AEI Study Outlines Principles for Regulation of Low-Skilled
NOVEMBER 3, 2010
Recent immigration reform proposals, such as Arizona’s SB1070, have focused on curtailing illegal immigration through increased border enforcement and deportation of unauthorized residents. But border enforcement is expensive and often ineffective. In addition, while foreign workers benefit the U.S. economy–whether they’ve entered legally or illegally–they also increase the tax burden on U.S. citizens. In Regulating Low-Skilled Immigration in the United States (AEI Press, 2010), Gordon H. Hanson, director of the Center on Pacific Economies, outlines principles for immigration reform that will balance these fiscal costs and benefits. Successful reform, he argues, must attract in-demand workers who have strong incentives to assimilate and be economically productive, but will not place excessive demands on public services.
Hanson outlines three broad choices policymakers must make concerning the mechanisms that govern immigration:
- Whether to regulate the entry of immigrants using prices or quantities: The current regime of legal immigration is primarily quantity-regulated, as Congress determines how many visas are available each year. However, a price mechanism, such as a visa processing fee, would attract workers with higher incentives to be productive during their time in the United States. A visa processing fee would also generate revenue for the federal government and help to offset the fiscal burden immigrants place on public services.
- How much variance to allow in the number of work visas: Current policy places strict caps on the numbers of visas issued, but a more flexible approach would benefit the economy by allowing immigration to increase during times of expansion and decrease during times of contraction. During times of economic growth, wages would rise and demand for visas would grow, pushing up their price. The government would receive a signal to increase the visa supply to keep prices stable. Accordingly, when the economy slows down and demand for visas falls, government would decrease the supply.
- How to balance the fiscal cost of immigration with incentives for assimilation: Easing the path to U.S. citizenship for legal and illegal immigrants would mean greater demands on public services, but it would also benefit the country by encouraging important investments in U.S. society, such as pursuing higher education, purchasing a home, and becoming active in community organizations. A method of balancing the fiscal costs and benefits would be a graduated system of residency rights, whereby an immigrant could earn increased benefits and eventual citizenship through demonstrated productivity and compliance with visa regulations.
When the Obama administration addresses immigration reform, as it has promised to, it “should seek first to do no harm,” Hanson writes. “Constructive reform requires allowing low-skilled immigration to occur under a legal framework that respects market mechanisms and treats immigrants as individuals with the potential to contribute to U.S. society. Unless Congress recognizes and understands the successes and failures of low-skilled immigration policy to date, we risk losing another chance to get reform right.”
Gordon H. Hanson is director of the Center on Pacific Economies and a professor of economics at the University of California, San Diego.