Tag Archives: United States

Why Are There So Few Unlawful Immigrants?

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

Open Borders Note: See also Vipul’s post and our posts tagged economic determinism.

Labor markets are heavily distorted by immigration restrictions, producing wide and persistent wage differences for observably identical workers in developed and developing nations. Income for low skilled American workers is 16 times as high as Haitians in Haiti, about 7 times as high as Indians in India, and about 4 times as high as Mexicans in Mexico—all adjusted for purchasing power parity. Just by moving here immigrants can largely close that wage gap.

There are very limited avenues for low skilled immigrants to immigrate legally, which raises an important question: if the economic benefits of immigrating are so high, why are there only 11 to 12 million unlawful immigrants here?

Below are the two broad reasons:

First, the benefits of immigrating are not as high as they seem. The probability of being employed in the destination country is a vital variable because unemployment does not confer any benefits on the immigrant. The skill level of prospective unlawful immigrants restricts job opportunities to certain occupations. If the sectors where low skilled immigrants work have high unemployment rates, as many do now, the chances of earning higher wages here is lower so the economic benefits of immigration are lower. Downward wage bargaining by immigrants is limited but unlawful immigrants do take a wage cut, all else being equal, of about 20 percent to compensate their employers for the legal risk of hiring them and other reasons. Growing economies in places like Mexico, China, and elsewhere might partially offset the benefits of immigrating by promising higher incomes in the near future.

Second, the cost of unlawfully immigrating is very high. Opportunity costs, search costs(including language barriers), transportation costs, legal costs, the probability of dying en route, the probability of being sold into slavery, and the probability of not making it to the United States despite paying the smuggling fee are all high and increase risk. Immigration enforcement is very effective at deterring most would-be unlawful immigrants. Highsmuggling fees are a high up front cost.

Immigration can be understood as an investment over a period of years.  The length of time the immigrant spends here employed at higher wages increases the economic benefits of immigrating. The costs of immigrating, like paying for a smuggler, are fixed while there seems to be a low marginal cost for staying here to avoid immigration enforcement. The psychic costs could shift with time.

Here is an example:

Assume a Mexican immigrant wants to illegally move to the United States and work in construction. A marginal worker in the construction sector would have about an 86.2 percent chance of being employed at $40,000 with an effective tax rate of about 18 percent (including income and FICA taxes) and a 2.6 percent annual average wage increase.

The cost of being smuggled in ($9,000 by boat, $4000 by land), buying documents to decrease the chances of detection, and opportunity cost from being out of the labor force is $11,000 assuming no psychic costs. After the first year, I assume that the out of pocket cost of living illegally was $1,000.

Assuming a two percent discount rate, the net present value of moving to the United States for five years is $126,000.  The net present value (NPV) of working in Mexico assuming a starting wage of $10,000 a year, 95 percent chance of being employed, a one percent wage growth, and a two percent discount rate is about $48,000. The wages are about 2.6 times as high assuming the immigrants successfully enters on his first attempt and immediately finds a job.

The uncertainty of working illegally in the United States, a higher smuggling price, and separation from one’s home dramatically increase costs. A relatively low annual cost of $11,000 a year in addition to smuggling fees of $9000 in the first year lowers the NPV to $77,340, just 61 percent greater than staying in Mexico. Psychic costs are higher for immigrants from countries that do not send many in the first place—like Yemen or the Central African Republic—because there is not a diaspora to fit in to. Unlawful immigrantsare typically young, male, single, and without families—groups with the lowest psychic costs of immigrating. The opportunity cost of using capital to pay smugglers is also high, especially in poor countries.

Immigration enforcement has a gargantuan deterrence effect—larger than any other factor. The vast majority of would-be unlawful immigrants are deterred by breaking immigration laws and the punishments—even if there is a small chance of being caught. A 10 percent increase in immigration enforcement hours along the border produced a 2.5 percent increase in smuggling prices—raising the cost of unlawfully immigrating. The size and scope of Border Patrol has increased substantially since 1980—virtually doubling in size since 2004.

Here are the first year wage gains including the cost of smuggling from different countries of origin:

Source Country

Smuggling Cost

Median Ind. Earnings, US Full Time

Income in Home Country

Wage Gain

Wage Gain/Smuggling
Brazil

$16,000

$31,905

$12,594

$19,311

1.21
China

$50,000

$31,863

$5,445

$26,418

0.53
Cuba

$10,000

$24,103

$5,400

$18,703

1.87
Haiti

$1,500

$35,103

$726

$34,377

22.92
India

$60,000

$50,443

$1,509

$48,934

0.82
Mexico

$9,000

$13,520

$10,047

$3,473

0.39

Source: 2011 American Community Survey, DHS, Havocscope. 

The smaller the wage gain to smuggling ratio is, the smaller the pure economic benefits of coming here are, assuming successful entry. If the Coast Guard was less effective or if Haitians could find a cheaper way to enter the United States unlawfully, many more would come. The pressure from Mexico is not nearly as great as many imagine. These numbers are only averages and probably understate the desirability of coming here but they explain why Indians and Chinese send so few unlawful immigrants despite the massive wage gains: immigration enforcement is very effective so it raises the price of smuggling.

The costs of moving to the United States are very high and the benefits are lower than international wage differences make them seem. The benefits from moving to the United States for millions of people would be enormous for most Americans, the immigrants themselves, and those who stayed behind. Given those large wage differences, it is truly remarkable that there are so few unlawful immigrants in the United States.

How arbitrary red tape changed someone’s life

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On Quora, someone has asked how getting a green card changed people’s lives. There is one response explaining how getting an Employment Authorization Document (EAD) changed his (or her) life:

This is more about how the EAD and AC-21 changed my life.

I moved to the US on an L1-B work visa to work for a major tech firm. I got lowballed on the pay and didn’t realize that till I got here. I couldn’t switch jobs on an L1-B because it is tied to the company you work for unlike an H1-B that can be transferred. The H1-B quotas were filling up within a few days of being open back then. The company filed for my GC in the EB-3 category for which the wait times were estimated at around 15 years (EB-3 NOT rest of world). The company was in constant threat of going out of business or getting bought out. Layoffs happened every few months. I decided to go back to school to get a Masters degree. After getting acceptance letters I learnt that I wasn’t eligible for a student visa because I had applied for the green card. To get a student visa I had to prove no intent to immigrate but I had proven the opposite by filing for the green card.

In July 2007, for some reason all the priority dates became current for a brief instant. This allowed me to get an EAD. With the EAD and using the AC-21 rule I switched jobs to a similar role at another company. For the new job I had been able to negotiate the type of work and the salary. I knew that I didn’t want to go to another company and remain in the EB-3  queue for 15 years. So I had waited till I had 5 years of work experience before switching jobs. The new company filed for my GC, this time in the EB-2 category. I got my GC 2 years later. Freedom.

I think the biggest advantage of the GC is the peace of mind it gives you. You can work in any role without having to worry about being forced to leave the country if things don’t work out.

The absurdity of immigration rules is something I keep pounding on because for most of us, the government is at worst an annoyance. It’s a pain to pay taxes, waste of time to go to the DMV, and torture to face a tax audit. But for most of us, we don’t live in mortal fear of government tearing apart our family, kicking us out of our home, or sacking us from our job because of a simple mistake. It’s only immigrants, and those who wish to immigrate, that put up with this.

Absurdity? Let me count the ways:

  1. L1B visas bring professional, skilled workers to the US, but force them to work for only one company
  2. To call converting this to an H1B “difficult” would be an understatement
  3. In any case, H1B quotas were literally filled within days of the government opening room to apply
  4. Applying for a green card meant a wait time of 15 years
  5. Converting the L1B to a student visa was impossible because applying for a green card makes you ineligible
  6. For reasons totally unknown (possibly a government mistake), this person was suddenly able to convert their L1B to an H1B, get a new job, and get a green card

The author speaks of the “peace of mind” having a green card gives you. My aunt has been a US citizen for going on 2 decades, and today she still speaks of the fear of having her green card taken away before she became a citizen. No citizen would let their government psychologically and emotionally scar them the way we let governments abuse immigrants.

Arbitrary government decisions literally make or break people’s lives, and to what end? How do any of the absurdities laid out above make life better for the typical US citizen? How are these benefits to citizens in any sense proportional to the harm they do to the thousands of people already in the US seeking to migrate legally, or to the millions more who would love to just get into the US?

Any large bureaucracy has collateral damage. I work for a large bank, I know this from experience. But if we held immigration regimes of the world to half the bar the US government holds its banks to (and the US is not known for its strict financial regulatory regime), we would find that few, if any, immigrant bureaucracies pass. As a banker, I would be ashamed to show the above process to a regulator and tell them that is how my company treats our customers’ loans or savings. Why should immigration bureaucrats and legislators get a free pass for playing Kafkaeseque games with people’s jobs and families?

The government form depicted at the top of this post is a fictitious Czech form, created by Petr Novák and available under the Creative Commons Attribution-Share Alike licence.

US to foreigners: we’re a nation of immigrants! (If you’re a lottery winner, or Methuselah)

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I recently stumbled across this interesting blog post by immigration lawyer Angelo Paparelli, where he talks about US visa refusals. The post is from 2009, responding to then-Secretary of State Hillary Clinton’s public statement that she was committed to streamlining the US visa process. Angelo mentions a staggering figure from the State Department’s fiscal year 2008 annual report:

In FY 2008, the State Department’s consular officers denied 1,481,471 nonimmigrant visa (NIV) applications under Immigration and Nationality Act (INA) § 214(b) (failure to establish entitlement to the requested NIV classification). While 19,837 (1.3%) of these refusals were overcome, almost 99% of the refusals prevented possibly deserving applicants from coming to the United States. [Note: These do not include the 64,516 refusals for specific grounds such as criminal conduct, public charge, material support of terrorism, etc.]

I checked the 2012 fiscal year figures and they are similar in every meaningful respect. To calculate the approval rate we need to bring in data on visas issued: with 8.9 million non-immigrant visas issued and 1.4 million non-immigrant visa applications rejected (virtually all because of 214(b)), we get an overall rejection rate of about 14%. I don’t know if that is too high or too low. But look at the data for yourself: these aren’t people with communicable diseases or criminal records. Over 1 million people have been refused student or visitor visas for the amorphous reason of “Failure to establish entitlement to nonimmigrant status.”

Presumably the intent is to deter fraud: there is a valid concern that non-immigrant visas can be used to get into the country and via overstaying, unlawfully “convert” the visa-holder to a de facto immigrant. But the main reason that is a problem is because the immigrant visa process itself deters bona fide immigrants! If you don’t believe this, one of Angelo’s colleagues recently crunched the numbers on current expected waits for some classes of lawful immigrants:

The wait for someone getting a visa today was as long as 24 years. The wait for someone starting today is much longer. An extreme example is Mexico F2B [Mexico-born “Unmarried Sons and Daughters (21 years of age or older) of Permanent Residents”].

The last time I took the difference between the cut-off date and the present date, then factored in the rate of “advance,” the anticipated delay for someone applying today under that category was 395 years. Mexico F-1 [Mexico-born “Unmarried Sons and Daughters of U.S. Citizens”] was “only” about 80-85 years.

In the US, gun rights activists love to say that if you make guns outlawed, only outlaws will have guns. By outlawing immigration, the US has ensured only outlaws will immigrate. Abortion rights activists love to warn that if abortions are banned, the only thing that will change is that more women will get hurt or die from unlicensed backdoor abortion providers: if immigration is banned, unsurprisingly millions will risk life and limb to immigrate.

If wait times longer than the human lifespan are not a de facto ban, I don’t know what is. You might as well tell someone he can own a gun when he lives to be as old as Methuselah (a man from the Old Testament who lived for over 8 centuries), or tell her she can have an abortion when she wins the Powerball (an American lottery). You may scoff. But that is exactly what the US government tells the person looking to join their family or earn a honest living. “Sure, we’re a nation of immigrants! If you’re a lottery-winning Methuselah, come on in.” And it is worse for those 1 million+ people denied the chance to visit or study in the US: because the US government has essentially outlawed immigrants, it has similarly had no choice but to do the same for visitors too. Through no fault of their own, millions of foreigners have been punished for the US government’s failure to fix its own laws.

“Brain drain” does not harm political activism: my experience, and open borders

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I just picked up my copy of the latest edition of The Economist, which had plenty to say about the recent elections in Malaysia (see this story, for instance). I’ve been asked to comment on this from an open borders standpoint — specifically, on how being a Malaysian living overseas has affected my ability to contribute to the political life of my nation. A common concern raised about open borders is that permitting migration more broadly might delay political reform in dysfunctional countries. I think I am well-placed to discuss this: this was the second Malaysian election in my adult life, and also the second I’ve participated in from overseas.

When I was a student during the last Malaysian national elections in 2008, I contributed financially to the causes I support. I also helped write campaign communications material, and I had no issues following the campaign from my university’s New Hampshire campus. Throughout the time I’ve been in the US, I’ve stayed abreast of Malaysian affairs, and for a few years, penned a regular column on Malaysian politics for a popular news website .

It’s actually remarkable how to a significant degree, online news and social media have made it easy to keep one’s thumb on the pulse of the zeitgeist. Sometimes readers would ask me how I knew what people were thinking or feeling back home, and it almost felt cheap to say that I just read blog comments or listened to what people were saying on Facebook. Of course, it also helped that I spent a few weeks at home whenever I had vacation time. This recent election, I similarly helped by donating money to the candidates I supported. Coincidentally, I donated to one of these candidates because another Malaysian currently living and working in Mongolia prodded me to, and offered to match my donation.

But beyond these basic things, which I could have done from Antarctica, I also plugged into the Malaysian diaspora in the US. There aren’t many of us here, but for the past 5 years in a row, I’ve helped organise a conference on Malaysian affairs in the northeast (and advised others as they began to organise similar gatherings in the midwest and west coast) — the Malaysia Forum. I organised and attended demonstrations in Washington, DC and New York City demanding a fairer political process.

I still remember how only a couple days after moving into my apartment near Washington, DC I was preparing a poster saying “Where is MY vote?” — a reference to how Malaysian policy then disenfranchised most citizens living overseas. I don’t think any of us at that demonstration outside the Malaysian embassy in DC less than two years ago expected that by this election, we would have the right to vote. And yet, our struggle came through. We were part of a global movement holding simultaneous rallies, in Kuala Lumpur and across the globe, for free and fair elections in Malaysia. At the same time I demonstrated in Washington, I had friends gathering and marching in London, Paris, Melbourne, Singapore, and Kuala Lumpur. The global synchronicity of it lent a powerful impetus to the movement; it was inspiring to Malaysians to think that scattered across our planet, there were Malaysian citizens sharing in the same struggle for democracy in our country. This election, I not only voted for the first time in my life at our embassy in Washington, but I also served as an election observer.

There is a concern that under open borders, people would flee dysfunctional countries instead of trying to fix them, this “brain drain” dooming these countries to failure in perpetuity. This concern is definitely applicable to Malaysia, and it’s something Malaysians openly wonder about and discuss all the time. (If you doubt me, come on over to next year’s Malaysia Forum and listen in.) The size of our diaspora perennially raises concerns that bad government policies are driving Malaysians away — which itself puts paid to the suggestion that emigration papers over domestic political problems.

Moreover, it’s not enough to suggest that apathetic Malaysians are disproportionately represented among emigrants as proof that permitting such migration is an issue. After all, there’s a selection bias going on: would the kind of people who leave Malaysia because they don’t care about it start caring about the country if immigration restrictions forced them to stay back? On the flip side, would the kind of people who love Malaysia but decide to leave it for other reasons stop loving their country?

I think these questions speak for themselves. But some further historical evidence unique to the Malaysian context: the overseas Chinese and Indian communities in Malaysia were extremely politically active in their homelands up until World War II. Sun Yat-Sen paid frequent visits to Malaysia to fundraise and organise, and Jawaharlal Nehru toured Malaysia to drum up political awareness. With a modicum of open borders, people were able to travel and so stay in touch with affairs of their respective homelands. Nowadays with the internet, there is absolutely no reason one can’t play an active role in the political life of one’s home, even from afar.

Another curious political event of note: the affiliates of the Chinese Nationalist Party (Kuomintang / Guomindang) and the Indian Congress Party in Malaysia eventually morphed into the Malaysian Chinese Association and Malaysian Indian Congress. Both went on to fight for Malaysian independence from the British, and remain influential Malaysian political parties today. It is not easy to classify political participation as an either/or thing.

Migration is a socially complex phenomenon. Not all who leave choose to do so permanently. Many return. Some stay. I have met many Malaysians in the US who, for various reasons, have wound up staying here and may wind up dying here. Perhaps their children will grow up as Americans rather than Malaysians (something I personally, at this point in time, can’t conceive of doing as a parent). But they have impressed on me their love for Malaysia despite spending years, if not decades, away from home.

There is no denying that living away from one’s homeland is tough, whether or not you have line of sight to eventually returning home. There are certainly things I could have contributed in this past election had I been home, instead of in the US. But I confess I do not see how forcing me to remain in Malaysia instead of being in the US would have made the political life of my country significantly better off. Neither do I see how forcing the thousands of Malaysians who have left the country to instead stay behind our country’s arbitrary borders would have made things significantly better.

Malaysia may be a unique case because we are a partially democratic country, and so overseas Malaysians have more opportunities to plug into the political struggles of our homeland. But neither pre-WWII China or India were democratic, and yet the Chinese and Indian diasporas stayed looped into the struggles of their respective home countries. One would not refuse refuge to someone fleeing North Korea. The US has open borders for Cubans who can make it to US soil, and Cuban-Americans continue to be vocal about the affairs of their ancestral homeland.

My suggestion is that political involvement primarily depends on how much you care about the issues at hand, not where you are. It might be that where you are affects your ability to hear about the issues, and thus how much you care about them. But that was not much of an excuse when the borders were open enough to let dissidents like Nehru travel, and it certainly isn’t much of an excuse now when we have the internet and Facebook connecting us to far-flung friends and family.

If anything, because of how it promotes exchanges of ideas and commerce, open borders arguably lends greater impetus to far-flung political movements: I earn far more in the US than I could in Malaysia, and can remit my income to Malaysian causes I support. The ideas I learn of in the US are ideas I can translate to a Malaysian context — and similarly I can transmit Malaysian ideas to my US friends and colleagues. Malaysian opposition leaders Anwar Ibrahim (a former Georgetown professor) and Lim Guan Eng (a former Australian student) are fond of quoting American figures like Thomas Jefferson and Martin Luther King, Jr. In a world where ideas are free to roam, it hardly seems right to keep the people behind them in a cage.