's long-term economic competitiveness.
As Mujagić notes, 'If America implements policies that discourage people from coming to the U.S. to study, stay, and start businesses, that will have consequences for the economy.' This warning comes at a critical time when other studies, including a January 2026 Brookings Institution report, show that U.S. net migration has turned negative for the first time in at least half a century.
Frequently Asked Questions
What would happen to wages if half of undocumented workers were deported?
Real wages would decline nationally by about 0.3%, but construction wages would rise nearly 1% and agriculture wages would increase 3.5%. Legal immigrants' incomes would grow over 3%, while remaining undocumented workers could see income jumps exceeding 12%.
How would ICE deportations affect inflation?
The study predicts inflation would increase between 0.5% and 1%, with slightly higher increases in agricultural prices. However, the overall inflationary impact is considered modest compared to other economic factors.
Why are economists concerned about long-term growth?
Immigrants disproportionately start new businesses, contribute to productivity growth, and found successful companies. Policies discouraging immigration could reduce America's entrepreneurial vitality and long-term economic growth potential.
Which sectors would be most affected by deportations?
Construction and agriculture would experience the most significant labor shortages and wage increases, as these sectors employ the highest percentages of undocumented workers in the U.S. economy.
What's the biggest economic risk of mass deportations?
The greatest risk isn't short-term wage or inflation effects, but rather the long-term reduction in America's economic growth capacity due to decreased entrepreneurship and innovation from immigrant communities.
Sources
Penn Wharton Budget Model Analysis
Brookings Institution January 2026 Report
Cato Institute Immigration Economic Contribution Study
