Foreign Stimulus

Pia Orrenius and Madeline Zavodny are the authors of the just-released book Beside the Golden Door: U.S. Immigration Reform in a New Era of Globalization (AEI Press, 2010).

The debate over Arizona's controversial immigration law and Congress's passage last month of another border security bill gives the impression that the only problem with our immigration policy is its inability to keep people from entering the country illegally. Not so. The country has an antiquated, jerry-built immigration system that fails on almost every count. The good news is that there is a way to replace it that will promote economic growth while reducing the flow of illegal workers.

First, work-based visas should become the norm in immigration, not the exception. The United States issues about 1.1 million green cards a year and allocates roughly 85 percent to family members of American citizens or legal residents, people seeking humanitarian refuge and "diversity immigrants," who come from countries with low rates of immigration to the United States.

The remaining 15 percent go to people who are immigrating for work reasons--but half of these are for workers' spouses and children, leaving a mere 7 percent for so-called principal workers, most of whom are highly skilled. No other major Western economy gives such a low priority to employment-based immigration, and for good reason: these immigrants are the most skilled and least likely to be a burden on taxpayers.

In place of our current system's lotteries and "first-come, first-served" policies, the government should hold regular auctions where companies can bid for permits to bring in foreign workers.

With so few slots allocated to work-based green cards, wait times continue to grow. Immigrants typically enter on temporary visas and adjust to permanent status over time. But most green card categories have strict numerical limits that fall far short of the number of immigrants on temporary visas who wish to stay. The most recent data suggest that 1.1 million approved applicants are waiting for employment-based green cards. Immigrants from China and India are among the most adversely affected because, in general, no more than 7 percent of green cards can be allotted each year to applicants from any one country.

There is a better way. Provisional work-based visas, sponsored by employers and valid as long as the holder has a job, should replace green cards as the primary path to legal immigration. These visas should not be subject to country quotas and should be open-ended, so that people who don't seek permanent residency will not get kicked out of the country, as happens now.

The visas would be "portable"--that is, the holder wouldn't be tied to one employer--to ensure that workers are treated fairly. But because these visas would be tied to employment, immigrants would have to leave the country if the economy deteriorated and they couldn't find work.

In place of our current system's lotteries and "first-come, first-served" policies, the government should hold regular auctions where companies can bid for permits to bring in foreign workers. Employers would bid highest for the most-valued workers, creating a selection mechanism that wouldn't rely on the judgment of bureaucrats or the paperwork skills of immigration lawyers.

Separate auctions would be run for high- and low-skilled workers, because permit prices would depend on prospective wages. Bringing low-skilled workers into the program is vital to stemming illegal immigration, as the current system's lack of sufficient visas for the low-skilled is a main reason that people cross the border illegally.

These auctions would be more efficient than the current system because they would respond to changes in labor demand. When prices rose, the government could react by increasing the number of permits, better syncing immigration with the business cycle. Work-based immigration would rise with economic growth and fall with rising unemployment.

Finally, the auctions would provide the government with new revenue in an era of huge deficits. Some of that money might be used to offset costs incurred by states or localities with large numbers of immigrants, or to retrain American workers displaced by immigration.

For the past two decades, policy makers have tinkered on the margins of the immigration system, reacting to the latest crisis or political priority. Greater emphasis on work-based immigration as part of a coherent immigration process would go a long way to enhance our economy's competitiveness and the nation's well-being.

Pia M. Orrenius is research officer and senior economist at the Federal Reserve Bank of Dallas. Madeline Zavodny is a professor of economics at Agnes Scott College.

Photo Credit: iStockphoto/Jim Parkin

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