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No. 7-7 • 2007

Immigration: Turning the Tide

Current immigration laws and policies are not serving the best
economic interests of the United States. What changes in border
About the Author and interior enforcement policies would help stem the flow of illegal
immigrants? What reforms in U.S. immigration law would encourage
Barry R. Chiswick, Ph.D. is head
of the Department of Economics, more highly-skilled legal immigrants and increase the economic
University of Illinois at Chicago benefits of immigration for the American public?
and serves as Program Director,
Migration Studies at the Institute
for the Study of Labor in Bonn, The following is an updated excerpt of scientific and technical knowledge. These are
Germany. He received his Ph.D. testimony by University of Illinois at Chicago characteristics associated with low earnings
with Distinction in Economics Distinguished Professor of Economics Barry in the destination.
from Columbia University and R. Chiswick at hearings before the United
States Senate Committee on the Judiciary on High-skilled and low-skilled immigrants
has held permanent and visiting will, in general, have different impacts on the
appointments at Columbia April 25, 2006. The author’s full remarks
can be accessed at http://judiciary.senate. host economy and labor market.
University, UCLA, Stanford
gov/testimony.cfm?id=1851&wit_id=5257. The result of high-skilled immigration
University, Princeton University,
Hebrew University (Jerusalem) By Barry R. Chiswick, Ph.D. tends to be an increase in the wages of low-

and the University of Chicago. skilled workers who are complements in
onceptually, it is best to think in terms production (and reduce their use of public
Dr. Chiswick has an international
of two types of immigrants, which income transfers) and a decrease in the wages
reputation for his research in Labor for simplicity we will call high- of high-skilled natives who are substituted in
Economics, Human Resources, skilled and low-skilled, with the same two production. This reduces income inequality,
the Economics of Immigration, skill groups represented in the native-born which we generally view as a good
the Economics of Minorities, and population. development. Like high-skilled natives,
Income Distribution. the taxes paid by high-skilled immigrants
High-skilled immigrants will have some tend to be greater than the costs they impose
characteristics in common, without regard on the public treasury through the income
for their country of origin. They tend to transfers they receive, the schooling received
have high levels of schooling, which means by their children, and the publicly subsidized
they tend to have a high degree of literacy, medical care that they and their families
perhaps also numeracy, critical thinking receive. High-skilled immigrants are also
or decision-making skills. Many, but not more likely to bring with them the scientific,
all, will have a high degree of scientific or technical and innovative skills that expand
technical knowledge, and in the modern the production capabilities of the economy.
era a high comfort level with computer As a result, the population as a whole tends
technology. Many, but certainly not all, will to benefit from high-skilled immigration,
either have a degree of proficiency in the although with some benefiting more than
destination language (in this case, English) others.
or the ability to acquire proficiency in that
language shortly after arrival. These are Now consider the impacts of low-skilled
all characteristics that have been shown to immigration. While these immigrants tend
improve the earnings of immigrants and to to raise the earnings of high-skilled workers,
facilitate their economic adjustment in the their presence in the labor market increases
host country. competition for low-skilled jobs, reducing the
earnings of low-skilled native-born workers.
Although particular individuals may This not only increases income inequality,
Clare Boothe Luce Policy Institute
differ, low-skilled immigrants generally which is rightly considered to be undesirable,
112 Elden Street, Suite P
have little formal schooling, limited literacy it also increases the need among low-skilled
proficiency in their mother tongue (the natives for public assistance and transfer
Herndon, Virginia 20170
language of their origin country), and limited benefits. Because of their low earnings,
P (888) 891-4288 • F (703) 318-8867
Immigration: Turning the Tide

low-skilled immigrants also tend to pay less American public as having two major
in taxes than they receive in public benefits, features—amnesty which was to “wipe the
such as income transfers (e.g., the earned slate clean” of undocumented workers, and
income tax credit, food stamps), public employer sanctions which was to “keep the
schooling for their children, and publicly slate clean”—along with some increased
provided medical services. Thus while the border enforcement of the immigration
presence of low-skilled immigrant workers law. Employer sanctions were intended
may raise the profits of their employers, to cut off the “jobs magnet” that attracted
they tend to have a negative effect on the undocumented workers to the United States.
well-being of the low-skilled native-born Half of the political bargain was fulfilled.
Low-skilled immigrants tend to
pay less in taxes than they receive population, and on the native economy as a Under its two major amnesty provisions
in public benefits. whole. legal status was granted to nearly 3 million
undocumented individuals, nearly all of
These points are not purely theoretical whom were low-skilled workers, and
arguments. In the past two decades the millions more have subsequently been able to
real wages of low-skilled workers have immigrate as their relatives. It is noteworthy
remained stagnant even as the real earnings that while in 1986 the word “amnesty” was
of high-skilled workers have risen. As a used outright, in the current political debate
result, income inequality has increased. the “A” word is anathema to the proponents
Several factors have been responsible for of what is euphemistically called “earned
this development, but one of them has legalization.” This by itself is testimony to
been the very large increase in low-skilled public perception of the failures of the 1986
immigration. Act.
The ‘Snowball Effect’ of Border & Interior Enforcement
Low-Skilled Immigrants
Border enforcement, both at land borders
For various reasons, most individuals and at airports, is a necessary element in the
working in the United States in violation of enforcement of immigration law. Border
immigration law are low-skilled workers. enforcement by itself has not, can not, and
But most low-skilled workers are not will not work in controlling illegal entry of
“undocumented” aliens. Most low-skilled undocumented immigrants. If a potential
workers were born in the United States and immigrant is unsuccessful in penetrating the
Current law permits a ‘snowball hence are citizens by birth.
effect’—1986 amnesty granted legal border on the first try, success may be had
status to nearly three million low-skilled Current U.S. immigration law, however, on the second or third try. This may be done
undocumented individuals, who in encourages the legal immigration of low- by “entry without inspection” (i.e., sneaking
turn sponsored the immigration of skilled workers. This encouragement comes across the border) or by using “fraudulent
millions more relatives. through the kinship preferences for various documents” at a border crossing point.
relatives built into our legal immigration Alternatively, a “visa abuser” enters into
system and to the smaller diversity visa illegal status by violating a condition of a
program. Our immigration law permits a legally obtained visa—by working while on
“snowball effect” where even immigrants a tourist visa, for example, or by overstaying
granted a visa for the skills they bring to the the time limit permitted on a temporary visa.
U.S. labor market can sponsor low-skilled Thus, border enforcement must be
relatives who will then legally work in the complemented with “interior enforcement.”
U.S. The 1986 Act focused on “employer
Of the 1.1 million people who received sanctions,” penalties for employers who
Permanent Resident Alien visas in 2005, knowingly hire people who do not have the
58 percent entered under one of the several legal right to work in this country. There
kinship categories, 13 percent entered as has, however, been no serious effort over
refugees, asylees, or parolees, 4 percent the past two decades to enforce employer
entered under “diversity” visas, and 2 percent sanctions. Modern technology makes it easier
had a cancellation of deportation order. The to create fraudulent documents, but it also
246,878 employment-based visas represented makes it easier to develop more stringent
only 22 percent of the total. However, identity checks. There are two major failings
The basic immigration question in the current system. Employers are not
should be changed from “To whom only about half of those who received an
are you related?” to “What can you employment-based visa were themselves given a “foolproof” mechanism to readily
contribute to the U.S. economy?” skill-tested, while the remainder of these identify those with a legal right to work, and
visas was received by their spouses and the Federal authorities show no interest in
children. Thus, only about 10 percent of the enforcing the law, except for an occasional
over one million visa recipients were asked a “show raid.”
question about their skills. It is not obvious that new enforcement
The 1986 Immigration Reform and legislation (e.g., to criminalize an illegal
Control Act (IRCA) was sold to the status) is called for. What is obvious is that
Policy Express No. 7-7

illegal immigration can not be controlled mechanisms to “close the gap” between
without a political will to enforce current the large demand for visas and the much
immigration law. This includes providing smaller supply that the U.S. is willing to
employers with a simple and “foolproof” make available. One possibility would
mechanism for identifying workers with a involve auctioning visas; another involves
legal right to work in the U.S., along with charging a large market-clearing “visa fee.”
more stringent enforcement of employer Among other advantages of these market
sanctions. mechanisms is that people in the U.S.
can express their preferences for bringing
Creating a Skills-Based relatives and friends by contributing to the
Legal Immigration System price of their visa. Nor does there need to be Border enforcement must be
only one mechanism—a skills-based system complemented with ‘interior
The current legal immigration system enforcement.’
and a market-based system could both be
is not serving the best economic interests of used.
the United States. Only a small percentage
of the immigrants who enter the U.S. legally How Many Immigrants?
in any year (about 10 percent) are screened
for their likely economic contribution to this The optimal immigration policy is
economy. The vast majority enter under a neither a completely open door nor a
nepotism system (the kinship preferences), completely closed one. There is no magic
with a smaller group entering under a number or proportion of the population.
lottery (diversity visas). To enhance the Currently, legal immigration is running at
competitiveness of the U.S. economy in approximately one million immigrants per
this increasingly globalized world, where year. This is on a par with the peak period
efficient competitors are emerging across the of immigration from 1905 to 1914, when
world, the U.S. needs to change the basic immigration also averaged one million per
immigration question from “To whom are year. Yet, relative to the size of the U.S.
you related?” to “What can you contribute to population, current legal immigration is
the U.S. economy?” about one-fourth of the ratio in this earlier
period. There is no clear evidence that the
Other highly-developed democratic U.S. has exceeded—or even reached—its
countries—Canada, Australia, New absorptive capacity for immigration.
Zealand—introduced “skills-based” The U.S. economy and society exhibits
immigration policies several decades ago. a remarkable adaptability to immigrants, Employers need a simple, foolproof
More recently, some countries in Western and thus far immigrants continue to show mechanism for identifying workers
Europe have done the same. Some, like with a legal right to work in the U.S.
considerable adaptability to the U.S.
Canada and Australia, use a “points system” economy and society. This adaptability
in which points are awarded based on means that the U.S. economy can absorb a
characteristics that research has shown to continuous stream of immigrants without
enhance the earnings of immigrants, such fracturing the system.
as age, schooling, technical training, and
proficiency in the host country’s language. The demand for visas to enter the U.S.
Those with more than the threshold number is very strong and, if anything, it seems to
of points receive a visa for themselves, be increasing. This is a credit to the U.S.
their spouse and their minor accompanying economy, society, and political system. The
children. This shift in emphasis in the number of visas the U.S. political process
rationing of visas would increase the skill is willing to supply is not immutable. The
level of immigrants and provide greater greater the economic benefits of immigration,
economic benefits to the U.S. economy than the larger the optimal number of visas and
the current system. the greater the willingness of the American
public to provide them.
A points system has many advantages
over the current targeted employment-based A comprehensive immigration policy
visas. Under the current system a complex reform would reduce undocumented
and very expensive bureaucratic process is migration by more stringent enforcement
required for employers to demonstrate to of existing law. It should also include the A skills-based points system, while
the U.S. Department of Labor not only that adoption of a skill-based points system simultaneously limiting kinship
the visa applicant is qualified for a specific and/or market mechanisms to ration visas, migration to immediate relatives of
job but also that there is no qualified person while limiting kinship migration to the U.S. citizens, would increase the
with a legal right to work in the U.S. who immediate relatives of U.S. citizens (spouse, benefits of immigration for
will take the job at “prevailing wages.” Even minor children, aged parents). These policies the American public.
then, the worker who obtains a visa through would increase the benefits of immigration
this process is not obliged to remain on that for the American public, providing economic
job or with that employer. incentives to increase the supply of visas and
See also “The Worker Next Door,” Barry R.
hence the annual total number of immigrants Chiswick, New York Times, June 3, 2006 http://
Other proposals would use market entering the country legally.