This paper finds that the ready availability of illegal-immigrant workers from Mexico in major industries in the Southwest region of the United States is having far-reaching and often unanticipated consequences for patterns of investment, employment, and business competition. It reviews the displacement of U.S. workers by illegal immigrants in agriculture, food processing, services, and construction, and analyzes the processes of ethnic recruitment networks and subcontracting that lead ultimately to the exclusion of U.S. English-speaking citizens and legal residents from many work places. The conclusion is that U.S. business acquiscence in illegal immigration has become a selective labor subsidy that has contributed in the last two decades to distorted investment decisions, slower growth, and the proliferation of low-skill, low-productivity jobs in the U.S. labor market. (DJC)