One month after Arizona introduced a law cracking down on businesses which employ illegal immigrants, Latino workers are fleeing the state and companies are laying off employees in droves, officials and activists say. Arizona has become one of the frontlines of the US immigration debate and broke new ground on January 1 with a law that threatens to put of business companies which knowingly hire undocumented workers. The effects of the law have been immediate, according to businessmen, workers and rights activists who spoke to AFP, with companies driving up wages to attract labor while being forced to part company with prized employees.

Even though a federal judge ruled last week that there will be no prosecutions under the law until March, it has done little to prevent a phenomenon being dubbed “Hispanic Panic.” “There’s a lot of fear and some people are leaving,” said Salvador Reza, an immigrant-rights activist who runs a day labor center in Phoenix. “The fear is not only at the worker level, it’s at the employer level. I’ve never seen that before in my life.”

Workers are going back to Mexico or to other states, Reza said. He predicted small businesses forced to lay off skilled employees like welders will now pay them in cash, creating a black economy. “The underground economy is going to take hold now, and there will be less money for the state,” Reza said.

Ten men were laid off at Ironco, a steel fabrication company in Phoenix which builds large-scale construction projects. “We had to let them go,” president Sheridan Bailey said. “Unfortunately some of these people were our best workers. This is terribly tragic.” Two out of three men who apply at Ironco, a construction firm that specialises in buildings and parking garages made with heavy steel, are Hispanic or foreign-born Hispanic, the company said.

Ironco has raised steel fitters’ wages 30 percent from a year ago, according to Bailey. “We’ve raised wages, competing for a diminishing supply (of workers),” he said. “We?ve been on a campaign of quality improvement, training, scouring the waterfront, so to speak, for American vets, ex-offenders trying to find their way back into society.”

A crew leader who worked for Rick Robinson’s Phoenix landscaping company left the state because his wife is an illegal worker. The worker was scared his wife would be deported. “I’ve talked to other companies who have said they can’t find anybody,” Robinson said. “I’ve heard they’re going to Utah or Texas or New Mexico because they don’t have a law like this. We and other landscape companies are uncertain as to how far-reaching it will be. People don’t know what they can and can’t do. The whole thing is confusing, gross, and unfair.”

David Jones, head of the Arizona Contractors Association, said he knows of three construction companies which have laid off 30, 40, and 70 employees respectively since the beginning of the year. “They can’t stand the risk of losing their license,” Jones said. Many workers are heading to neigboring Nevada to find jobs. “We’ve created a climate which will make Arizona’s construction industry subordinate to Nevada,” Jones said. “We’re all frustrated (with illegal immigration), but I don?t think this is the right approach. If we don?t have a functional guest worker program in this country, we?re going to be in trouble.”

Businesses feel exposed to discrimination lawsuits and anonymous malicious complaints from competitors, said Greater Phoenix Chamber of Commerce vice president Todd Sanders. “What we’re hearing from folks is a level of uncertainty because there are some loose ends in the law,” Sanders said.

The ripple in Arizona’s economy has spread to other sectors. Real estate agent John Aguero Sr. said he gets four to seven calls each day from people asking about what they can do with their homes. Fifteen out of 100 people who call Aguero “are just walking away from their property,” he said. One man called and asked how long the foreclosure process would take if he skipped his 1,600 house payments. Aguero told him four months. “Well, I’ll save that and just go home (to Guatemala),” Aguero said. “His wife is a citizen but he’s not. The whole family will pack up and leave. He has three children, all of whom were born here.”

Royal Palms Middle School serves a largely Hispanic and immigrant area of the city. Three or four students have formally left the school since the beginning of the year. Twice that number haven’t shown up to school in ten days. Attendance is down five percent. “We’ve tied what we’re hearing to attendance,” said principal Lenny Hoover. An announcement was made to students that police cannot come into the school and seize them. “What I have noticed is a great deal of student mental diffidence about it,” Hoover said. “They?re worried about it, and kids don?t worry about a lot.”

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