Tag: guest workers

Allow Renewals for Guest Worker Visas

Reforming low-skilled guest worker visas is a vitally important part of immigration reform. It will substantially reduce unauthorized immigration by providing a lawful pathway to enter and reenter the U.S. To that specific end, an effective guest worker visa has to be designed to address how migrant and guest workers actually behave. Allowing a guest worker visa to be renewed multiple times for each worker, assuming the worker follows the law when in the U.S., will decrease the incentives to migrate unlawfully. For each theory of migrant movement, allowing a guest worker visa to be renewed multiple times is compatible with migrant actions and will decrease unauthorized immigration. Here are the theories:

Target Income Theory

Under the target income theory, migrants come to the U.S. to meet a specific monetary or life goal, like starting a business or buying a house back home, that they would be unable to meet in their home country. Upon reaching the monetary threshold for that goal, they return home.  According to this theory, a recession in the U.S. would cause migrants to stay longer until they meet their targeted goal, while higher migrant wages or an economic boom would make them return sooner. 

If a migrant behaves according to this theory, he will work until the goal is met. Let’s say a guest worker visa allows a migrant to work in the U.S. for 10 years but no longer. If, at the end of that period, the migrant requires 2 more years of work to reach his income goal, the migrant will be tempted to overstay and work illegally until the goal is met. In this case, allowing the guest worker to legally stay longer and meet his goal will decrease the incentive to overstay on the visa. If the target income theory explains migrant behavior, allowing many visa renewals will help decrease unauthorized immigration. Renewable visas will allow immigrants to satisfy their income goal and return home.

Disappointment Theory

According to this theory, migrants return home if the economic conditions in the U.S. are less favorable than they imagined, or if the economic conditions in their home country improve. Migrants would prefer to return when conditions improve, at least temporarily, but many stay in the U.S. longer because it is difficult for them to reenter should they ever want to. The depth of migrant social networks in their home and destination countries greatly influence this effect.        

Guest worker visas that could be renewed multiple times will incentivize migrants to return home when conditions there improve because they will not fear being stuck there if they deteriorate. 

Circular Migration Theory

To distinguish circular migration from the disappointment theory above, migrants come to the U.S. for seasonal or yearly work but move back and forth as labor demand for their occupations changes. Beginning in 1986, this circular movement between Mexico and the U.S. was interrupted with expanded border security that increased the length of time that unauthorized migrants stayed here, which in turn increased the likelihood that they would settle permanently. Because migrants suddenly faced the possibility of being stuck in Mexico if they ever left, they decided to stay and work.    

If those migrants had a lawful way to cross the border, many would have returned to Mexico just as they did when the Bracero Program offered a visa to do just that. Renewable guest worker visas will allow some legal migrants to move back and forth for seasonal labor, lessening the incentive to illegally stay once here.

Conclusion

Migrants come for different reasons. Migrant actions might exhibit some or all of these theories, or enter the U.S. with one in mind and then switch to another during their stay. No matter which theory provides a better explanation of why migrants come, making the visa renewable as many times as possible will substantially decrease the incentive to migrate illegally or overstay a visa. 

Creating a guest worker visa that can be renewed multiple times will allow migrants to legally work in the U.S., leave while preserving the possibility of legal return, and thus reduce unlawful entry and visa overstays. A flexible and numerically large guest worker visa program will substantially reduce the supply of unauthorized immigrants by channeling them into the legal market. The more times that such a visa can be removed, the more effective it will be at decreasing unauthorized immigration.       

CBO Dynamically Scores Immigration Bill

The Congressional Budget Office has fiscally scored the Senate’s immigration bill, S. 744, and found that it will decrease fiscal deficits over the next 20 years—giving a huge boost to reform proponents.  In line with criticisms made by me and others, the CBO departed from orthodoxy and assumed that S. 744 would affect economic growth (i.e., they dynamically scored the bill)—arguing that the economic and fiscal gains from immigration reform are clear.  These findings are broadly consistent with Cato’s findings here.  

The CBO produced two scores of S. 744.  The first was less dynamic, assuming that GDP and the workforce would grow as a result of immigration. Increased numbers of workers will add to GDP, producing growth by definition, and not displacing many other workers.  The second score is more dynamic, taking into account many of the economic effects of immigration reform using an enhanced Solow model.

The less-dynamic CBO score found that immigration reform will reduce the federal deficit by about $197 billion by increased GDP and tax revenues through adding six million people to the workforce by 2023.  Over a period of 20 years, the CBO estimated that this legislation would reduce deficits by about $700 billion—a sizeable decrease.  In what seems to be a specific dig at the 50-year span of the recent Heritage study, the CBO wrote that, “we cannot determine whether enactment of S. 744 would lead to an increase in on-budget deficits … in any of the three 10-year periods starting in 2033.” 

The more dynamic CBO score found that S. 744 would not affect the budget by 2023.  However, because the dynamic economic effects of S. 744 would affect the economy slowly, the CBO predicts a $300 billion decrease in deficits from 2023-2033 greater that the $700 billion reported in the less-dynamic score.

The more-dynamic CBO model predicts $1.197 trillion in reduced deficits over the next 20 years if immigration reform is passed. 

Delving into the details of the CBO’s more-dynamic score, they estimated that S. 744 would increase GDP by 3.3 percent in 2023 and 5.4 percent in 2033, relative to the baseline.  Per capita GNP would lower by .7 percent by 2023 but be higher by .2 percent in 2033.  Wages would be .5 percent higher in 2033 under S. 744. 

The more-dynamic score takes into account these effects from S. 744: 

  1. Increased size and employment in the economy.
  2. Increased average wages after 2025.
  3. Slightly increased unemployment rate through 2020.
  4. Increased quantity of capital investment.
  5. Increased productivity of labor (due to complementary task specialization).
  6. Increased productivity of capital (due to increase in supply of labor and TFP).
  7. Higher interest rates.

The CBO took account of some of the main findings in the economic literature about the economic effects of immigration.  For example, the CBO predicts there will be a 12 percent increase in the wages of legalized immigrants.

Conceptually, dynamically scoring legislation is a big step toward rationally judging the costs and benefits of policy changes.  Legislation that changes the size of the economy or the pace of economic growth will affect future tax revenues that will, in turn, affect the fiscal state of the federal government.  CBO scores have been inaccurate over time—many wildly so.  They should never be the final word on the estimated net fiscal costs of immigration reform, but this is the most thorough examination to date. The CBO’s findings broadly confirm Cato’s research that immigration reform will be economically beneficial to immigrants and the country as a whole. 

Tiered Guest Workers – Preliminary Details & Observations

Union and business negotiators have supposedly reached a deal on the major aspects of the guest worker visa program.  The details have not been released yet and the utility of such a proposal will rest there, but here are some brief observations on the broad strokes released:

  1. Tiered visa program.  The plan appears to create a tiered guest workers visa program based on the state of the economy.  Under the first tier, firms will be allowed to hire 20,000 visas in 2015 that would ratchet up to 75,000 in 2019.  The second tier could then kick in if the economy is growing quickly and unemployment is below a preset threshold, going up to an annual cap of 200,000 per year.  Under a third tier, employers sound like they would be able to hire a large number of guest workers if they are willing to “pay significantly higher wages.”  According to the Mexican Migration Monitor, almost 700,000 unauthorized immigrants entered in 2006, up from 500,000 in 2005.  If the regulations, fees, and wage controls for the third-tier are minimal, this tiered program could reduce unauthorized immigration significantly if the sectors of the economy that employ unauthorized immigrants can apply for them.
  2. Sector limitations.  The construction industry would be limited to no more than 15,000 visas annually.  As I wrote here, housing starts provided a huge incentive for unauthorized immigrants to enter to work in construction or other housing-related sectors of the economy.  Unauthorized immigration collapsed beginning in mid-2006 as housing starts declined precipitously, reducing demand for construction workers.  But with housing starts picking up, unauthorized immigration will increase again too.  15,000 total annual visas is not enough to siphon most unauthorized immigrants seeking construction employment into the legal market.  However, details in the tiered visa system could allow for some wiggle room there.       
  3. Wage controls.  It appears that guest worker wages will be determined from complex formula that considers actual wages paid by employer to similar U.S. workers, industry wage scales, and regional variations in compensation.  Current guest worker visas are similarly regulated with disastrous and expensive results that encourage illegal hiring.  Replacing all of these regulations with a fee is a much simpler, cheaper, and effective way of incentivizing employers to hire Americans first.  Stacking the regulatory deck too much in favor of hiring Americans, even in industries for which there are very few American workers, will just incentivize employers to look in the black market – defeating the purpose of immigration reform.  More enforcement (code for bureaucracy) will either fail to halt that behavior or halt it by destroying large sectors of the economy through regulatory micromanagement.   
  4. Worker mobility.  An unambiguously positive development is that guest workers would be allowed to switch jobs very easily.  Tying guest workers to employers was always a bad policy, one that could lead to employer abuse and justified numerous bureaucrats to intrusively inspect working conditions.  By allowing labor mobility, guest workers can look out for their own conditions and switch jobs when appropriate – obviating expensive bureaucratic oversight of employers and guest workers. 

These preliminary observations are based on broad policy outlines in numerous news stories rather than actual legislation.  I will update these observations as more details are released or the actual plan is published.