18 February 2013
The Economic Benefits of Immigration
Diana Furchtgott-Roth, Senior Fellow, Manhattan Institute
America's economic growth is hovering around 2 percent,
public debt is $16 trillion and rising, and job creation
and labor market participation remain low. Embracing a
more flexible legal immigration system can dramatically
improve this situation. This paper describes the link between
economic growth and immigration, the need for policy change, the
misguided history of America's political opposition to immigration,
and a rational immigration policy.
Immigrants increase economic efficiency by reducing labor
shortages in low- and high-skilled markets because their educational
backgrounds fill holes in the native-born labor market. However, the
share of immigrants in the U.S. workforce has declined since its 1991
peak. Increased immigration would expand the American work-force,
and encourage more business start-ups. Businesses ranging from Apple
Corporation to apple growers would be able to find the workers they
need in America.
Current law has inhibited such positive developments.
H-1B temporary visas for new skilled immigrant workers, limited
at 85,000 annually, do not meet demand. This quota represents just over one twentieth of one percent of the overall
labor force. Acquiring permanent residency (a "green
card") is a lengthy and potentially costly process.
When immigrant talent, such as the 51 percent of
engineering doctorate earners and the 41 percent of
physical sciences doctorate earners who are foreignborn, are forced to leave the United States, private
and taxpayer investment in research loses value.
Such limitations have been the result of opposition,
based largely on false premises, to more open
Opposition to immigration is as old as immigration
itself. American anti-immigrant groups have long
feared the possibility that immigrants drive nativeborn workers out of jobs. However, this occurs only
in the negligible proportion of occupations where
native-born and immigrant skill sets overlap. Many
economists have shown that immigration increases
the wages of native-born Americans.
A growth-oriented immigration policy would allow
a greater number of immigrants to legally enter,
stay, and work in the United States. Arlene Holen,
using Congressional Budget Office methodology,
has estimated that if no green card or H-1B visa
constraints had existed in the period 2003–07, an
additional 182,000 foreign graduates in science and
technology fields would have remained in the U.S.
Their contribution to GDP would have been $14
billion in 2008, including $2.7 to $3.6 billion in
tax payments. Three hundred thousand H-1B visa
holders would also have remained in the U.S. labor
force, earning $23 billion in 2008 and generating
$34$47 billion in tax revenue over the next decade.
An immigration policy focused on increasing
economic growth would seek ways to admit more
immigrants with the advanced education levels
desired by domestic employers. One approach to
increasing legal immigration in a growth-oriented
way, suggested by economists Pia Orrenius and
Madeline Zavodny, is to auction permits to employers
with demand-based minimum prices. This would raise public revenues while creating a market for
permits and guaranteeing that immigrants would
arrive with employment. Differing prices could be
charged for workers with particular skill sets, given
demand. Initial revenues could be as much as $6
billion, which could be invested in services that
Such policy innovations would require, as well,
resolution of the status of the estimated 11
million undocumented "illegal immigrants" now
living and (generally) working in the U.S. The
Brookings-Duke Institute Roundtable has suggested
that a solution to the problem of undocumented
immigrants would begin with the establishment of a
workplace verification system, proven to be effective,
which allows employers to know promptly whether
a potential employee has the right to work in the
United States. This would be followed by a series
of steps toward legalization—including payment
of back taxes, a mandatory fine, employment and
background checks, and a citizenship-type test for
those wanting to remain in America. These steps
were the basis of the 2005 and 2007 McCainKennedy comprehensive immigration proposals,
and form the core of the Senate bipartisan agreement
announced in January. Provisional visas and a path
to permanent residency and citizenship could be
provided for immigrants without criminal records,
provided all requirements are completed.
Immigration benefits the economy, and America
must adopt more flexible immigration policies that
America's growth is stalled at around 2 percent. The
federal budget deficit has exceeded $1 trillion for
four years in a row, and the public debt stands at $16
trillion. The economy has 3 million fewer jobs than in December 2007, the start of the recession. The labor force
participation rate is at 1981 levels, before the Reagan
Revolution and the entry during the 1980s of 12
million women to the workforce.
The most important task before the 113
to increase economic growth. Immigration reform is
an immediate and powerful way to do that. President
Obama has stated that immigration reform will
be a priority of his second term, and a bipartisan
group of senators has endorsed a comprehensive
immigration proposal. America should facilitate the
process of obtaining high- and low-skill legal workers
in the United States. We are turning away qualified
workers at a time when we are concerned about our
To help move our economy forward, we must
embrace a more flexible system that allows more
potential workers to enter the country legally. This
will benefit native-born Americans, who will see
broader job opportunities.
Only 13 percent of green cards authorizing permanent
residenceand a path to citizenshipare granted for
For many immigrants, such as
those from India, the wait for American green cards
can stretch for several decades. Since green cards bring
in few workers, most skilled workers use temporary
visas. More work visas are also needed for unskilled
workers, for whom there are very few alternatives to
U.S. businesses founded by immigrants employed
approximately 560,000 workers and generated $63
billion in sales during 2012, according to an October
2012 Kauffman Foundation study.Immigrants have a
higher propensity to start businesses than native-born
Americans. For example, 44 percent of high-tech Silicon
Valley businesses had at least one immigrant founder.
America needs to make a rational attempt at crafting
a better immigration policy, one that accounts for the
financial costs of immigration and allows immigrants
to enter and leave depending on economic conditions.
Recently several economists, such as Pia Orrenius of
the Dallas Federal Reserve and University of Chicago
Nobel prize winner Gary Becker, have proposed
auctioning off work permits to employers or visas to individuals. This would raise funds that could be used
to reduce the deficit. In addition, such funds could
be distributed to those parts of the country, such as
California and Arizona, to offset costs of security and
educating immigrants' children.
Separating the two species of unions greatly complicates the conventional story of union decline, which focuses on the private sector. Private- and public-sector unions emerged at different times and from different legal sources, and they have followed different trajectories. The central difference today is the staying power of public-sector unions. Across the country, roughly 36 percent of public employees belong to unionsNew York tops the charts, with 69 percent of its public workers in unions. Even if the reforms in Wisconsin cause some of the Badger State's unions to decertify and declare themselves associations, these overall numbers won't change very much. At the state and local level, then, public-sector unions are now fixtures of America's political economy.
American Economic Growth is Linked to Immigration
As America emerges from the recession and seeks
to increase economic growth, immigration reform
should be part of the growth agenda. Immigrants have
been founders of many companies that have grown to
billion dollar giants, such as Google and Yahoo!. Many
immigrants have different skills from the native-born
population, and complement the skills of the U.S.
labor force. Immigrants make the economy more
efficient by reducing bottlenecks caused by labor
shortages, both in the high-skill and low-skill area.
The educational backgrounds of immigrants and
native-born Americans are different. Statistically, the
average skills of native-born American workers are
distributed in a bell-shaped curve. Many Americans
have high school diplomas and some college
education, but relatively few adults lack high school
diplomas and even fewer have Ph.D.'s in math and
science. In contrast, immigrants' skills are distributed
in a U-shaped curve, with disproportionate shares of
adults without high school diplomas who seek manual
work and others with Ph.D.'s in math and science.
Among native-born Americans, 91 percent have a high
school diploma or higher, whereas only 62 percent of
noncitizens do. Immigrants make the economy more
efficient by reducing bottlenecks caused by labor
shortages, both in the high- and low-skill areas, and
creating jobs for native-born Americans. The share
of immigrants by educational attainment is shown
in Figure 1.
Migrant inflows have declined in relative terms.
Annual immigration from all countries has fallen
since its peak of 1.8 million green card recipients in 1991.
Immigration was less than one percent of the
U.S. labor force in 2011, down from 1.4 percent of
the labor force in 1991.
In 2011, Caribbean, Central
American, and South American immigrants combined
were equivalent to two tenths of a percent of the labor
force, whereas Mexicans accounted for one tenth of a
percent of the labor force.
Meanwhile, the foreignborn population has been largely flat since the late
2000s. Foreign-born workers of Hispanic origin,
including undocumented workers, made up 8 percent
of the labor force in 2011.
Furthermore, the number
of undocumented workers in the United States has
been declining since 2007, as can be seen in Figure 2.
Immigrants are about 16 percent of the labor force,
yet represent 49 percent of the labor force without
a high school diploma, 25 percent of all doctorates,
and 35 percent of doctorates in science, math,
computer science, and engineering.
they have a smaller share of high school diplomas
and B.A.'s, which is where native workers tend to be
concentrated, they do not compete directly with most
"They Do the Jobs We Won't Do"
Immigrants have different skills and job preferences
from native-born Americans, and so they make
American workers more productive. Immigrants
complement rather than substitute for nativeborn workers and capital moves to take advantage
of available labor.
Although immigrants will be
substitutes for some primarily low-skilled workers,
many of whom are immigrants too, the negative effect
on such workers is much smaller than the positive
effect for everyone else. The economy as a whole gains, with substantially more winners than losers. In
our society, this makes it possible for the winners to
compensate those who lose from immigration, and
still come out ahead.
Hispanic and Latino immigrants comprised 42
percent of the American unskilled labor force (defined
as those without a high school diploma).
immigrants are disproportionately represented in
the service, construction, and agricultural sectors,
with occupations such as janitors, landscapers,
tailors, plasterers, stucco masons, and farmworkers.
Government, education, health, and social services,
are sectors that employ few immigrants.
Immigrants choose different jobs from native-born
Americans. Low-skill immigrants come to be fruit
pickers, as well as janitors and housekeepers, jobs
native-born Americans typically do not choose
as careers. However, immigrants are not found as
crossing guards and funeral service workers, low-skill
jobs preferred by Americans. Similarly, high-skilled
immigrants prefer occupations such as research
scientists, dentists, and computer hardware and
software engineers. They generally do not choose to
be lawyers, judges, or education administrators. Table
1 shows the percent distributions of foreign-born and
native-born American workers by occupation.
Even in broad categories of employment, a difference
in occupational choice is seen, as is shown in Table
1. Among professionals, foreign-born workers are
employed in computer and mathematical occupations
at a higher rate than native-born workers, 3.5 percent
versus 2.4 percent. Native-born workers are more than
twice as likely to be employed in legal occupations as
immigrants, 1.4 percent compared with 0.4 percent.
Workers born in America are much more likely to work
in education, training, and library occupations than
foreign-born workers, 6.6 percent versus 3.7 percent.
In service-oriented fields, 7.9 percent of immigrants
work in food service, compared with 5.1 percent of
native-born workers. Almost 9 percent of immigrants
are employed in building, grounds keeping, and
maintenance, but only 3 percent of native-born
Nearly a quarter of native-born workers are employed
in sales and office occupations, compared with
17.5 percent of immigrants. Among immigrants,
13.5 percent are employed in natural resources, construction, and maintenance occupations, whereas
only 8.5 percent of native-born workers belong to this
category. These proportions are further illustrated in
The Immigrant As Entrepreneur
One way to understand the benefits of immigration
for native-born Americans is to examine the role of foreigners in start-ups. Economist Robert Litan has
estimated that the U.S. economy now generates about
15 new companies a year that are likely to grow to
have a billion dollars or more in annual revenue. Litan
also predicts that legal and regulatory reform could
increase that number to 45 to 75 such new companies,
raising GDP growth by a full percentage point. With
GDP growth at 4 percent the economy would double
in 18 years, raising real incomes.
Start-ups lead to economic growth, and immigrants
found new companies in America at greater rates
than do the native-born.
Examples include Sergey
Brin's Google, Andrew Grove's Intel; Jerry Yang's
Yahoo!; Pierre Omidyar's eBay; and Elon Musk's
PayPal and SpaceX, to name but a few. Alexander
Graham Bell, Levi Strauss, Adolph Coors, and Henry
Heinz were all immigrants who founded profitable
new American businesses.
However, the share of immigrant-founded Silicon
Valley companies has declined from 52 percent
between 1995 and 2005 to 44 percent between
2006 and 2012.
By making it difficult for high-skill
workers to stay in America, Congress is dissipating
the value America receives from private and taxpayers'
investments in research.
Immigrants in Academia
American universities are among the world's leading research institutions, attracting the top minds,
not only those from America but also from many
other countries. The National Science Foundation
data show that 176,000 foreign graduate students
studied science and engineering in American universities in 2010, up from 172,000 in 2009.
In 2009, the most recent year for which data are
available, the federal government spent more than
$63 billion on science and engineering research at
American universities and research institutions.
This helps finance Ph.D. programs, which are heavily populated with foreign students. More than $35
billion of this spending is done through the Department of Health and Human Services. Other funders
include the Defense Department, at $6.8 billion,
and the Department of Energy, at $7.2 billion.
Many universities rely on graduate students for
research assistance and technical expertise. Government research trains graduate students in the latest
technologies. Most research does not require security
clearances, and little if any research is restricted to
American students. Because of this, 52 percent of doctorate recipients in engineering and 40 percent
of graduate students in the physical sciences were
foreign-born temporary U.S. residents in 2011.
Immigrants are also prominent in advanced scientific
research. Over one-third of U.S. Nobel Prize winners
in physiology or medicine between 1901 and 2012
were foreign-born. If it were easier for foreign-born
students and workers to obtain provisional visas to
stay and work in America, visas that could transition
into green cards later, America would have faster GDP
growth and job creation.
With another two dozen new Apples or Facebooks
every year making similarly attractive products,
U.S. economic growth and employment would
be substantially higher.
Data show that new
companies, those in their first few years of
existence, hire a substantial number of workers.
Immigrants in the Labor Force
In recent years, immigrants have had higher labor force
participation rates than native-born Americans, as
can be seen from Figure 4. Since 1999, the difference
between the labor force participation rates of the two
groups have been steadily increasing. In 2012, 67.5
percent of immigrants participated in the labor force,
compared to 63.2 percent of native-born Americans.
In February 2011, at a small dinner with President
Obama, Apple founder Steve Jobs emphasized the
need for more engineers in America. He suggested
rewarding foreign engineering students earning a
degree in the United States with a visa. At the time
of their conversation, Apple employed 700,000 line
workers in Chinese factories, because there were
30,000 engineers on-site. "You can't find that many in
America to hire... If you could educate these engineers,
we could move more manufacturing plants here."
Some might say that offering visas to foreign
engineers denies opportunities to native-born aspiring
engineers. But, as Jobs pointed out, there are not
enough Americans with engineering degrees to satisfy
the economy's demand for engineers.
The same holds true at the low end of the skill scale.
Farms provide income to farmers, as well as to other
native-born Americans employed in the industry in trucking and distribution. If farmers cannot get
low-skill immigrants to pick fruit, as was the case in
Washington State for the 2012 apple crop, agriculture
will move offshore to where low-skill labor can be
found. Consumers may not care where their food
comes from, but American farmers most certainly do.
It makes little sense to send a whole economic sector to
other countries just to avoid employing immigrants.
America could import produce from abroad at little
The reason immigrants come to America is because
they see opportunity—gaps in our economy that they
have the skills to fill. The goal for any worker is to
find a market in which his skills are valued. For many
workers all over the world, that is the United States.
American Immigration Policy is Broken
Each year the United States Citizenship and
Immigration Services accepts applications for H-1B
visas. Sixty-five thousand H-1B temporary visas
are issued to skilled workers certified by the Labor
Department, and 20,000 H-1B visas are issued
to those with U.S.-awarded masters degrees.
addition, some companies will acquire three-year
extensions on previous visa renewals. Non-profits and
institutions of higher education are exempt from the
visa cap, so those workers will also receive visas. In
2011, the United States Citizenship and Immigration
Services issued 129,000 new or extended H1 visas.
The demand for foreign labor far outstrips the supply
of H-1B visas. Visa applications can be filed on April
1 of each year. In 2012, the cap was reached on June
In 1999, Congress temporarily raised the quota
to 115,000, and again to 195,000 in 2001, a number
that did not exceed demand, but the quota reverted
to 65,000 (plus 20,000 awarded for recipients of U.S.
advanced degrees) in 2004.
The current figure (85,000) represents a small fraction
of the U.S. labor force of 156 million.  Even if
the quota were raised to 150,000 annually when employment growth picks up, that would be less than
one tenth of one percent of the labor force. A higher
quota would still block admission to the vast majority
of applicants who are discouraged from applying due
to the small likelihood of success.
After receiving an H-1B visa, the next step is to get
permanent residency through the employmentbased "green card" program. Government data
show that of the 1.1 million awarded "green cards"
in 2011, 15,000 went to new arrivals sponsored by
an employer, and 124,000 went to current residents
sponsored by an employer. Of these, about 1,400 were
While some types of workers
are "current," highly educated Chinese workers who
applied after December 8, 2007 and Indian workers
who applied after September 1, 2004 are not eligible
for employment-based visas.
The backlog in the immigration system does not stop
upon entrance. Once an immigrant enters the United
States, if he violates the terms of his visa, he may be
called in front of an immigration court. The wait times
for immigration court processing are substantial. According to data from Syracuse University's Transactional Records Access Clearinghouse, the average wait
time for an immigration case decision was 525 days
in the year ending October 31, 2012.
Table 2 shows
waiting times by country of origin. Chinese citizens,
for example, had an average wait time of 786 days.
The U.S. Citizenship and Immigration Services
estimates that there are about 13.1 million legal permanent residents of the United States, and 129,000
workers were admitted with H-1B visas in 2011.
The estimated number of illegal immigrants was 11.5
million in January 2011, close to the number of legal
permanent residents admitted for any reason—family, sanctuary, or work.
A 2012 estimate suggested
that 4.9 million illegal immigrants had entered the
country between 2000 and 2011.
Employers seeking to hire immigrants must navigate
a number of obstacles. If the employer wishes to hire
an immigrant to work permanently in the United States, the employer must prove to the Department
of Labor that qualified local workers are unavailable
at market wages. Employers categorized as H-1B
Dependent, those whose workforce is comprised of
15 percent workers on H-1B visas, must prove they
have recruited U.S. workers for the position, and that
the hire will not displace U.S. workers. Employers
must also commit to paying prevailing wages for both
permanent and H-1B hires.
Then, a complicated game of "application tag" ensues,
with the State Department and Department of Homeland Security sending documentation back and forth,
validating identities and ensuring that no employer
is trying to hire a criminal, terrorist or undesirable
person. These may be necessary steps, but they are
time-consuming. Even if the State and Homeland
Security Departments would find a worker acceptable,
arbitrary quotas may render the entire process moot.
These protections and regulations are less burdensome
for temporary workers, but still require extensive
documentation and cost. Applications for "national
interest waiver-based permanent residency visas" can
take an entire month to complete and cost $6,000 in
legal fees and $1,000 in application fees. For people
seeking permanent residency, the process can take
years or even decades. This adversely affects U.S. labor
Historical Opposition to Immigration in America
Opposition to immigration is as old as immigration
itself. In the 1850s, the goal of the Know-Nothing
Party, also called the American Party, was to keep only
white native-born Americans in political power and
limit immigration. Members of the party had to swear
"that you will not vote, nor give your influence for any
man for any office in the gift of the people, unless he
be an American-born citizen, in favor of Americans
ruling America, nor if he be a Roman Catholic…"
The party was particularly concerned by the influx
of Irish and, to a lesser extent, German, Catholic
immigrants in the late 1840s. The Know-Nothing
Party set on fire the homes of Irish tenants and
Catholic churches. There were riots in Baltimore,
Maryland, in 1856 when a Know-Nothing candidate,
Thomas Swann, was elected mayor. The secretive
party required that if members were asked about Party
activities they reply, "I know nothing."
In 1894, the Immigration Restriction League was
founded for the purpose of decreasing the immigration
of undesirable immigrants. It also sought to restrict
immigrant voting through reading tests. The purpose
of the League was "to advocate and work for the
further judicious restriction or stricter regulation
of immigration, to issue documents and circulars,
solicit facts and information on that subject, hold
public meetings, and to arouse public opinion to the
necessity of exclusion of elements of undesirable for
citizenship or injurious to our national character." In
1918 the Immigration Restriction League presented a
bill which would decrease immigration from Southern
and Eastern Europe but allow more immigration from
Northern and Western Europe.
The Immigration Act of 1924, the Johnson-Reed
Act, placed restrictions on immigration that lasted
until the 1960s. During the debate over the Act,
Senator Ellison DuRant Smith of South Carolina, a
Democrat who served from 1909 to 1944, said on the
floor of the Senate, "I think we now have sufficient
population in our country for us to shut the door and
breed up a pure, unadulterated American citizenship.
Thank God we have in America perhaps the largest
percentage of any country in the world of the pure,
unadulterated Anglo-Saxon stock…"
Harvard professor Samuel P. Huntington wrote in
Foreign Affairs in 2004 that true assimilation of
Hispanic immigrants is impossible. According to
Americans like to boast of their past success in assimilating millions of immigrants into their society,
culture, and politics. But Americans have tended to
generalize about immigrants without distinguishing
among them and have focused on the economic
costs and benefits of immigration, ignoring its social
and cultural consequences. As a result, they have
overlooked the unique characteristics and problems
posed by contemporary Hispanic immigration. The
extent and nature of this immigration differ fundamentally from those of previous immigration, and
the assimilation successes of the past are unlikely
to be duplicated with the contemporary flood of
immigrants from Latin America.
Former congressman Tom Tancredo, in an editorial
entitled "Hispanic Assimilation Has Failed," argues
that low rates of identification as Americans means
they "have some huge gaps still to bridge if assimilation to American society is to be achieved."
Similar concerns about assimilation were made
about Jews, Italians, Irish, Germans, Poles, and even
Norwegians when they first came to America, yet all eventually assimilated. Research by Princeton University professor Douglas Massey shows that within two
generations Mexican immigrants in California stop
speaking Spanish at home, and within three generations they cease to know the language altogether. He
concludes, "Like taxes and biological death, linguistic
death seems to be a sure thing in the United States,
even for Mexicans living in Los Angeles, a city with
one of the largest Spanish-speaking urban populations
in the world."
In a 2013 update to his Measuring Immigrant Assimilation in the United States series for the Manhattan Institute, Duke University professor Jacob Vigdor
found that assimilation is steadily increasing among
immigrants. In 2011, he found the greatest amount of
assimilation since 1980, a full generation, in cultural,
economic, and civic areas. Composite, cultural, and
civic indices are all on clear upward trends. According to
Vigdor, the increased extent of economic assimilation
likely shows a combination of improving economic and
migratory trends: unsuccessful migrants leaving, foreigners with weak prospects electing not to migrate.
Do Immigrants Depress Wages?
One reason that Congress does not increase the
number of visas is the popular perception that foreign
workers, especially those with low skill levels, harm job
opportunities of native-born workers. The concern that
immigrants drive out native-born immigrants from jobs
is predicated on the assumption that large numbers
of immigrants are displacing American workers, even
though, as we saw in the previous section, the numbers
are low as a percentage of the labor force.
A major concern of those critical of immigration,
such as Harvard University professor George Borjas,
is that immigrants depress wages. Nevertheless, many
economists have found that immigrants sometimes
raise wages, rather than decreasing them. For example,
senior economist Pia Orrenius of the Federal Reserve
Bank of Dallas finds a slight increase in wages for
professionals and a slight decline for manual workers
from immigration of less than 1 percent.
David Card of the University of California, Berkeley
finds a decrease in wages of about 3 percent among
low-skilled workers in high immigrant cities such as
Miami and Los Angeles, and smaller effects in other
cities and occupational groups.
Card (2009) goes on
to find that immigration yields a 5 percent increase
in overall wage inequality. This finding supports the
other studies showing immigration increases wages
of high-skilled workers and decreases wages of lowskilled workers.
Professor Giovanni Peri of the University of
California, Davis, in a paper just published in
the Journal of the European Economic Association,
coauthored with Bocconi University Professor
Gianmarco Ottaviano, concludes that immigration
raised wages of native-born Americans by six tenths
of a percent during the period from 1990 to 2006.
It decreased wages of existing immigrants by 6.7
percent, because new immigrants are substitutes for
prior waves of immigrants.
Although immigrants no doubt will displace some
low-skilled workers, primarily other immigrants, the
negative effect on such workers is much smaller than the
positive effect for everyone else. The economy as a whole
gains, with substantially more winners than losers.
Unlike other economists, Borjas assumes that
immigrants are substitutes for native-born workers.
Furthermore, he assumes that capital is fixed and does
not respond to changes in wage rates.
to Borjas, low-skilled immigrants arrive in America
and take jobs away from African-Americans. Due to
the lack of job opportunities, African-Americans are
drawn into illegal activities, get arrested, and are then
put in prison. Borjas concludes that employment and
incarceration rates of black men are highly sensitive
to immigration, although "much of the decline in
employment or increase in incarceration in the black
population remains unexplained."
One problem with this line of reasoning is that
young black men began withdrawing from the
labor force in the 1960s, when the share of immigrants in the labor force was less than 1 percent.
The percentage of black men between ages 16 and
24 who were not in school, not working, and not
looking for work rose to 18 percent in 1982 from
9 percent in 1964. It then reached 23 percent in
and remained at that level as of 2011.
Borjas's findings that immigrants substantially lower
Americans' wages not only have been questioned by
other economists but have moderated over time. In
2003 Borjas found that immigrants lowered wages
of average American-born workers by 3 percent and
wages of high school dropouts by 9 percent.
year later, he found that the effect on high school
dropouts had moderated to a 7 percent loss. 
By 2006, Borjas had concluded that immigrants
raised average wages of Americans by 0.1 percent and
lowered the wages of the low-skilled, those without
a high school diploma, by 5 percent.
that America has a net gain from immigrants. Since
a relatively small percentage of American workers
have less than a high school diploma (8.5 percent
in 2012), it is possible for these workers to be compensated through transfer payments, leaving our
economy still ahead.
In a 2011 paper, Borjas admits that "the economics
literature has found it difficult to document the
inverse relation between wages and immigrationinduced supply shifts."
If immigrants affect any
wages, it is those of prior immigrants, who compete
for the same jobs that new immigrants are after.
But we do not see immigrants protesting in the
streets to keep others out, as we see homeowners in
scenic locations demonstrating against additional
development. Rather, some of the biggest proponents
of greater immigration are the established immigrants
themselves, who see America's boundless opportunities
as outweighing negative wage effects.
A Rational Immigration Policy
To encourage economic growth, America needs to
issue more visas and admit more immigrants legally.
This would raise more revenue and confer a net
benefit on the economy.
Arlene Holen of the Technology Policy Institute, using
methodology from the Congressional Budget Office,
has estimated that in the absence of constraints on
green card and H-1B visas over the period 2003–07,
an additional 182,000 foreign graduates in science,
technology, engineering, and mathematics (STEM)
fields would have remained in the United States. Their
earnings and contribution to GDP would have been
$14 billion in 2008, and they would have paid $2.7
billion to $3.6 billion in taxes.
In addition, in the absence of constraints on visas,
during that same period, 300,000 H-1B visa holders
would have remained in the U.S. labor force rather
than returning to their home countries. Holen
estimates that they would have earned $23 billion in
2008, and generated $4.5 billion to $6.2 billion in
tax revenue during that year.
Her study estimates that proposals considered by
Congress five years ago to loosen green card and
temporary work constraints for high-skill workers
would reduce the deficit on the order of $100 billion
over ten years.
Visa Auctions: A Simple, Effective Reform
One simple way to reform immigration policy is for
Congress to keep the same system we have now, but
issue more employment-based visas, both to skilled
and unskilled workers. Congress could also endorse
the sale of visas or auctioning them off to raise revenue
at the outset of the process.
Economists Pia Orrenius and Madeline Zavodny
propose that the government auction off work permits
to employers that allow them to hire foreign workers.
This would simplify our complicated immigration
system and create revenue for the Treasury.
authors suggest initial minimum prices—that would
fluctuate according to demandof $10,000 for a high-skill permit, $6,000 for a low-skill permit, and
$2,000 for a seasonal permit. The permits would
This approach would replace the current alphabet soup
of different visa types. As an added benefit, the money
paid by immigrants to smugglers and lawyers will be
redirected to the government and hence the taxpayer.
Congress is unlikely to adopt any immigration
proposal swiftly. But what might tempt Congress in these days of fiscal austerity are auction
revenues. When unemployment is high, as now,
the number of visas, set by an independent commission, would be kept low. When the economy
reaches full employment, the quota might be raised.
Auctioned permits, in the proposal above, would
be good for five years, and could be sold to other
employers if original purchasers no longer needed
them. With an active market in permits, employers would buy them from each other, as well as at
quarterly government auctions. According to Ms.
Orrenius, "The advantage of having the employer
buy the permit is that more immigrants who enter
the United States would come with a job and immigration would generate government revenue."
Orrenius and Zavodny want to eliminate illegal
immigration, give priority to employment-based immigration, raise money to cover services immigrants
use, and set visa caps that can grow with the economy. They would limit family reunification to spouses
and children; other relatives would have to get their
own permits. Foreign workers would be granted a
five-year provisional work visa through an employer
who would commit to hiring the immigrant. Visa
holders would be free to move to another employer
who had a work permit at any time. They could stay
longer if they found someone to hire them, and could
eventually apply for a green card and citizenship.
The number of permits offered at government
auctions would depend on employer demand, as
estimated by an independent group or a rule. If the
price of the permits for a given skill level was high,
this would be a signal for government to sell more
permits for that groupand lower the number of
permits if the price declined. Orrenius and Zavodny
suggest starting with approximately 1 million permits
per year, reflecting the number of foreign workers
granted different types of visas annually now.
One twist, which Orrenius and Zavodny do not
propose, would allow different prices to be charged for
workers with different skills. If particle physicists were
in demand one year, the price of their work permits
would be higher. Depending on the mix of highskill, low-skill, and seasonal workers, initial revenues
to the government might be as much as $6 billion.
The authors suggest that these funds be allocated to
communities, based on the numbers of immigrants they
take, to cover local costs, such as schooling and health care.
University of Chicago economics professor Gary
Becker has proposed raising even more money by
auctioning off green cards to individual immigrants,
starting at $50,000, raising about $50 billion annually.
This auction could occur in parallel with employer
auctions. Green card purchasers might buy houses,
go shopping to help our economy, or start businesses.
Many affluent families facing increasing violence in
other parts of the world would be glad of the chance
to buy a green card to come to America. Crumbling
cities such as Detroit could be rejuvenated with legal
immigrants. They could buy real estate, raising land
values. They could start businesses, ranging from
restaurants to software companies.
Debate in Washington
In January 2013 a bipartisan group of senators,
including Democrats Chuck Schumer (New York)
and Dick Durbin (Illinois), and Republicans Lindsay
Graham (South Carolina) and Marco Rubio (Florida),
announced an outline for a broad immigration bill,
endorsed by President Obama. It would be the first
such bill to become law since the Immigration Reform
and Control Act of 1986. The proposal, which as of
this writing has yet to be fleshed out in the detail that often confounds agreements in principle, would offer
a path to legal status to many of America's 11 million
unauthorized immigrants. The senators contemplate
that these immigrants would first be eligible for work
permits, and then would be able to join the back of
the line to get green cards and citizenship. That will
be hotly debated on Capitol Hill.
The path to legal status would be open to immigrants
who have not committed serious crimes and who pay
back taxes they may owe, as well as a fine. For men
and women who have been working here for years and
have paid no taxes, that could be a high hurdle. Final
legislative language should cap tax payments, or allow
them to be paid over a longer period of time, perhaps
with a higher Social Security tax rate.
The proposal states that immigrants on work permits
would not qualify for federal public benefits, such as
food stamps, free school lunch programs, and health
insurance subsidies under the Affordable Care Act.
The status of state welfare programs, such as Medicaid
and unemployment insurance, would presumably be
decided by individual states.
This proposal follows the outlines of the BrookingsDuke Immigration Policy Roundtable, which
published a comprehensive set of immigration
reform proposals in 2009.
It is also similar to
reform plans that failed in 2005 and 2007, when
Arizona Republican senator John McCain and the
late Massachusetts Democrat Edward M. Kennedy
co-sponsored bills. That they were not enacted was
not for want of presidential leadership, for in 2007
President George W. Bush travelled the country
promoting immigration reform.
Rather, in 2007 some Republicans opposed the
immigration bill because they said that it would
reward people coming into the country illegally.
Some Democrats didn't want to vote for it because
they didn't want Bush to be the president who signed
immigration reform into law. The emerging bipartisan
agreement would make it easier for new immigrants to
enter the country legally, and strengthen enforcement
measures, at the border and in the workplace.
Although the 112
Congress did not pass immigration
legislation, President Obama took matters into
his own hands and instructed the Department of
Homeland Security through executive order to
interpret regulations to make them friendlier to
immigrants. For example, entrepreneurs can now
qualify as an individual of exceptional ability in
sciences, arts, or business. Regulations also broadened
H-1B visa eligibility of entrepreneurs with ownership
in companies. This is a worthy goal, but it should
be done through changes in the statute rather than
changes in regulation.
The Homeland Security Department, through
regulatory reform, is also enhancing EB-5 Visa
processing and expanding premium processing for
employers seeking high-skilled workers. The list of
STEM degrees which automatically qualify eligible
graduates holding student visas for an Optional
Practical Training extension is being expanded. New
categories introduced in 2011 and 2012 include
neuroscience, medical informatics, pharmaceutics
and drug design, and econometrics. This means
these STEM graduates will have an additional 17
months to remain in the United States to pursue
work training in their field, beyond the initial 12
months available to all graduates. Furthermore, DHS
is expanding immigration regulations in other ways
such as providing spouses of certain H-1B visa holders
with work authorization.
President Obama also instructed the Homeland
Security Department by executive order, shortly
before the 2012 election, not to deport undocumented
immigrants who came here as children. The
Development, Relief, and Education for Alien
Minors Act (DREAM Act), versions of which failed
in multiple Congresses, would have allowed some of
these children to stay.
American history is a vast complex of triumphs and
challenges. We are largely a nation of immigrants
and their descendants. Immigration has always been
a part of American life, usually for good, and not the cause of the challenges that face our country. Some
economists have found that immigration is bad for
America. The result is not only counterintuitive, it is
America's goal should be an immigration policy
that fosters economic growth. That requires finding
a way to allow people who want to work here to
come legally. Since most immigrants' skills are
complements to the skills of native-born Americans,
this would increase the efficiency of our economy
and create jobs for native-born Americans. With our
economy in a slow process of recovery, we should
be giving visas to those with innovative ideas who
can help move our economy forward. This would
prevent offshoring of American jobs and keep job
growth here at home.
With a global market for talent, we should make it
easy for the best and the brightest to come to America.
Currently, the reverse is true. Only 13 percent of green
cards authorizing a path to citizenship are granted
for employment purposes. It is far easier for talented
immigrants to settle in Canada and Australia than in
the United States. This hurts our competitiveness both
in the short run and in the long run, as innovations
and start-ups which should have been developed here
are located in other countries.
Throughout American history, some Americans have
been opposed to immigration. However, immigrants
make the economy more efficient and raise the wages
of native-born Americans.
Immigration reform can be accomplished in many
ways. Congress could simply expand the number
of employment-based visas granted to skilled and
to unskilled workers. A more complex solution, but
one that would raise some revenue, would be to
set up a system of tradable work permits for which
employers would pay. Similarly, visas and permits
could be auctioned to the highest bidder. Finally, a
new version of comprehensive immigration reform,
the 2007 McCain-Kennedy bill, was proposed by a
bipartisan group of senators in January 2013.
Any of these initiatives would improve the glacial pace
of our immigration system, where people can wait for
decades to enter the country.
Why should immigration policy succeed today when
it has failed in the recent past? There are three reasons.
First, even though President George W. Bush supported broad immigration reform, including a path
to citizenship for undocumented workers, other
Republican politicians have taken anti-immigrant
positions, so Hispanics perceive Republicans as antiimmigration. This cost Republicans votes, and possibly
the presidency, in the 2012 election. According to the
Pew Research Center, 71 percent of Hispanics voted
for President Obama on Election Day. Members of
Congress are above all concerned about their reelection
prospects. Having fared badly with Hispanic voters at
the polls, Republicans appear to be more inclined to
vote for reform today than in 2007.
Second, there are new enforcement mechanisms,
such as unmanned (and unarmed) aerial surveillance
vehicles, or drones. They can watch both sides of the
U.S.-Mexico border and make unnecessary the controversial and expensive border fences. The images the
drones transmit to monitors permit deployment of
border patrol forces. The Department of Homeland
Security reported in May that each drone cost about
$18 million, and the U.S. Customs and Border Protection has about 10 in operation.
Finally, America's economy is in worse economic
shape than in 2007, with a slower growth rate and
a higher unemployment rate. Net immigration
has slowed. To some, a bad economy means that
America does not need more immigrants. Others
believe that more immigrants will create jobs and
invigorate our economy.
Immigrants come to America because they see
opportunitygaps in our economy that they have
the skills to fill. America's goal should be a policy that
enables them to come legally, and fosters economic
growth. Now is the time for reform.
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