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.