[NYT] Rethinking the Economics of Immigration

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From: Joachim Feise (jfeise@ics.uci.edu)
Date: Thu May 25 2000 - 13:52:28 PDT

One of the best articles about immigration, H1B, and Greencards that I have
seen in a long time.



          Rethinking the Economics of

          By ALAN B. KRUEGER

               he inscription on the Statue of Liberty is quietly being rewritten:
               "Give me your tired, your poor, your huddled masses yearning
               to breathe free; I'll also take your skilled employees under the
          temporary visa program, H-1B."

          The H-1B visa was established in 1990 to permit foreigners with a
          college degree or higher to work in the United States for a
          renewable three-year term for employers who petition on their
          behalf. In 1998, the program was expanded to allow 115,000
          workers, up from 65,000, to enter the United States in fiscal years
          1999 and 2000. Demand for H-1B visas by employers is high,
          particularly among high-technology companies. This year the limit
          was reached just six months into the year. President Clinton and
          many members of Congress would like to increase the limit to
          200,000 a year the next three years.

          The expansion of temporary work visas should be evaluated in the
          context of overall immigration policy. But immigration reform,
          replacing Social Security, has become the new third rail of
          American politics. So instead of tackling the issue head on,
          Washington has come to rely on temporary work visas as a
          substitute for addressing the economic and social shortcomings of
          current policy.

          The United States is in the midst of the "Second Great Migration."
          The first occurred between 1880 and 1924, when 26 million
          immigrants arrived on our shores. The second began in the late
          1970's: more immigrants have come to the United States since
          1980 than in the previous 60 years.

          Workers admitted under the H-1B program are not immigrants, but
          experts in the field expect that most of them will end up staying
          permanently in the United States.

          In addition to workers with H-1B visas, hundreds of thousands of
          other foreigners are admitted to work temporarily in the United
          States under visa categories covering intracompany transfers,
          individuals with extraordinary ability, registered nurses and nonprofit
          religious organizations. A fast-growing category is the Nafta TN visa,
          which offers an unlimited number of temporary visas for
          professional workers from Canada and soon Mexico.

          In a new book, "Heaven's Door," George Borjas, a Harvard
          economist, proposes that the United States adopt a Canadian-style
          point system, in which applicants for visas are assigned points on
          the basis of characteristics like their ability to speak English,
          work-force skills, family ties, refugee status and ethnic diversity.
          Those whose total points exceed a certain threshold would be
          admitted. Going even further, Professor Borjas favors setting the
          threshold so that the number of immigrants entering the United
          States falls from about 900,000 to about 500,000 a year. The total
          number can be debated. If nothing else, this policy would be

          Who should become an American? The question is profound,
          involving more than economics alone. But economic considerations
          obviously play a role.

          Theoretically, the economics of immigration is straightforward. If
          more workers are admitted to the country -- as permanent
          immigrants or temporary workers -- the earnings of native American
          workers competing with them for jobs should fall. At the same time,
          the price of goods and services they produce should decline, and
          the profits of businesses should rise.

          The winners are employers, consumers and the immigrants
          themselves. The losers are workers in the same job market as

          Economic research has not been able to estimate with any
          confidence the wage decline for native workers that results from
          immigration. Much solid research finds no effect. This suggests to
          me that any effect is likely to be small.

          Professor Borjas's evidence indicates that the skills of legal and
          illegal immigrants have slipped relative to those of natives since the
          1970's. A third of employed male immigrants are high school
          dropouts. At the same time, the labor market increasingly demands
          more high-skilled workers, as suggested by the long-term rise in the
          number of workers with college degrees and their sharply increased
          pay compared with that of those with high school degrees.
          Therefore, it would be economically beneficial to admit relatively
          more highly skilled permanent immigrants -- not to mention that
          skilled immigrants are less likely to take advantage of the safety net.

          If immigration reform is off the table, it makes economic sense to
          increase the number of skilled immigrants by issuing H-1B visas --
          through what might be called heaven's backdoor. Yet economic
          principles also suggest that the playing field between H-1B workers
          and the rest of the work force should be leveled.

          American workers are protected from exploitation on the job by
          three defenses: exit, voice and regulation. Exit entails the ability to
          move to a better job if one is available; voice results from
          representation by labor unions and other organizations; and
          regulation is a labyrinth of standards enforced by government

          These protections are deficient for H-1B workers.

          They cannot easily switch jobs because they must find another
          employer willing to petition the Immigration and Naturalization
          Service on their behalf. Even if they manage to do that, they must
          wait months for a reply. H-1B workers are also unusually beholden
          to their employers, the ones who can sponsor them for permanent
          immigrant status.

          They lack voice because no organization effectively represents

          And they have less regulatory protection than other workers
          because the Labor Department is precluded from investigating their
          conditions of employment unless a complaint is filed.

          Evidence suggests H-1B visa holders suffer as a consequence.
          Even though 70 percent of them are in well-paid computer-related
          and engineering fields, a 1996 report by the Labor Department's
          inspector general found that 19 percent of H-1B workers are paid
          less than the salary they were promised.

          Legislation to increase the number of H-1B visas should provide
          protection from exploitation.

          This also would help native workers and improve economic

          What could be done? Permit H-1B workers to change jobs freely
          after they are admitted to the country. Authorize the Labor
          Department to conduct random investigations of their employment
          conditions. Finally, require the immigration service to process
          applications for permanent, employment-based immigration more
          quickly, which would reduce the need for H-1B visas in the first

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