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Congress’s Proposed Guest Worker Program Deeply Flawed, Finds New Council Report

Author: Gordon Hanson, Professor of Economics, University of California, San Diego
April 10, 2007
Council on Foreign Relations


Temporary Legal Immigrants Will Not Displace Illegal Labor, and Economic Costs Unlikely to Outstrip Benefits

While immigration policy reform is long overdue, the solutions now being considered by Congress are unlikely to solve the problem, says a new Council Special Report. By creating a guest worker scheme that replicates the flaws of the current legal immigration system, Congress is failing to understand the economic incentives that drive illegal immigration. “In their efforts to gain control over illegal immigration, Congress and the administration need to be cautious that the economic costs do not outstrip the putative benefits,” warns the report.

“Illegal immigration is a source of mounting concern for politicians in the United States,” says the report, The Economic Logic of Illegal Immigration. “Yet, as Congress is again this year set to consider the biggest changes to immigration laws in two decades, it is critical not to lose sight of the fact that illegal immigration has a clear economic logic: It provides U.S. businesses with the types of workers they want, when they want them, and where they want them. If policy reform succeeds in making U.S. illegal immigrants more like legal immigrants, in terms of their skills, timing of arrival, and occupational mobility, it is likely to lower rather than raise national welfare.”

“There is little evidence that legal immigration is economically preferable to illegal immigration,” writes author Gordon H. Hanson, of the University of California at San Diego. While legal immigrants are “subject to arbitrary selection criteria and bureaucratic delays...illegal immigrants fill jobs for which the supply of U.S. native workers is in decline, appear in larger numbers when the U.S. economy is booming (and Mexico’s is not), and move between employers and regions of the country according to changes in the demand for labor.”

Despite Bush’s remarks calling for tougher enforcement at U.S.-Mexico border, increases in border spending make little sense, says Hanson. While acknowledging that “there may be gains to increased border enforcement associated with enhanced national security that would justify the expense,” Hanson warns that “any new policy that requires a major outlay of funds would be likely to lower U.S. economic well being.”

This responsiveness to the market is one of the reasons that the number of illegal immigrants has risen so sharply in the past decade, from an estimated five million to twelve million. Current guest worker programs, and those now under consideration by Congress, are not similarly flexible. The report notes that “the advance planning, occupational limitations, and bureaucratic hurdles involved in hiring guest workers reduce their value to the U.S. economy relative to comparably skilled unauthorized workers.”

“Absent a bold redesign of U.S. guest worker programs that allows for the dynamic participation of legal immigrant workers in the U.S. economy, temporary legal immigrants would be unlikely to displace illegal labor,” says the author.

Hanson proposes the following guidelines as crucial reform:

“A new visa program must mimic the current beneficial aspects of illegal immigration. One way to achieve this would be for the Department of Homeland Security to sanction the creation of global temp agencies, in which U.S. employers posted advertisements for jobs and foreign workers applied to fill these jobs.”

“Matching foreign workers to U.S. employers efficiently would require flexibility in the number of guest workers admitted. Keeping the number of visas fixed over time, as is the case now, means that during boom times U.S. employers have a stronger incentive to seek out illegal labor.”

Allowing guest workers to move between jobs in the United States. “One way to facilitate mobility for guest workers would be to allow existing visa holders to apply for new job postings, along with prospective guest workers abroad.”

The report, part of the Bernard and Irene Schwartz Series on American Competitivenessfor the Council’s Maurice R. Greenberg Center for Geoeconomic Studies, finds that the divisive debate over “amnesty” for current illegal immigrants in the United States is largely irrelevant from an economic perspective. “The fiscal consequences of providing illegal immigrants with a path to citizenship would not be felt for over a decade and could be controlled by defining the types of government benefits to which legalized immigrants are eligible.”

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