Is Arizona Law Sending Business South?

It's nearly midnight in downtown Phoenix. Mexican immigrants, some legal, some not, are heading for the border - any border - outside of Arizona.

"Every day, every day, every single day there's a new family with the same story," a bus-station employee told CBS News correspondent Ben Tracy.

They can't find work, thanks to a new Arizona immigration law - one of the toughest in the nation.

"The No. 1 lure for illegal aliens in this country is jobs," Arizona state Rep. Russell Pearce said.

So Pearce wrote a law saying if a business knowingly hires an illegal immigrant, they won't simply be fined - they'll be shut down.

"If you shut down the rides and turn off the lights the crowds will go home," Pearce said.

And they are: Entire apartment buildings are empty, students are disappearing from schools, stores that catered to Hispanic families … closed.

You can also see it at a work center in Phoenix where they used to have more than 100 people every day looking for work. Now it's less than half that.

But it's not just the law, it's also protestors who are scaring away business.

"They call us racists for wanting our laws enforced," one protester said. "We're not against immigrants ... legal immigrants"

"Are you in the country legally?" Tracy asked a worker.

"I don't want to answer that question," he replied

But it's a question states are asking because federal immigration reform failed. Fifteen states are proposing laws with penalties for employers similar to the one in Arizona.

But Jason Levecke, who owns more than 50 burger joints in Arizona, says the new law is an economy killer - turning business owners into immigration agents.

"Nobody is defending illegal immigration," Levecke said. "We have to fix the problem but a state can't do it without destroying its economy."

Read more from Ben Tracy at Couric & Co. Blog: Exploring Immigration's Fault Line
Levecke hired two people and spent a half million dollars to ensure his workers are legal.

And he's put wraps on plans to open 40 new stores in the state saying it is too risky.

"Who's going to invest in a state where you can lose your business license?" he asked.

One in 10 workers in Arizona is an illegal immigrant. A recent study showed the state's economy would take an 8 percent annual hit if they were removed from the labor force.

"Would you normally have more workers out here right now?" Tracy asked.

"Uh, we would, yes we would," Sheridan Bailey said.

Bailey says the new law is even scaring away legal immigrant workers from his iron-fitting business.

"We will wind up out-sourcing part of our fabrication work to Mexico, where the people are able to work for us," Bailey said.

So as yet another bus heads out of Arizona, the question is how to make the law work without sending the state's economy south.