Heritage’s Flawed Immigration Analysis

May 7, 2013 4 Comments

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

In the Washington Post today, Jim DeMint and Robert Rector of the Heritage Foundation invoke the free-market pantheon in arguing their anti-immigration stance: “The economist Milton Friedman warned that the United States cannot have open borders and an extensive welfare state.”

They’re halfway right about that. What Friedman actually said was that immigration is “a good thing for the United States…so long as it’s illegal.” He meant that open immigration is highly beneficial to the economy, provided those productive but inexpensive laborers do not have access to welfare. Friedman later wrote that, “There is no doubt that free and open immigration is the right policy in a libertarian state.” Friedman’s problem was with the welfare state, not immigration. His remarks are fundamentally at odds with the position Heritage is trying to argue.

It’s not the first time that I’ve questioned the free-market credentials of my friends at Heritage lately, and that’s making me sad.

On Monday, Heritage released a new study entitled “The Fiscal Cost of unlawful Immigrants and Amnesty to the U.S. Taxpayer” by Robert Rector and Jason Richwine, PhD. I criticized an earlier version of this report in 2007, arguing that their methodology was so flawed that one cannot take their report’s conclusions seriously. Unfortunately, their updated version differs little from their earlier one.

I’m joined in this view by a host of prominent free-marketeers. Jim Pethokoukis at AEI, Doug Holtz-Eakin at American Action Forum, Tim Kane at the Hudson Institute, and others have all denounced the fundamentals of the Heritage report.

The new Heritage report is still depressingly static, leading to a massive underestimation of the economic benefits of immigration and diminishing estimated tax revenue. It explicitly refuses to consider the GDP growth and economic productivity gains from immigration reform—factors that increase native-born American incomes. An overlooked flaw is that the study doesn’t even score the specific immigration reform proposal in the Senate. Its flawed methodology and lack of relevancy to the current immigration reform proposal relegate this study to irrelevancy.

Even worse, the Heritage study recommends a “solution” to the fiscal problems it supposedly finds. It suggests:

Because the majority of unlawful immigrants come to the U.S. for jobs, serious enforcement of the ban on hiring unlawful labor would substan­tially reduce the employment of unlawful aliens and encourage many to leave the U.S. Reducing the number of unlawful immigrants in the nation and limiting the future flow of unlawful immigrants would also reduce future costs to the taxpayer.

Professor Raul Hinojosa-Ojeda of UCLA wrote a paper for Cato last year where he employed a dynamic model called the GMig2 to study comprehensive immigration reform’s impact on the U.S. economy. He found that immigration reform would increase U.S. GDP by $1.5 trillion in the ten years after enactment.

Professor Hinojosa-Ojeda then ran a simulation examining the economic impact of the policy favored by Heritage: the removal or exit of all unauthorized immigrants. The economic result would be a $2.6 trillion decrease in estimated GDP growth over the next decade. That confirms the common-sense observation that removing workers, consumers, investors, and entrepreneurs from America’s economy will make us poorer.

Would decreasing economic growth by $2.6 trillion over the next ten years have a negative impact on the fiscal condition of the U.S.? You betcha.

Do the authors consider the fiscal impact of their preferred immigration policy? Nope.

For those of us who “grew up” on the fine policy analysis long produced by Heritage, the immigration report is a supreme disappointment. No one has done more than Heritage to promote the importance of dynamic scoring, which is critical to understanding the true effects of government activity on the marketplace. For that organization to have seemingly abandoned its core principles for this important debate is a stinging blow to those of us who crave an honest, data-driven debate on the fiscal merits of policy.

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Heritage Immigration Study Fatally Flawed

April 5, 2013 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

There are indications that The Heritage Foundation may soon release an updated version of its 2007 report, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” by Robert Rector. That 2007 report’s flawed methodology produced a grossly exaggerated cost to federal taxpayers of legalizing unauthorized immigrants while undercounting or discounting their positive tax and economic contributions – greatly affecting the 2007 immigration reform debate.

Before releasing its updated report, I urge the Heritage Foundation to avoid the same serious errors that so undermined Mr. Rector’s 2007 study. Here is a list of some of its major errors:

  1. Count individuals, not households.[1]  Heritage counts household use of government benefits, not individual immigrant use. Many unauthorized immigrants are married to U.S. citizens and have U.S. citizen children who live in the same households. Counting the fiscal costs of those native-born U.S. citizens massively overstates the fiscal costs of immigration. 
  2. Employ dynamic scoring rather than static scoring. [2] Heritage’s report relies on static scoring rather than dynamic scoring, making the same mistake in evaluating the impact of increased immigration on welfare costs that the Joint Committee on Taxation makes when scoring the impact of tax cuts. Instead, Heritage should use dynamic scoring techniques to evaluate the fiscal effects of immigration reform. For example, Heritage should assume that wages and gross domestic product are altered considerably because of immigration policy reforms. In contrast to that economic reality, immigrant wages, gross domestic product, and government welfare programs are unrealistically static in Mr. Rector’s study. His study largely ignores the wage increases experienced by immigrants and their descendants over the course of their working lives, how those wages would alter after legalization, and the huge gains in education amongst the second and third generation of Hispanics.[3] Heritage is devoted to dynamic scoring in other policy areas – it should be so devoted to it here too.[4]
  3. Factor in known indirect fiscal effects.[5]  The consensus among economists is that the economic gains from immigration vastly outweigh the costs.[6] In 2007, Mr. Rector incorrectly noted that, “there is little evidence to suggest that low-skill immigrants increase the incomes of non-immigrants.” Immigrants boost the supply and demand sides of the American economy, increasing productivity through labor and capital market complementarities with a net positive impact on American wages.[7] Heritage should adjust its estimates to take account of the positive spill-overs of low-skilled immigration.
  4. Assume that wages for legalized immigrants would increase – dramatically.[8]  Heritage did not assume large wage gains for unauthorized immigrants after legalization.  In the wake of the 1986 Reagan amnesty, wages for legalized immigrants increased – sometimes by as much as 15 percent – because legal workers are more productive and can command higher wages than illegal workers.  Heritage should adopt similar wage increases to estimate the economic effects of immigration reform if it were to happen today.[9] 
  5. Assume realistic levels of welfare use.[10]  Vast numbers of immigrants will return to their home countries before collecting entitlements,[11] the “chilling effect” whereby immigrants are afraid of using welfare reduces their usage of it, and immigrants use less welfare across the board.[12]  100 native-born adults eligible for Medicaid will cost the taxpayers about $98,000 a year.  A comparable number of poor non-citizen immigrants cost approximately $57,000 a year – a 42 percent lower bill than for natives.  For children, citizens cost $67,000 and non-citizens cost $22,700 a year – a whopping 66 percent lower cost.  Heritage should adjust its estimates of future immigrant welfare use downward. [13] 
  6. Use latest legislation as benchmark.[14]  The current immigration plan, if rumors are to be believed, would stretch a path to citizenship out for 13 years.[15]  Most welfare benefits will be inaccessible until then, so Heritage’s report must take that timeline into account.
  7. Remittances do not decrease long term consumption.[16]  Remittances sent home by immigrants will eventually return to the U.S. economy in the form of increased exports or capital account surpluses.  Heritage should recognize this aspect of economic reality rather than assuming remittances are merely a short-term economic cost.  
  8. Factor in immigration enforcement costs.[17]  Heritage did not compare costs of legalization and guest workers to the costs of the policy status quo or increases in enforcement.  The government spends nearly $18,000 per illegal immigrant apprehension while the economic distortions caused by forcing millions of consumers, renters, and workers out of the U.S. would adversely affect income and profitability.[18]
  9. Use transparent methodology.[19]  Heritage’s methodology should replicate that of the National Research Council’s authoritative and highly praised – even by immigration restrictionists – study entitled The New Americans.[20]  That study is the benchmark against which all efforts at generational fiscal accounting – including Heritage’s 2007 report – are measured.  If Heritage deviates from their methods, it should explain its methodology in a clear and accessible way that states why they altered practice.[21]
  10. Don’t count citizen spouses.[22]  Heritage counted U.S.-born spouses of unauthorized immigrants as fiscal costs.  Counting the net immigrant fiscal impact means counting immigrants and perhaps their children at most,[23] not native-born spouses who would be on the entitlement roles regardless of whether they married an immigrant or a native-born American.
  11. Suggest changes to the welfare state.  Heritage has elsewhere called low-skill migrant workers “a net positive and a leading cause of economic growth”[24] and accurately reported that “[t]he consensus of the vast majority of economists is that the broad economic gains from openness to trade and immigration far outweigh the isolated cases of economic loss.”[25]  Instead of arguing against low-skill immigration, Mr. Rector should instead suggest reforms that would, in the words of Cato’s late Chairman Bill Niskanen, “build a wall around the welfare state, not around the country.”[26]

It is imperative that the economic costs and benefits of increased immigration be studied using proper methods and the most recent data.  A previous report by the Heritage Foundation in 2006 entitled, “The Real Problem with Immigration … and the Real Solution,” by Tim Kane and Kirk Johnson roundly rejected the negative economic assessments of Mr. Rector’s 2007 study.[27]  Not only does Mr. Rector not speak for the broad conservative movement; it appears that economists who have worked for the Heritage Foundation also disagree with Mr. Rector’s conclusions. 

For decades, the Heritage Foundation has been an influential intellectual force in conservative circles.  Its economic analyses have been predicated on consideration of the dynamic effects of policy changes as opposed to static effects.  Unfortunately, Mr. Rector’s past work has not been consistent in this regard, employing the same static scoring conservatives have traditionally distrusted in other policy areas. 

Many conservatives rely on the Heritage Foundation for accurate research about immigration’s impact on the economy.  Before releasing another study assessing the net fiscal impacts of immigration reform, Heritage should correct the errors outlined above to guarantee the most accurate information on this important topic is available.


[1] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 1.

[2] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 14.

[3] Fry and Lopez, “Hispanic Student Enrollment Reach New Highs in 2011,” Pew Hispanic research Center, August 20, 2012.

[4] Beach, “It is Time to Include Dynamic Economic Analysis in the Process of Changing Tax Policy,” Heritage Testimony on the Economy, October 6, 2011. 

[5] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, pp.19-20.

[6] Kane and Johnson, “The Real Problem with Immigration … and the Real Solution,” Heritage Institute Backgrounder, No. 1913, March 1, 2006, pp. 2-3.

[7] Borjas and Katz, “The Evolution of the Mexican-Born Workforce in the United States,” in Mexican Immigration to the United States¸NBER Book, May 2007, Lewis, “Immigrants-Native Substitutability: The Role of Language Ability,” NBER Working Paper 17609, forthcoming in David Card and Stephen Raphael, eds., Ottaviano and Peri, “Rethinking the Effects of Immigration on Wages,” Journal of the European Economic Association, 2012.  Peri and Sparber, “Task Specialization, Immigration, and Wages,” American Economic Journal: Applied Economic, 2009, Peri and Sparber, “Highly-Educated Immigrants and Native Occupational Choice,” Centre for Research and Analysis of Migration Discussion Paper Series No. 13/08, November, 2008.

[8] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, pp. 19-20.

[9] Amuedo-Dorantes, Bansak, and Raphael, “Gender Differences in the Labor Market: Impact of IRCA,” American Economic Review, 2007, Rivera-Batiz, “Undocumented Workers in the Labor Market: An Analysis of Earnings of Legal and Illegal Mexican Immigrants in the United States,” Journal of Population Economics, 1999, Kossoudji and Cobb-Clark, “IRCA’s Impact on the Occupational Concentration and Mobility of Newly-Legalized Mexican Men,” Journal of Population Economics, 2000, Kossoudji and Cobb-Clark, “Coming Out of the Shadows: Learning about Legal Status and Wages from the Legalized Population,” Journal of Labor Economics, 2002, Baker, “Effects of the 1986 Immigration Reform and Control Act on Crime,” SSRN Working Paper, 2011.

[10] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 8.

[11] Alden, The Closing of the American Border: Terrorism, Immigration, and Security Since 9/11, New York, NY: HarperCollins Publishers, 2008, p. 74.

[12] Ku and Bruen, “Poor Immigrants Use Public Benefits at a Lower Rate than Poor Native-Born Citizens,” Economic Development Bulletin, Cato Institute, No. 17, March 4, 2013.

[13] See Ku and Bruen, “Poor Immigrants Use Public Benefits at a Lower Rate than Poor Native-Born Citizens,” Economic Development Bulletin, Cato Institute, No. 17, March 4, 2013.

[14] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 21.

[15] Bennett, “Senators Agree on Path to Legal Status for Illegal Immigrants,” Los Angeles Times, March 11, 2013.

[16] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 30.

[17] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 20.

[18] Nowrasteh, “The Economic Case against Arizona’s Immigration Laws,” Cato Institute Policy Analysis, No. 709, September 25, 2012.

[19] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, pp. 8-9, 23.

[20] This advice is based on praise of those methods by the Center for Immigration Studies, a restrictionist think-tank in Washington, D.C.: Camarota, “The High Cost of Cheap Labor: Illegal Immigration and the Federal Budget,” Center for Immigration Studies, August 2004.

[21] See Smith and Edomnston, eds., The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, Washington, D.C.: National Research Council, 1997.

[22] Rector and Kim, “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer,” Heritage Special Report, SR-14, May 21, 2007, p. 9.

[23] Kandel, “Fiscal Impacts of the Foreign-Born Population,” CRS, October, 2011, R42053, p. 8.

[24] Kane and Johnson, “The Real Problem with Immigration … and the Real Solution,” Heritage Institute Backgrounder, No. 1913, March 1, 2006, p. 3.

[25] Kane and Johnson, “The Real Problem with Immigration … and the Real Solution,” Heritage Institute Backgrounder, No. 1913, March 1, 2006, p. 3.

[26] Niskanen, “Build a Wall Around the Welfare State, Not Around the Country,” Cato Institute Blog, June 15, 2006.

[27] Kane and Johnson, “The Real Problem with Immigration … and the Real Solution,” Heritage Institute Backgrounder, No. 1913, March 1, 2006.

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Tiered Guest Workers — Preliminary Details & Observations

April 1, 2013 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

Union and business negotiators have supposedly reached a deal on the major aspects of the guest worker visa program.  The details have not been released yet and the utility of such a proposal will rest there, but here are some brief observations on the broad strokes released:

  1. Tiered visa program.  The plan appears to create a tiered guest workers visa program based on the state of the economy.  Under the first tier, firms will be allowed to hire 20,000 visas in 2015 that would ratchet up to 75,000 in 2019.  The second tier could then kick in if the economy is growing quickly and unemployment is below a preset threshold, going up to an annual cap of 200,000 per year.  Under a third tier, employers sound like they would be able to hire a large number of guest workers if they are willing to “pay significantly higher wages.”  According to the Mexican Migration Monitor, almost 700,000 unauthorized immigrants entered in 2006, up from 500,000 in 2005.  If the regulations, fees, and wage controls for the third-tier are minimal, this tiered program could reduce unauthorized immigration significantly if the sectors of the economy that employ unauthorized immigrants can apply for them.
  2. Sector limitations.  The construction industry would be limited to no more than 15,000 visas annually.  As I wrote here, housing starts provided a huge incentive for unauthorized immigrants to enter to work in construction or other housing-related sectors of the economy.  Unauthorized immigration collapsed beginning in mid-2006 as housing starts declined precipitously, reducing demand for construction workers.  But with housing starts picking up, unauthorized immigration will increase again too.  15,000 total annual visas is not enough to siphon most unauthorized immigrants seeking construction employment into the legal market.  However, details in the tiered visa system could allow for some wiggle room there.       
  3. Wage controls.  It appears that guest worker wages will be determined from complex formula that considers actual wages paid by employer to similar U.S. workers, industry wage scales, and regional variations in compensation.  Current guest worker visas are similarly regulated with disastrous and expensive results that encourage illegal hiring.  Replacing all of these regulations with a fee is a much simpler, cheaper, and effective way of incentivizing employers to hire Americans first.  Stacking the regulatory deck too much in favor of hiring Americans, even in industries for which there are very few American workers, will just incentivize employers to look in the black market – defeating the purpose of immigration reform.  More enforcement (code for bureaucracy) will either fail to halt that behavior or halt it by destroying large sectors of the economy through regulatory micromanagement.   
  4. Worker mobility.  An unambiguously positive development is that guest workers would be allowed to switch jobs very easily.  Tying guest workers to employers was always a bad policy, one that could lead to employer abuse and justified numerous bureaucrats to intrusively inspect working conditions.  By allowing labor mobility, guest workers can look out for their own conditions and switch jobs when appropriate – obviating expensive bureaucratic oversight of employers and guest workers. 

These preliminary observations are based on broad policy outlines in numerous news stories rather than actual legislation.  I will update these observations as more details are released or the actual plan is published. 

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Immigrants Are Attracted to Jobs, Not Welfare

March 26, 2013 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

Unauthorized and low skilled immigrants are attracted to America’s labor markets, not the size of welfare benefits.  From 2003 through 2012, many unauthorized immigrants were attracted to work in the housing market.  Housing starts demanded a large number of workers fill those jobs.  As many as 27 percent of them were unauthorized immigrants in some states.  Additionally, jobs that indirectly supported the construction of new houses also attracted many lower skilled immigrant workers.

Apprehensions of illegal crossers on the Southwest border (SWB) is a good indication of the size of the unauthorized immigrant flow into the United States.  The chart below shows apprehensions on the SWB and housing starts in each quarter:

 

Fewer housing starts create fewer construction jobs that attract fewer crossings and, therefore, fewer SWB apprehensions.  The correlation holds before and after the mid-2006 housing collapse. 

What about welfare? 

Here is a chart of the national real average TANF benefit level per family of three from 2003 to 2011 (2012 data is unavailable) and SWB apprehensions:

 

Prior to mid-2006, TANF benefit levels fell while unauthorized immigration rose.  During the housing construction boom, unauthorized immigrants were attracted by jobs and not declining TANF benefits.  After mid-2006, when housing starts began falling dramatically, real TANF benefit levels and unauthorized immigration both fell at the same time.  If unauthorized immigration was primarily incentivized by the real value of welfare benefits, it would have fallen continuously since 2003.   

The above chart does not capture the full size of welfare benefits or how rapidly other welfare programs increased beginning in 2008.  As economist Casey Mulligan explained in his book The Redistribution Recession, unemployment insurance, food stamps (SNAP), and Medicaid benefits increased in value and duration beginning in mid-2008.  Including those would skew welfare benefits upward in 2008 and beyond, but unauthorized immigration inflows still fell during that time.

In conclusion, housing starts incentivize unauthorized immigration while TANF does not. 

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How Does Immigration Impact Wages?

February 15, 2013 4 Comments

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

Many Americans are curious about the impact of immigration on the wages of other Americans.  The best research on this focuses on the period between 1990 and 2006, when almost 17 million people immigrated to the U.S. lawfully and a net 12 million came unlawfully.  The first major study is by Borjas and Katz (B&K) and the second is by Ottaviano and Peri (O&P).  O&P borrowed much of B&K’s methodology.  Here are the long run findings:

B&K draw a more negative conclusion than O&P.  The main differences are that O&P assume capital adjusts quicker to increased labor abundance and immigrants are more complementary.  B&K’s paper reflects their assumptions about native-immigrant substitutability.  Since immigrants are more likely to have less than a high school degree and more likely to have a graduate or professional degree than natives, B&K’s model assumes natives in those categories are competing with immigrants for jobs and therefore experience wage declines. 

Both O&P and B&K found that increased immigration has a larger affect on immigrants than natives.  Depending on their level of education, longer settled immigrants experience greater wage declines and smaller wage gains from more recent immigration compared to natives:

Both sets of authors rightly assume that more recent waves of immigrants are most similar to immigrants from older waves, making the two arrival cohorts of immigrants substitutes in the workplace.  Recent papers by Ethan Lewis and Giovanni Peri and Sparber make convincing argument that language ability of recent immigrants makes them more similar and, thus, substitutable with previous waves of immigrants.  Language ability also makes immigrants complements to natives, partly explaining why O&P and B&K found wage increases for so many American workers as a result of immigration.

Here is a comparison of the long run wages effects on immigrants and natives from the O&P and B&K study:

These charts merely explain the results of previous waves of immigration on the American labor market.  If immigration increases in the future these numbers will likely be different but the past is always a useful guide for anticipating the effects of future policy changes.

Bibliography:

Borjas, George, “The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market.”

Borjas, George and Lawrence Katz, “The Evolution of the Mexican-Born Workforce in the United States.”

Ottaviano, Gianmarco and Giovanni Peri, “Immigration and National Wages: Clarifying the Theory and the Empirics.”

Peri, Giovanni and Chard Sparber, “Task Specialization, Immigration, and Wages.”

Lewis, Ethan, “Immigrant-Native Substitutability: The Role of Language Ability.”  

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America Does Not Have A ‘Genius Glut’

February 13, 2013 8 Comments

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

On Friday, Ross Eisenbrey of the Economic Policy Institute wrote an op-ed in the New York Times titled “America’s Genius Glut,” in which he argued that highly-skilled immigrants make highly skilled Americans poorer. 

A common way for highly-skilled immigrants to enter the United States is on the H-1B temporary worker visa. 58 percent of workers who received their H-1B in 2011 had either a masters, professional, or doctorate degree. The unemployment rate for all workers in America with a college degree or greater in January 2013 is 3.7 percent, lower than the 4 percent average unemployment rate for that educational cohort in 2012. That unemployment rate is also the lowest of all the educational cohorts recorded. 

Just over half of all H-1B workers are employed in the computer industry. There is a 3.9 percent unemployment rate for computer and mathematical occupations in January 2013, and an unemployment rate of 3.8 percent for all professional and related occupations. For selected computer-related occupations from the Bureau of Labor Statistics’ “Quarterly Census of Employment and Wages,” real wage growth from 2001 to 2011 has been fairly steady:   

 

 11 percent of H-1B visas go to engineers and architects but wage growth in those occupations has been fairly steady too:

 

Mr. Eisenbrey concludes that those rising incomes would rise faster if there were fewer highly-skilled immigrants. 

The unemployment rates for engineers and computer professionals are low but not as low as they used to be. There are a whole host of factors explaining that, but highly-skilled immigration is not likely to be one.  

Mr. Eisenbrey also claims that American firms hire H-1B visa workers because they are paid lower wages. Complying with certain regulations prior to hiring an H-1B can cost a firm $10,000, filing and other fees can cost additional thousands of dollars, and legal fees can be steep. The cost of hiring H-1Bs is high.

Contradicting Mr. Eisenbrey’s story about H-1Bs lowering American wages, IT workers on H-1Bs actually earn more than similarly skilled Americans. According to survey data, H-1B workers are more willing to work long hours and relocate to a job, making them more productive and raising their wages. Additionally, H-1B engineers are paid $5,000 more a year than American born engineers. If the goal of employers was to hire cheaper workers through the H-1B visa, they’re going about it in an odd way. The high regulatory costs and wages of employing H-1B workers incentivizes firms to hire foreign workers when they are expanding and can’t find American workers fast enough.  

Mr. Eisenbrey’s doesn’t touch on other characteristics of highly-skilled immigrants such as their high rates of entrepreneurship, inventiveness, or skill complementarity. If the New York Times chooses not to run one of my letters to the editor about those topics, I will be writing about them in the upcoming weeks.

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The Good and Bad of the Immigration Reform Blueprint

January 28, 2013 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post originally appeared on the Cato-at-Liberty blog here and is reprinted with the author’s permission.

Today, the so-called Gang of Eight senators revealed a blueprint for an immigration reform bill. Details in the actual legislation will matter a great deal but these are initial impressions based on the blueprint. The good and the bad.

Good:

  • Earned legalization for non-criminal unauthorized immigrants. After paying fines, back taxes, undergoing a criminal background check, and other firm penalties, unauthorized immigrants will be able to stay in the United States and eventually earn a green card. This will increase their wages over several years much faster than if they remained unauthorized. 
  • DREAMers will not face the same penalties as unauthorized immigrants who intentionally broke U.S. immigration laws, which is a positive step.
  • Legalization for unauthorized immigrant workers in the agricultural industry will be fast-tracked. This is especially important because the majority of farm workers in most states are unauthorized immigrants.
  • Removing some regulatory barriers and increasing quotas for highly skilled immigrants. This will likely include an increase in the number of employment based green cards and removing the per-country quotas that produce wait times for Indian, Chinese, Mexican, and Filipino workers. Currently, numerous firms and immigrants are dissuaded from even trying to obtain employment based green cards because of the enormous wait times.

Bad:

  • Increases the amount of resources spent on border security. The size of the border patrol is double of what it was in 2004. The number of border patrol agents is seven times greater than what it was in the 1980s with about nine times as many on the southern border. More technology and aerial drones on the border will be wasteful and not produce results.
  • Strong employment verification system like E-Verify. As I wrote here, here, and here, E-Verify is an intrusive big government workplace identification system that does not even root out unauthorized immigrants. In Arizona, which has had mandatory E-Verify since 2008, many unauthorized immigrants have moved deeper into the black market, some industries fire numerous unauthorized workers but don’t hire natives to fill the spots, and the business formation rate dropped because the penalties for intentionally or knowingly hiring unauthorized workers are so draconian.
  • Increases regulations for guest worker visas. Current guest worker visas for agricultural workers are so overregulated that they are barely used. Adding more regulations will only make the visas more unusable and incentivize American farmers and employers to hire unauthorized workers.

A viable guest worker program will increase economic growth in the United States. Guest worker visas are not as good as green cards for lower-skilled workers, but they are the only viable option at this moment. The devil is in the details but this blueprint does not provide for enough future low-skilled immigration.     

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Immigrants Did Not Take Your Job

November 2, 2012 4 Comments

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This piece was originally published at the Cato-at-Liberty blog here and is reproduced with permission from the author. The original version features footnotes that have not been included here. Also, links to relevant Open Borders material have been added to the post.

Mark Krikorian, executive director of the anti-immigrant Center for Immigration Studies (CIS) [Open Borders note: CIS describes itself as pro-immigrant. The fine print is discussed here] and author of the book The New Case Against Immigration: Both Illegal and Legal, criticized a remark I made to Washington Times reporter Stephen Dinan about a new CIS memo.

The memo, which can be found here, claims that immigrants are taking most of the jobs created since President Obama took office. I told the Washington Times that the memo “makes a mountain out of a molehill” because it ignores key economic explanations that have nothing to do with demonizing immigrants. Steven Camarota, one of the authors of the memo, even agreed that one factor I mentioned could explain his findings.

In response, Mr. Krikorian wrote that I should, “Tell that to the 23 million Americans who are unemployed, forced to settle for part-time work, or gave up looking for work altogether.”

My response is that the CIS memo is so flawed it should not be taken seriously.

Location, Location, Location

The memo looks at native and immigrant concentrations in different sectors of the U.S. economy. It points out that immigrants have made gains in some sectors where there is are high native-born unemployment rates. But the memo fails to take into account one very important factor when studying labor markets: labor mobility. This issue is so important that Harvard economist George Borjas, the most respected economists who is skeptical of the gains from immigration, called it “the core of modern labor economics” and criticized his fellow scholars for overlooking its importance. The authors did not heed Professor Borjas’ criticism. Read more of this post

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Immigrants are Important for Disaster Reconstruction

October 30, 2012 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This piece was originally published at the Cato-at-Liberty blog here and is reproduced with permission from the author.

Hurricane Sandy walloped the East Coast yesterday. The strongest part of the storm focused its wrath on coastal cities, ravaging New York, Atlantic City, Ocean City, and others in the storm’s path. In the coming days, focus will turn from rescuing people to rebuilding the devastated areas.

Immigrant workers, especially in the building trades, are an essential component of any reconstruction. People living in places hit by Sandy are going to demand an influx of laborers to rebuild and replace their destroyed property.

During and after Hurricane Katrina in 2005, hundreds of thousands of people from Louisiana, Mississippi, and Alabama left their homes behind. For many from New Orleans, Houston became their new home. In contrast, around 100,000 immigrant workers quickly moved into the Gulf Coast area to take advantage of the labor market opportunities offered by the reconstruction in the aftermath of Katrina.

Many Americans also moved into the Gulf Coast region to rebuild with the immigrants. But in the year prior to Hurricane Katrina, Hispanic immigrant workers accounted for about 40 percent of the total growth in the construction sector-–the majority of whom were unauthorized immigrants. A year after the rebuilding began in New Orleans, an estimated quarter of all construction workers were unauthorized immigrants.

A tornado in Tuscaloosa, Alabama in April 2011 left 43 dead and tore a path almost a mile wide through the city. Immigrant Hispanic workers in Alabama responded with alacrity. “Hispanics, documented and undocumented, dominate anything to do with masonry, concrete, framing, roofing, and landscaping,” said Bob McNelly, a contractor with Nash-McCraw Properties. Three months after the tornado, Tuscaloosa issued 1069 business licenses with 81 percent of them related to businesses repairing storm damaged.

There is no economic silver lining to a disaster, despite what The New York Times thinks, but fortunately there is a mobile workforce capable of responding to natural disasters to aid in reconstruction. After dealing with the Tuscaloosa reconstruction, McNelly said that he prefers Hispanic immigrants workers. “It’s not the pay rate. It’s the fact that they work harder than anyone. It’s the work ethic,” he said.

Immigrant workers are the economic early responders to natural disasters. They are typically younger so they do not own houses and mortgages tying them down to certain areas. As a result, they move quickly based on labor market demands allowing reconstruction to start quicker and complete faster. Immigrant workers, mostly Hispanics in the building trades, will flock along with others to the areas devastated by Hurricane Sandy. As in previous natural disasters, they will be an important component of any rebuilding.

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Lifting the Cuban Travel Ban Is Good for U.S.

October 16, 2012 2 Comments

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This piece originally appeared at the Cato-at-Liberty blog here and is reproduced with permission from the author.

This morning the Cuban government announced reforms of its 52 year old travel ban. In mid-January, the Cuban government will cease requiring exit visas and invitations from foreign nationals so Cubans can leave. It’s unclear how the new plan will be applied in practice. The Cuban government’s announcement might not be as welcome as people hope, but this is a substantial change in rhetoric. My colleague Juan Carlos Hidalgo wrote about how such an approach would affect Cubans here.

Assuming the travel ban is mostly or entirely lifted, this policy change will also affect Americans in numerous ways.

First, the United States has a unique immigration policy for Cubans. Known as the “wet foot/dry foot policy,” if a Cuban reaches American soil he or she is allowed to gain permanent residency within a year. If a Cuban is captured at sea, he or she is returned to Cuba unless they cite fears of persecution. This means that most Cubans who want to leave, with the exception of violent or other criminal offenders, will be able to stay in the United States if they are able to make it to American soil. No other nationality in nearly a century, except the Hungarians in the 1950s, has been subject to such a generous policy.

Because of their unique legal-immigration status, the Cuban-born population living in the United States was excluded from estimates of unauthorized immigrants and very few of them are likely in violation of any immigration laws.

Second, the United States is the number one destination abroad for Cubans. Additionally, nearly 60 percent of Cuban-Americans were born abroad compared to less than 40 percent for all other Hispanic groups. Cubans tend to be older, more likely to own homes and businesses, more geographically concentrated in Florida, more educated, wealthier, and have fewer children than other Hispanic immigrant groups. They are overwhelmingly positive for the American economy.

Third, Florida has been the main destination and beneficiary of Cuban immigration since the 19th century century. Ybor City, a section of Tampa, owes its birth and development to Cuban and Spanish-born entrepreneurs like Ignacio Haya and Vincente Martinez Ybor who made the city a cigar manufacturing powerhouse by the early 20th century. For generations, Ybor City was known as “Little Havana.”

In addition to the tobacco trade, Cuban-American entrepreneurs in Ybor City also specialized in legal services, accounting offices, real estate development companies, and advertising. Restaurants have probably had the biggest impact on the habits of Americans. The Columbia Restaurant, currently Florida’s oldest restaurant, was opened by Cuban- born Casimiro Hernandez in 1905. It started as a small corner cafe serving authentic Cuban sandwiches and café con leche and has since expanded to seven other locations.

The situation was similar in Miami where Cubans excelled at opening small businesses and revitalizing large sections of the city that had begun to decay. Ever since the earliest Cubans came to America, they haven’t wasted any time in their pursuit of the American dream.

Fourth, Cuban immigration to Florida has not lowered the wages for Americans working there. According to an authoritative peer-reviewed paper written by Berkeley labor economist David Card, the sudden immigration of 125,000 Cubans on the famed Mariel boatlift in 1980 increased the size of Miami’s total labor market by 7 percent and the size of its Cuban workforce by 20 percent.

For non-Cubans in Miami with similar skills, wages were remarkably stable from about 1979-1985. A massive and sudden increase in labor supply did not lower wages for Americans or increase their unemployment. Miami businesses rapidly expanded production to account for the influx of new consumers and workers and Cuban immigrants started businesses with a gusto, thus creating their own employment opportunities.

Cuba’s reform of the travel ban could reignite Cuban immigration. In 2011, roughly 40,000 Cubans gained legal permanent residency and refugee status in the United States. That number could increase dramatically if the Cuban government truly got out of the way and let its people move toward relative freedom and economic opportunity.

Beginning in mid-January, assuming U.S. policy does not change (an unlikely scenario given that neither political party wants to upset the politically influential Cuban community in South Florida), we could witness a large new wave of Cuban immigration to the United States.

Despite entertaining movies like Scarface, the long run consequences of the Marial boatlift have been good for Americans, Cuban immigrants, and Florida. Cuban-Americans reveal a pattern of success and achievement similar to other contemporary immigrant groups and those in our country’s past. Immigrants are more successful in the United States than their former countrymen left behind. American capitalist institutions are the main cause of this, but it’s also because immigrants are overwhelmingly committed to economic advancement and the hard work that takes.

If Cuba truly lifts the travel ban, it will be a blessing for all Cubans. Many of them will likely immigrate to the United States, which will also be good for us.

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Arizona-Style Immigration Laws Hurt the Economy

October 12, 2012 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This piece originally appeared in Forbes here, and is reproduced with permission from the author. It is written specifically in the context of United States politics.

With  the “papers please” portion of Arizona’s recent immigration law SB 1070 going into effect, civil rights and watchdog groups are in  overdrive readying for the litany of purported abuses and complaints.  Lydia Guzman, president of Respect Respeto, a civil rights group in Arizona that records abuses at the hands of police, said, “Our hotline has been receiving hundreds of calls a day since the law was implemented.”

Forcibly removing peaceful unauthorized immigrants from the U.S., separating them from their families, property, and jobs, to satisfy arcane labor market regulations created by Progressive politicians, is an appalling indecency.  It also inflicts significant economic harm. Arizona’s immigration laws have drastically damaged its economy since mid-2007. The humanitarian arguments may leave those who complain the loudest about unauthorized immigration unmoved, but the supporters of Arizona style immigration laws might be persuaded by the economic costs.

In a new Policy Analysis by the Cato Institute called “The Economic Case against Arizona’s Immigration Laws,” I analyze the economic carnage inflicted by Arizona’s immigration laws.

The Legal Arizona Workers Act (LAWA or employer sanctions) was the first such law, and it tried to regulate unauthorized workers out of the market.  Its chief tool is E-Verify, an electronic employment eligibility verification system used to weed out unauthorized immigrants when they apply for a job.

E-Verify has three major problems.  It is very expensive, discourages investment and increases unemployment.

Just to run an employee through costs around $147. Compliance, however, also requires additional human resources and legal services, increasing the financial burden on firms.

The second problem is that E-Verify scares away businesses, investment, and workers.  E-Verify is tied to what then-Governor Janet Napolitano called the “business death penalty.”  Businesses that knowingly hire unauthorized immigrants have their licenses revoked on a second offense, killing the business.

Despite the fact that application of the business death penalty has been relatively rare the prospect has scared investors and businesses out of the state.  It was largely responsible for a shocking business formation rate decline of 14.3 percent in the third quarter of 2007 in Arizona, rates of business formation in California and New Mexico increased over the same time.

Entrepreneur Richard Melman halted plans of opening a restaurant in Arizona after LAWA passed said:  “You put in $3 million or $4 million, and you can be shut down for a mis­take. Why take a chance? I want to see how it plays out.”  He wasn’t the only one.

The third problem with E-Verify is that it increases unemployment.  Supporters of E-Verify like Kris Kobach, the Secretary of State of Kansas and author of many different state level anti-immigrant bills, claim that E-Verify will force unauthorized immigrants out of jobs so Americans can fill them.

In reality, some unauthorized immigrants are forced out of jobs, which then mostly remain unfilled.  In the immigrant heavy farming industry, crop production employment dropped by 15.6 percent in the first 4 years after LAWA was passed.  American workers did not fill the gaps.  In neighboring New Mexico and California, crop production employment increased over the same time period.  E-Verify explains much of that difference.

Two and a half years after LAWA was passed, Arizona created a more controversial law called SB 1070 to enforce immigration laws outside of the workplace.  The combined effects of LAWA and SB 1070 forced about 200,000 people out of Arizona, most of them from the Phoenix area.

In the six years after April, 2006, the home price index for the 20 largest metropolitan areas in the nation declined by 32.9 percent.  In the Phoenix area, the price index declined by a whopping 51.29 percent.

The housing bust, combined with forcing 200,000 consumers of real-estate out of Arizona lowered prices further.  Homeowner and rental vacancy rates in Arizona were consistently above those in California and New Mexico.  For four years after LAWA passed, Albuquerque and Los Angeles even recorded vacancy rates that were 50 to 75 percent lower than those prevailing in Phoenix.

As a result of the triple whammy of E-Verify, the business death penalty, and the housing price decline partly caused by forcing hundreds of thousands of renters and buyers out of the market, employment in construction collapsed faster and further than in neighboring states.

The economic harm caused by LAWA and SB 1070 is only the tip of the iceberg.  Following the next election, when numerous states will begin to consider Arizona style immigration laws, they should pause to survey the tremendous economic toll it has taken on Arizona.

Open Borders note: More related information is available at the Arizona immigration crackdown page.

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Immigration Politics are Holding Up the Technology Sector

September 27, 2012 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This piece originally appeared in the National Journal here, and is reproduced with permission from the author. It is written specifically in the context of United States politics.

Politicians are simply playing at immigration reform. As these representatives and senators take their turn at political games, introducing pieces of legislation designed to go nowhere, the federal immigration bureaucracy once again highlights how much the current opaque immigration system damages the U.S. economy, now in its third year of anemic growth.

Rep. Lamar Smith, R-Texas, recently introduced a bill to eliminate the diversity visa program, which awards 55,000 green cards by lottery, and instead redirects all of those green cards to skilled advanced foreign graduates from U.S. universities. His bill came up for a vote last week, failing in the House.

As a counter, Sen. Chuck Schumer, D-N.Y., and Rep. Zoe Lofgren, D-Calif., who represents part of Silicon Valley, introduced their own legislation to increase the number of green cards for highly skilled graduates without destroying the diversity visa program. It’s a version of Smith’s bill meant to appeal to Democrats who support the diversity visa, but it will turn off Republicans who are newly opposed to it.

Both bills, introduced with provisions unacceptable to the other party, make for political theater but leave the fundamental problem of immigration reform unresolved.

On Oct. 1, new highly skilled migrant workers on H-1B visas can start working in the United States. H-1B visas are a small subset of visas that let U.S. firms temporarily hire skilled foreigners. Along with skilled foreigners on green cards, H-1Bs make a big difference in innovative growth industries, even though only 85,000 a year are hired annually. About half of all H-1Bs work in the computer industry, with most of the rest in engineering, science, mathematics, and technology. 

Over the last decade, the number of jobs in these sectors has grown three times faster than in the rest of the economy. Foreigners seem particularly driven to these high-growth industries. About 35 percent of engineers, 27 percent of computer scientists and mathematicians, and 25 percent of physical scientists were born in foreign countries. 

To be clear, Americans are driven to these industries, too. U.S. firms try to hire H-1Bs and skilled immigrants when they are expanding. Smaller technology firms that employ H-1Bs hire five to seven other employees for each H-1B worker brought in. H-1B workers expand production, meaning that firms have to hire other Americans as well to work alongside H-1Bs. That is one reason why more technology workers do not drive down American wages. 

Every year, firms in Silicon Valley and elsewhere clamber for more H-1B visas than are issued. This year, after just two months of accepting H-1B visas, the government had to stop because the quota had been reached. Last decade, when the economy was growing at a rapid clip, the yearly quota would fill up in a single day. 

Presidents George W. Bush and Obama have done a lot to hobble the H-1B. Under Bush’s TARP, financial firms getting bailed out were not allowed to hire H-1B workers. 

And it’s not like hiring H-1B workers is easy or cheap. Firms already spend about $6,000 in legal and government fees per H-1B and as much as twice that for employment-sponsored green cards. Obama didn’t think those fees were high enough, so he doubled them for firms heavily dependent on H-1B workers, mostly Indian firms, to fund increased border-security efforts. 

Dynamic Silicon Valley firms and the technology industry are highly dependent on skilled workers. As they grow, so does their demand for skilled workers. To continue to expand in this overall moribund economy and remain a bright light of economic success, they need to be freed of obtuse immigration restrictive, quotas, and rules that hobble their expansion.

The bills introduced by Schumer, Lofgren, and Smith would release a bit of the pressure. But when desperately needed reform is stalled over the diversity visa, which has nothing to do with skilled immigration and is blamed for many sins it has never committed, it is clear just how unserious Washington is about solving the immigration mess it created.

[Open Border editorial note: Readers might like to check our pages on high versus low skill as well as our page on the startup visa, which contain related material]

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TRUST Act Breaks Through in California

September 3, 2012 1 Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This post was originally published as an op-ed for the Huffington Post here. It is reproduced with permission from the author.

Last Friday the California State Assembly passed the TRUST Act. Also called the "anti-Arizona immigration law" by some, it would limit California law enforcement’s cooperation with the federal Secure Communities program (SCOMM). The bill is now on its way to Governor Jerry Brown’s desk where he is expected to sign it into law. The TRUST Act is good news for California budgets, residents, and police departments, for three main reasons:

First, it would limit immigration detainers to unauthorized immigrants convicted or currently charged with a serious or violent felony. If SCOMM must exist, it should exist for violent or property offenders and not otherwise peaceful unauthorized immigrants.

This limitation is essential to continuing California cities’ successful use of community policing strategies that rely on informant and witness cooperation with police, even if they are unauthorized immigrants. If the possibility of deportation is increased with SCOMM, fewer unauthorized immigrants and their legal families will go out on a limb to help police solve real crime. The TRUST Act limits the growing distrust between immigrants and police.

Second, the TRUST Act would lower the cost for local governments who object to shouldering the high cost of detaining suspected unauthorized immigrants. A recent report found that detention costs for SCOMM currently run over $26 million a year for Los Angeles county and $65 million a year for the entire state. Food, guards, prisons, beds, and other amenities that need to be provided to suspected unauthorized immigrants are too expensive for many jurisdictions.

Third, the TRUST Act frees those who haven’t been convicted of violent or serious felonies and would prevent imprisonment of American citizens like James Makowski. He was wrongly accused of being an unauthorized immigrant and held in detention for two months before the government admitted its mistake and released him. After his release, Makowski said, "Everybody makes mistakes. I’ve made mine . . . But if the government can detain a U.S. citizen without justification, that’s pretty outrageous. There have to be safeguards in place." (Markowski is suing the Federal Bureau of Investigation and the Department of Homeland Security for his two-month detention.)

SCOMM was started by a pilot project in 14 police jurisdictions by the Bush administration in October 2008. SCOMM is now active in over 3,000 jurisdictions in the United States, roughly a 21,429 percent increase in jurisdictional reach since Obama took office, and will be going nationwide shortly.

Beyond the TRUST Act, SCOMM should be discontinued. SCOMM is a federal immigration enforcement program that links fingerprint records with government immigration and criminal databases. If Immigration and Customs Enforcement (ICE) suspects an arrestee is an unauthorized immigrant, it issues a detainer to hold the arrestee so that ICE is notified when the arrestee is to be released, often delaying the arrestee’s release until ICE is ready–on merely a suspicion that the arrestee is an unauthorized immigrant. ICE then detains the arrestee, verifies he is unauthorized (occasionally they deport American citizens by accident), and deports him. Meanwhile, local police departments hold these suspected unauthorized immigrants past their release dates.

States and localities originally volunteered to cooperate with ICE in this program, but some states like New York and Illinois want to drop out. The government’s response to their requests was to declare SCOMM mandatory despite earlier agreements and statements to the contrary.

ICE officials have previously stated in their SCOMM agreement with California that the program would only target those "convicted of serious offenses." Recently obtained government documents show that SCOMM issues detainers for people who are not suspected of any criminal conduct. Some are detained by SCOMM because they were unable to identify themselves satisfactorily at drivers’ license checkpoints or because they were arrested for identification purposes. Merely being arrested for non-serious offenses should not subject an arrestee to SCOMM.

SCOMM has lost credibility with the public, imposes heavy incarceration costs on states, and diverts the resources that should be used to deport unauthorized immigrants convicted of violent or serious felonies. The TRUST Act will build a wall around the worst parts of SCOMM in California and help restore confidence between police and immigrants.

Parts of this op-ed are based on an earlier blog post written here.

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Obama’s Tepid and Temporary Immigration “Reform”

June 18, 2012 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

The post was originally published at the Huffington Post blog here and is reproduced with permission from the author.

The Department of Homeland Security (DHS) just released a memo outlining a temporary relaxation in prosecutorial discretion to allow unauthorized immigrants who came here when they were under the age of 16, to get a temporary two year (possibly renewable) work visa. This proposal is a truncated version of Senator Marco Rubio’s (R-FL) recent proposal and another older law called the DREAM Act. This temporary version of the DREAM Act offers a glimpse of the benefits of the real one.

Under the proposal, unauthorized immigrants who came to the United States when they were younger than 16, have lived here for 5 years, are in school or have graduated from high-school or are honorably discharged from U.S. Armed Forces, who are not criminals, and who are currently under younger than 30 can stay and receive a two year temporary work permit that can be renewed. That’s it.

The government already has legal authority to grant something called “deferred action” to unauthorized immigrants. That basically means the government will choose not deport them and instead focus on criminals or other deportation priorities. Those immigrants are then allowed, under current law, to get a temporary work permit if they show “an economic necessity for employment.”

Most unauthorized immigrants who could be legalized by Obama’s memo would meet the “economic necessity” qualifications for a temporary work permit.

Representative Steve King (R-Iowa) has already said he will sue the Obama administration to stop this memo from going into effect but his success is uncertain. Rubio rightly called the measure “a short-term answer to a long-term problem” but continues by saying that it “will make it harder to find a balanced and responsible long-term [solution].”

Since taking office, Obama’s DHS has deported over 1.2 million people in a frenzy of government immigration enforcement not seen since the 1950s. Last year his administration promised to use prosecutorial discretion to stop prosecuting those who had strong American family ties and no criminal records. Since that policy went into effect in November 2011, DHS officials have reviewed more than 411,000 cases but closed less than 2 percent of them.

Immigration enforcement officers referred to that administrative order as “a joke” which barely impacted government policy toward deportations. This year’s change could be very different.

If applied as broadly as the DREAM Act, somewhere between 800,000 and 2.1 million unauthorized immigrants could gain a temporary work permit through the administration’s actions.

Only a fraction of the economic benefits of the proposed DREAM Act will be reaped by the memo’s policy change. Political scientist Raul Hinojosa-Ojeda estimated that an amnesty similar to 1986 would yield at least an added $1.5 trillion to GDP over a single decade. If the maximum of 2.1 million eligible unauthorized immigrants are legalized under the Dream Act, we would gain at least $250 billion in additional production over the next decade by a rough estimate.

A temporary two years deferment with uncertain renewals will yield benefits that are miniscule compared to what they would be under legalization.

This temporary reprieve should also have a very minimal impact on the welfare state and other government services because they are limited to those with work permits. But even if they were granted permanent resident status tomorrow, it would still be five years before they were eligible for any kind of major government assistance. In any case, immigrants use less welfare and government assistance than Americans with similar incomes.

Our government’s restrictive immigration policies fly in the face of economic reality. Most immigrants who want to come to the U.S. are denied by our immigration regulations. But just because our law doesn’t adapt to supply and demand doesn’t mean people remain idle when confronted with poverty in their home countries. A predictable outcome of immigration restrictions is that immigrants will come without authorization and Americans will want to work with them, employ them, and sell to them.

The sad situation that so many unauthorized children face, being born in another country but raised American, can only be permanently resolved with immigration reform that vastly diminishes the government’s role in regulating, limiting, and controlling immigration.

Unauthorized immigrants brought here as young children are attached to this country and our society. Many of them don’t even remember the land they were born in. It’s about time the government gets out of the way, even if it’s temporarily, and allows industrious, peaceful, and otherwise law-abiding unauthorized immigrants to not fear deportation. The next step should be real immigration reform.

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Obama Administration Adopts De Facto Dream Act

June 15, 2012 1 Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

The post was originally published at the Cato@Liberty blog here and is reproduced with permission from the author.

Two senior Obama administration officials told the Associated Press that the administration will enforce many of the major portions of the Dream Act using the president’s administrative discretion to defer deportation actions. According to a memo released by the Department of Homeland Security this morning, the plan would apply to unauthorized immigrants who:

  • Came to the United States under the age of 16.
  • Have continuously resided in the United States for a least five years preceding the date of the memorandum and are present in the United States on the date of the memorandum.
  • Are currently in school, have graduated from high school, have obtained a general education development certificate, or are an honorably discharged veteran of the Coast Guard or Armed Forces of the United States.
  • Have not been convicted of a felony offense, a significant misdemeanor offense, multiple misdemeanor offenses, or otherwise poses a threat to national security or public safety.
  • Are not above the age of 30.

If the above plan is implemented fully, between 800,000 and 2.1 million unauthorized immigrants could be legalized for up to two years. By being legalized they will become more productive, earn higher wages, and more fully assimilate into American society. But this is only a temporary fix.

Temporary work permits can be issued to unauthorized immigrants who have their deportations deferred but in this situation they would only last 2 years. It’s a routine administrative procedure that already occurs for unauthorized immigrants who have their deportations deferred. This is one situation where the complexity of our immigration rules and regulations works to the advantage of immigrants and Americans.

A permanent version of this action in the form of the admittedly imperfect Dream Act would need to be passed to reap the full rewards.

The benefits from passing the Dream Act are enormous. Evidence from the 1986 amnesty showed that the legalized immigrants experienced a 15.1 percent increase in their earnings by 1992, with roughly 6 to 13 percentage points due to the legalization.

In the Winter 2012 issue of The Cato Journal, Raul Hinojosa-Ojeda estimated that an amnesty similar to 1986 would yield at least an added $1.5 trillion to GDP over a single decade. If 2.1 million eligible unauthorized immigrants were permanently legalized, that would be at least $250 billion in additional production over the next decade (back of the envelope calculation).

However, before we get too thrilled about the prospects of this sorely needed temporary liberalization, we should remember that hardly anything changed the last time the Obama administration used its prosecutorial discretion to review deportation cases. His administration promised to wade through backlogged cases and close those where the unauthorized immigrants had strong American family ties and no criminal records. Since that policy went into effect in November 2011, DHS officials have reviewed more than 411,000 cases and less than 2 percent of them were closed.

If the administration’s proposal temporarily goes as far as the Dream Act would, it will shrink the informal economy, increase economic efficiency, and remove the fear and uncertainty of deportation from potentially millions of otherwise law-abiding people. It would be a good first step toward reforming immigration and a glimpse at what the Dream Act would do.

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Selling Work Visas: Auctions or a Tariff?

May 16, 2012 5 Comments

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

The post was originally published at the Cato@Liberty blog here and is reproduced with permission from the author.

Yesterday Professor Giovanni Peri presented an immigration reform plan that would auction work visas to employers. As I wrote yesterday, Peri’s plan would diminish the misallocation of current visas but not do much to increase the quantity of work visas. Since the real problem with America’s immigration system is a lack of work visas and green cards, Peri’s plan seeks to solve a rather miniscule problem by comparison.

Proponents of selling visas either support auctioning a limited number of visas to the highest bidders or establishing a tariff that sets prices but allows the quantity to adjust. An immigration tariff is far superior to an auction of numerically limited work visas. You can read my proposal in more detail here or listen to me explain it here. ADDED BY OPEN BORDERS: For a background on immigration tariffs, see here.

Here are three reasons why an immigration tariff is better than an auction: Read more of this post

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Selling work visas

May 16, 2012 1 Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

The post was originally published at the Cato@Liberty blog here and is reproduced with permission from the author.

Professor Giovanni Peri today made an interesting proposal to auction work visas to the highest bidding employer. His reform is similar to an auction proposal made by Gary Becker, but more specific. His idea is innovative and deals with transitioning from the current maze of quotas, visa categories, and other barriers to a more open system that better allocates visas to the highest bidders.

The one problem with Peri’s proposal is that it does not meaningfully increase the number of work visas. The limited number of work visas, not the distribution, is the main problem with America’s immigration system. Instead, he calls for reallocating visas from families to the employment based category. He then wants American employers to bid for the limited quantity of work visas issued quarterly. A government commission would adjust the quantity and immigrants would be free to move between employers who purchase visas.

Economists like Becker and Peri are rightly concerned with how societies allocate scarce resources to different uses, but the scarcity of work visas is an artificial one created by the government, not one that results from a scarcity of the factors of production or other inputs. This is why there should be no numerical limits on the quantity of work visas issued even if they are priced. Charging for work visas is a substantial improvement over the current system, as I say here, here, here, and here. Most of the welfare gains come from allowing the quantity of visas to adjust to the price, not the other way around. An efficient visa selling process will operate more like a tariff than an auction. ADDED BY OPEN BORDERS: For a background on immigration tariffs, see here.

For normal goods and services, a rising price incentivizes consumers to limit their consumption and producers to increase production. A government commission tasked with adjusting visa quantities would face political rather than market incentives and not increase visas in response to rising prices. Unless the incentives are carefully aligned, the result would probably be a more arbitrary and numerically limited immigration system.

Another problem with Peri’s proposal is that it only allows employers to bid for work visas. Read more of this post

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Unlawful Presence Waivers Are Not Amnesty

May 4, 2012 1 Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

The post was originally published at the Cato@Liberty blog here and is reproduced with permission from the author.

Under current law unauthorized immigrant spouses or children of U.S. citizens can gain lawful permanent residency (LPR) status if they return to their home country to apply at a U.S. consulate or embassy. The Catch-22 is that unauthorized immigrants who have lived here are barred from returning for up to ten years once they leave the U.S. The immigrant has to apply for an unlawful presence waiver to remove the bar, a process that could take up to 28 months, including appeals, separating the immigrant from his U.S. family in the mean time. Consequently, many unauthorized immigrants who could regularize their status do not take this opportunity.

The government is now asking for comments on a proposed rule change that would close part of that administrative Catch-22. Under the proposed rule an unauthorized immigrant could apply for and adjudicate the waiver before departing for interviews in consulates abroad, shortening the separation time between the immigrant and his family. Half of waivers are approved in seven days at the American consulate in Ciudad Juarez, Mexico. The other half can take years.

The waiver removes the bar on returning if the immigrant can show that “being separated from their U.S. citizen spouse or parent would cause that U.S. citizen relative extreme hardship.” Extreme hardship only applies to the migrant’s U.S. citizen spouse or parent, not to the immigrant himself or his U.S.-citizen children. Extreme hardship is determined by USCIS bureaucrats where relevant factors include the intensity of family ties, health, age, financial impact, and country conditions. Financial problems and the normal hardship of familial separations are not, by themselves, sufficient reasons to grant a waiver.

Even with those strict legal requirements, thousands of people could have their immigration status legalized. Read more of this post

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Economic Judgment on Arizona’s Immigration Law

April 25, 2012 Leave a Comment

Post by Alex Nowrasteh (see all posts by Alex Nowrasteh)

This is a cross-posting, with permission from the author, of an article that originally appeared in the Huffington Post here.

On April 25, the U.S. Supreme Court will hear oral arguments over the constitutionality of Arizona’s controversial immigration law. But jurisprudence aside, the economic verdict is already in: The law has damaged Arizona’s economy.

Arizona’s immigration law burdens businesses with regulation and penalizes workers. It has driven tens of thousands of laborers, consumers and entrepreneurs from the state, turning its bad economy even worse.

At its heart, Arizona’s immigration policy is an unfunded mandate that raises the cost of hiring workers and expanding production. Neither is good policy in even the best of economies, which we are far from experiencing currently.

The worst example: E-Verify. It’s an electronic verification system that employers are supposed to use to check the legal work status of all new employees. Besides failing to detect unauthorized immigrants 54 percent of the time — thus flunking its core function — E-Verify falsely identifies legal workers as illegal about one percent of the time. Read more of this post

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