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Answering the Critics of Comprehensive Immigration Reform by CATO Institute - The Koch Brothers Think-Tank

Answering the Critics of Comprehensive Immigration Reform by CATO Institute - The Koch Brothers Think-Tank

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Published by Zimvi
Tea Partiers - please listen to this very reasonable opinion from the CATO Institute - (The Koch Brothers prestigious Think Tank)
Tea Partiers - please listen to this very reasonable opinion from the CATO Institute - (The Koch Brothers prestigious Think Tank)

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Published by: Zimvi on May 11, 2011
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May 9, 2011 No. 32
 
Stuart Anderson is an adjunct scholar at the Cato Institute, executive director of the  National Foundation for American Policy, and the author of  
Immigration
(2010).
Comprehensive immigration reformis defined by supporters as legislationthat would reduce illegal immigration inthe future and address the legal status of a large percentage of those now in thecountry illegally. The best approach foradvocates of such reform is to take seri-ously the arguments of critics, explain why these arguments are incorrect and, if necessary, adapt legislation to address theconcerns raised.Argument #1: “Immigration reform will harm taxpayers.” Response: Legal-izing both the flow of workers and the workers already here will help taxpayersby raising the newly legalized workers’productivity, their earnings, and the likeli-hood that they will pay taxes in the formaleconomy.Argument #2: “Newly legalized im-migrants will burden the welfare rolls.”Response: Immigrants are not heavy us-ers of welfare, and additional limits can beplaced on legalized workers. Newly arriv-ing immigrants to the United States aregenerally not eligible for federal means-tested benefits programs.Argument #3: “Another ‘amnesty’ willbeget more amnesties.” Response: Legal-ization is not necessarily an “amnesty”; itcan include fines and other conditions forlegalization. The 1986 law failed becauseit did not include a well-designed tempo-rary worker visa system.Argument #4: “Legalizing or admittingmore unskilled workers will undermineU.S. culture and the English language.”Response: Immigrants and the children of immigrants are learning English.Argument #5: “Letting in more tem-porary visa holders and legalizing currentillegal immigrants will increase the un-employment rate.” Response: Immigrantsmake Americans more productive and donot increase the unemployment rate. The primary arguments employedagainst comprehensive immigration re-form do not stand up to a review of recenthistory and predictable social and eco-nomic behavior.
 Answering the Critics of Comprehensive Immigration Reform
 by Stuart Anderson
Executive Summary 
 
 
2
 A future legal flow of workers would largely replacethe current illegalflow, resulting in workers who earnhigher wages.
Introduction
 The best approach for supporters of com-prehensive immigration reform is to take se-riously the arguments of critics, explain why these arguments are incorrect and, if neces-sary, adapt legislation to address the concernsraised.Comprehensive immigration reform is de-fined by supporters as legislation that wouldreduce illegal immigration in the future andaddress the legal status of a large percentage of those now in the country illegally. Supportersof reform on the left have focused most of theirefforts on legalizing the status of those already in the country illegally, viewing it as immoralthat so many people—10 million or more—live “in the shadows” in America. Supporterson the right and in the business community have focused much more on the economic andpolicy benefits of establishing a good “futureflow” of foreign-born workers, believing thebest way to reduce illegal entry is to providelegal paths to work in the United States by ex-panding temporary visas.Comprehensive immigration reform legis-lation failed to pass the U.S. Congress in 2006and 2007. In part because of these failed ef-forts, new legislation did not seriously emergein 2008, 2009 or 2010. If such legislation is tohave a chance in the future, supporters mustexamine and respond to the major argumentsmade by critics of comprehensive immigra-tion reform legislation.
 Argument #1:“Immigration Reform Will Harm Taxpayers.”Response: Legalizing Boththe Flow of Workers andthe Workers Already Here Will Help Taxpayers.
One of the primary arguments made by opponents of immigration reform is that ad-mitting a new flow of foreign workers—andlegalizing existing ones—will harm taxpay-ers. The argument is that adding more lower-skilled workers would represent a fiscal drain. The primary problem with this argument isit ignores two important facts: (1) illegal im-migrants already work in the United States,but for lower wages than if they were here le-gally, and (2) a future legal flow of workers, if designed correctly, would largely replace thecurrent illegal flow, resulting in workers whoearn higher wages, pay taxes in the traditionaleconomy, and are less likely to settle perma-nently in the United States. Would foreign-born workers earn more if they worked in the United States legally? Andif such workers earned higher wages, wouldn’tthey pay higher taxes than they pay today  while lacking legal status? Available data—and common sense—indicate the answer toboth questions is “yes.” Not only would legal workers earn higher wages, it is less likely they  would be part of the “underground” economy in ways that avoid taxes.Research has shown that legal workers re-ceive higher salaries than illegal immigrants.Data compiled by Columbia University econ-omist Francisco L. Rivera-Batiz indicate il-legal immigrants may feel that they shouldnot complain and need to stay in the jobs they hold, which would make them less likely thanlegal workers to seek higher-paying employ-ment. “The key theoretical hypothesis ex-plaining discrimination against undocument-ed workers is that illegality allows employersto exert monopsonistic power over these workers because of their great fear of being re-ported to immigration authorities,” accordingto Rivera-Batiz.
1
 Rivera-Batiz found the wage differencebetween legal and illegal workers was signifi-cant. He examined the impact of the 1986legalization program on the earnings of pre- viously undocumented workers. His researchutilized longitudinal data capable of trackingimmigrants from illegal to legal status. Hefound, “The average hourly wage received by illegal immigrants rose significantly after the workers were legalized.” The data showed an
 
3
 The lack of jobmobility appears to be a major reasonthat the wages of illegal immigrantsdo not increase asmuch as those of other workers.
increase of about one dollar an hour (in 1989dollars) for both male and female immigrants who had been illegal previously, about a 15percent rise.
2
 Legalization of status “has a direct positiveeffect on the earnings of illegal immigrants,”according to Rivera-Batiz.
3
“An analysis of undocumented immigrants legalized after the1986 U.S. immigration policy reform showssignificant wage growth in the four years fol-lowing legalization.”
4
Importantly, Rivera-Batiz noted, “These gains are due mostly to thechange in legal status itself, not to changes inthe characteristics of immigrants over time.”
5
 However, some of the improvement in thelot of previously “illegal” workers came fromthe willingness of such workers to invest intheir human capital or U.S. labor market skills(education, training, and English language)after the assurance they could stay permanent-ly in the United States. That is an additionalfactor arguing in favor of the positive fiscaland economic impact of legalization. “Thegreater educational attainment and Englishproficiency of workers after legalization may have not been achieved if the workers had re-mained illegally in the U.S. instead of apply-ing for legalization,” noted Rivera-Batiz.
6
Other researchers have also found that le-galization helped raise the wages of those whopreviously lacked legal status. In an analysisof the 1986 legalization program, University of Michigan economist Sherrie A. Kossoudjiand Australian National University economistDeborah A. Cobb-Clark concluded, “Uponarrival in the U.S. labor market, unauthor-ized men’s wages would have been 14 percenthigher if they had been legal workers.”
7
Overtime, the wage “penalty” that workers pay forbeing here illegally increases, on average, to 22percent, according to Kossoudji and Cobb-Clark. Some part of this wage penalty for ille-gal immigrants is because those here illegally have “little incentive to invest in human capi-tal while unauthorized and then have largeincentives to invest once legalized.”
8
  The lack of job mobility appears to be amajor reason that the wages of illegal immi-grants do not increase as much as those of other workers. Unlike illegal immigrants, le-gal workers are free to change jobs as a way to increase wages. Studying data of illegal im-migrant male workers, Kossoudji and Cobb-Clark found that because of legalization such workers became “free to pursue job opportuni-ties,” and their wages grew.
9
Replacing the current flow of illegal immi-grants with legal temporary visa holders wouldalso be a gain for taxpayers. A 2009 study forthe Cato Institute by Peter Dixon and Mau-reen Rimmer, both with the Centre of Policy Studies at Monash University in Australia,compared various scenarios and concluded thatU.S. households would gain approximately $260 billion a year with a new law that permit-ted widespread use of legal temporary visas ascompared to increased border enforcement.
10
Using an economic model developed forthe U.S. International Trade Commission,Dixon and Rimmer compared an increase inborder enforcement—basically a continuationof current U.S. policies—to a new policy of significant use of temporary visas. A scenarioof increased border enforcement that reducesthe supply of illegal immigrants by 28.6 per-cent would lead to a cost of $80 billion a yearfor U.S. households, according to Dixon andRimmer. U.S. household welfare would besimilarly reduced if stricter interior enforce-ment reduced illegal immigration and shiftedemployer costs to paying for unproductive ac-tivities related to legal compliance.In contrast, a policy that relied on increasesin temporary visas would achieve a “welfaregain for U.S. households . . . equivalent to1.19 percent of the gross national product,or $170 billion.” U.S. households would gaineven more, the researchers note, from imple-menting a visa tax. Dixon and Rimmer write,“This [policy] would eliminate smugglers’ feesand other costs faced by illegal immigrants. It would also allow immigrants (now guest work-ers rather than illegals) to have higher produc-tivity. Both effects create a surplus gain for theeconomy by raising the value of immigrantlabor relative to the wage necessary to attractit. This surplus can then be extracted for thebenefit of U.S. households.”
11
 

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