Who Gains from Undocumented Labor? Wage Effects, Firm Benefits, and Consumer Prices across Low-Skilled U.S. Sectors

Abstract

This paper examines who benefits more from undocumented labor in the United States: firms or consumers. Rather than focusing only on wage effects, the paper compares three labor-intensive sectors-agriculture, meat processing, and construction-to analyze how gains are distributed across the economy. The study uses a comparative sector approach and evaluates two key mechanisms: labor substitution and cost pass-through. Evidence from labor-force composition, enforcement shocks, market concentration, and pricing structures is used to assess how undocumented labor affects production costs, firm profits, and consumer prices. The findings suggest that agriculture provides the greatest relative benefits to consumers because labor stability supports food supply and reduces price pressure. Meat processing benefits firms more than consumers due to industry concentration, while construction provides the largest relative gains to firms and contractors because project-based pricing limits consumer pass-through. The paper concludes that the economic effects of undocumented labor differ significantly across sectors and should be evaluated through sector-specific analysis rather than broad national averages.