What Do Falling Gas Prices Tell Us About the Impact of Illegal Immigration on Consumer Prices?

By David Seminara, December 10, 2014

Amid mounting evidence that President Obama's executive amnesty will cost American taxpayers a bundle, one persistent myth perpetuated by talking heads and members of the media looking to bolster the case for amnesty is the contention that illegal immigration benefits Americans by keeping consumer prices low. Plunging gas prices give us a textbook example of why illegal labor has little or no positive impact on the price of food or just about anything else made with the help of illegal labor.

The national average for a gallon of gas has plunged to $2.69 and the cost of jet fuel has dipped 18 percent just since September. Jet fuel is the single biggest operating expense for airlines, representing 27 to 38 percent of total expenses, depending on the airline. So airfares must be going down, right? Nope. Thanks to strong demand and an improving economy, fares are still rising, to the tune of 3.5 percent so far this year according to the industry trade group Airlines for America.

The airline industry is not an outlier. There are plenty of other businesses that are benefitting from falling oil prices that aren't lowering their prices. Business is booming at FedEx, in part because they currently have their fuel surcharge pegged to October gas prices and are pocketing the difference rather than lowering prices, according to Art Hatfield, an analyst at Raymond James Financial who was quoted in a CNN piece titled "FedEx is the New Santa Claus". And the consumer price index rose 1.7 percent between October 2013 and October 2014, with food prices going up 3.3 percent during a year when gas prices fell substantially.

The American agriculture industry is one of the loudest advocates for lax immigration enforcement. According to a 2012 USDA report, labor makes up 17 percent of variable production expenses in U.S. agriculture. This means that gas prices are roughly twice as big an expense for the airline industry as human labor is to farmers as a percentage of their overall operating expenses.

Just as airlines won't be lowering their prices despite cheaper fuel, the cost of food isn't going to go down because American farmers might now have access to a wider labor pool. This is really just Capitalism 101, but it bears repeating. Companies want to charge the highest prices possible. Give them access to cheaper labor (cheaper for them, that is, not the taxpayer) and they will only pass those savings to you, the consumer, if they have to in order to sell the product.