Immigration reform needs consensus on flow of foreign labor

The US must adjust the future flow of immigrants – low-skilled guest workers and educated foreigners alike. Immigration reform must include incentives for legal immigration, recognize the employment needs of US citizens, and create a flexible system that can adjust over time.

Opinion

In the debate over US immigration reform, the media and public have focused on controversial issues such as citizenship for those who are here now illegally, and enforcement efforts on the US-Mexican border and in American workplaces.

But another issue is also critically important. The United States must get the future flow of immigrants right, whether these be low-skilled guest workers or educated foreigners for the tech sector.

These flows must be managed to ensure that immigrants come legally, and in the numbers and categories that Americans agree fit their vision for a better society. If we get this part of immigration reform wrong, then our current effort at comprehensive reform is doomed to fail – just as other efforts have failed in the past.

The latest example is the 1986 Immigration Reform and Control Act. This law generated an amnesty for those here illegally at the time, as well as new procedures and penalties to prevent employers from hiring newly arriving illegal workers. But it did little to address the future flows of legal immigrant labor.

That missing piece in the reform became a glaring hole during the economic boom of the 1990s, when foreign workers poured into the US illegally to take plentiful jobs at low wages. Limited enforcement to restrict illegal flows also posed few effective constraints on the workers and employers who were interested in these arrangements.

This huge flow of illegal immigrants created a need for reform. If the issue of future immigrant labor is again avoided, then another flow of illegal immigrants over time might lead the US back to the same situation as today, and yet another major fight over reform in a decade or two.

But coming up with a consensus on how to regulate the influx of guest workers and other legal foreign labor is difficult – that’s why an immigration reform effort in Congress collapsed in 2007. Labor and industry couldn’t agree. Unions generally fear that too many guest workers undercut jobs and wages for Americans, while industry complains it can’t stay in business without this influx.

A bipartisan reform effort shaping up in the Senate includes future foreign workers. For this piece of the package to work, it must adhere to the following three broad principles.

Incentives for legal immigration

First, both employers and potential immigrants need much stronger incentives to engage in legal rather than illegal immigration.

For employers, there must be sufficient numbers of legal immigrants available to them, and at wages roughly consistent with US market realities. For incoming workers, it should mean that legal status allows them to switch jobs when opportunities arise, and to apply for permanent residence and eventual citizenship. Thus, they aren’t trapped in exploitative working conditions, and employers are motivated to adhere to reasonable workplace standards.

Competing needs

Second, the competing needs of workers who are already US citizens, employers, and the economy must also be recognized.

There is little controversy now over the notion that the US economy will benefit from permanently attracting more highly educated immigrants or keep immigrants educated in the US. Those workers will start businesses, pursue patents, and power the technology sector. But strong disagreements remain over immigration at other parts of the skill spectrum, especially at the bottom.

After studying a large body of economic research and literature, I’ve concluded that less-educated immigrants do indeed compete with the least-skilled American workers, particularly males, and especially when unemployment is high (like right now). But the overall harm on American workers is minimal.

Over time, the negative impact of such immigrants on the employment and earnings of Americans is quite modest. This is especially true in low-wage industries (like agriculture, restaurants, and hotels) where Americans have little interest in working, even if wages rise somewhat; or in those sectors where the supply of skilled workers is perpetually low, as in nursing. And as baby boomers begin to retire in larger numbers, the effects of this competition should grow even weaker.

Meanwhile, the economic benefits of immigration, even at the low end, can be substantial – by lowering consumer prices and raising product availability in many important sectors (such as health and elder care, housing, and food); by improving the nation’s long-term fiscal outlook, which is quite grim; and by making it easier for some groups, like highly educated women, to enter the labor force (by providing them with less expensive home cleaning and child-care services).

A flexible system

Third, because net economic benefits and costs of immigrant labor vary over time, the need for flexibility is important when considering the amount and type of foreign labor to allow.

During periods of labor-market weakness – which span the past five years and might well last for most of the decade – it makes sense for legal flows to be more limited, while they should be allowed to grow whenever the market regains its strength. Legal immigrant flows should also be tailored at least somewhat to different levels of labor-market tightness at any time in different occupations or sectors and different regions, with larger flows allowed where greater tightness is observed.

It is promising that in today’s immigration debate, these principles seem to have largely guided unionized labor and business. Recently, the labor union umbrella organization, the AFL-CIO, and the US Chamber of Commerce agreed on the broad outline of a guest-worker program. But many details remain to be worked out, and the competing arguments and needs of many constituent groups remain to be heard.

Getting the future flows of immigrants right, especially from an economic point of view, grabs fewer headlines and generates less passion than fights over legalizing the undocumented and generating effective enforcement. But it is a critical piece of the immigration puzzle, if Congress is to generate reform that helps the economy and survives politically over time.

Harry Holzer is a former chief economist at the US Department of Labor and now a professor of public policy at Georgetown University.