The economics of being illegal, and how the wall increased the illegal population

Mexicans come to the US for the money.  

In Mexico, an unskilled laborer can earn $2.50 / hour; in the US, four times as much. 

Of course, the cost of living is higher in the US, and migrants have to be compensated for moving to a foreign country.  All in, Mexicans need about $6.50 / hour -- call it the Relocation Wage – to come work in the US.  If the border were completely open, unskilled wages for the relevant industry sectors would fall to this level as Mexicans moved north to take the jobs.

So how much do Mexicans actually earn in the US, the prevailing unskilled wage of $10 / hour or the Relocation Wage around $6.50 / hour?  Our research suggests it's closer to the latter, principally due to wage theft and poor off-season utilization for seasonal workers trapped in the US.  Add another $1 / hour for hassle factor, including the risk of deportation and the daily inconveniences of living illegally, and the net compensation for Mexicans (including non-cash costs) actually appears to be pretty close to the Relocation Wage of $6.50 / hour on average.

This suggests that the Wall has not actually been a binding constraint on Mexican migrant levels.  Compensation is not much different than if the border were unenforced.

And indeed, that’s what Pew Research’s population estimates also suggest.  After peaking at 6.9 million in 2007, the undocumented Mexican population fell to 5.6 million in 2016.   Ironically, this suggests that, during the 2008-2016 period, the Wall succeeded in keeping more undocumented Mexicans in the US than it kept out.  Because re-entering the US can be difficult, risky and expensive, a Mexican would only leave if Mexican wages compensated for the possibility of crossing the border back into the US.   However, if the re-entry cost were zero, the cost of leaving would also be lower, and more Mexicans would have left.  Border enforcement sustained the undocumented Mexican population above its natural level after 2008.

This implies that Mexicans’ compensation was in fact below the Relocation Wage after 2007.  Undocumented migrants suffered as did Americans with the Great Recession, but more so.  Border enforcement exaggerated the effects of the Great Recession and artificially depressed wages and employment levels in the US, at least for undocumented Mexicans.  

I would note that this analysis does not pertain to Central Americans, nor does it suggest that the border should have been unenforced after 2007.  Nor does it claim that the same economic conditions hold today.  We do claim, however, that an approach which fails to treat illegal immigration as a black market problem will yield perverse results, at least some of the time.