[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                    U.S. IMMIGRATION POLICY AND ITS
                     IMPACT ON THE AMERICAN ECONOMY

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           November 16, 2005

                               __________

                           Serial No. 109-27

                               __________

  Printed for the use of the Committee on Education and the Workforce



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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN A. BOEHNER, Ohio, Chairman

Thomas E. Petri, Wisconsin, Vice     George Miller, California
    Chairman                         Dale E. Kildee, Michigan
Howard P. ``Buck'' McKeon,           Major R. Owens, New York
    California                       Donald M. Payne, New Jersey
Michael N. Castle, Delaware          Robert E. Andrews, New Jersey
Sam Johnson, Texas                   Robert C. Scott, Virginia
Mark E. Souder, Indiana              Lynn C. Woolsey, California
Charlie Norwood, Georgia             Ruben Hinojosa, Texas
Vernon J. Ehlers, Michigan           Carolyn McCarthy, New York
Judy Biggert, Illinois               John F. Tierney, Massachusetts
Todd Russell Platts, Pennsylvania    Ron Kind, Wisconsin
Patrick J. Tiberi, Ohio              Dennis J. Kucinich, Ohio
Ric Keller, Florida                  David Wu, Oregon
Tom Osborne, Nebraska                Rush D. Holt, New Jersey
Joe Wilson, South Carolina           Susan A. Davis, California
Jon C. Porter, Nevada                Betty McCollum, Minnesota
John Kline, Minnesota                Danny K. Davis, Illinois
Marilyn N. Musgrave, Colorado        Raul M. Grijalva, Arizona
Bob Inglis, South Carolina           Chris Van Hollen, Maryland
Cathy McMorris, Washington           Tim Ryan, Ohio
Kenny Marchant, Texas                Timothy H. Bishop, New York
Tom Price, Georgia                   John Barrow, Georgia
Luis G. Fortuno, Puerto Rico
Bobby Jindal, Louisiana
Charles W. Boustany, Jr., Louisiana
Virginia Foxx, North Carolina
Thelma D. Drake, Virginia
John R. ``Randy'' Kuhl, Jr., New 
    York

                    Paula Nowakowski, Staff Director
                 John Lawrence, Minority Staff Director




                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on November 16, 2005................................     1

Statement of Members:
    Boehner, John A., Chairman, Committee on Education and the 
      Workforce..................................................     1
        Prepared statement of....................................     3
    Kucinich, Dennis J., a Representative in Congress from the 
      State of Ohio, ``Hurricane Relief Workers'' flyer..........    25
    Norwood, Charlie, a Representative in Congress from the State 
      of Georgia, prepared statement of..........................    58

Statement of Witnesses:
    Camarota, Dr. Steven A., Director of Research, Center for 
      Immigration Studies........................................    41
        Prepared statement of....................................    42
    Holtz-Eakin, Hon. Douglas, Director, Congressional Budget 
      Office.....................................................     5
        Prepared statement of....................................     8
        CBO slides shown during statement........................    59
    Holzer, Dr. Harry J., Professor of Public Policy, Associate 
      Dean, Georgetown University................................    36
        Prepared statement of....................................    38
    Siciliano, Dan, Esq., Executive Director, Program in Law, 
      Economics, and Business, Stanford Law School...............    49
        Prepared statement of....................................    51


 
                    U.S. IMMIGRATION POLICY AND ITS
                     IMPACT ON THE AMERICAN ECONOMY

                              ----------                              


                      Wednesday, November 16, 2005

                     U.S. House of Representatives

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The committee met, pursuant to notice, at 10:37 a.m., in 
room 2175, Rayburn House Office Building, Hon. John A. Boehner 
[chairman of the committee] presiding.
    Present: Representatives Boehner, Petri, McKeon, Johnson, 
Norwood, Osborne, Kline, Inglis, McMorris, Marchant, Fortuno, 
Foxx, Drake, Kuhl, Miller, Kildee, Scott, Woolsey, Tierney, 
Kind, Kucinich, Holt, Davis of California, McCollum, Grijalva, 
Van Hollen, and Bishop.
    Staff present: Byron Campbell, Legislative Assistant; Steve 
Forde, Director of Media Relations; Ed Gilroy, Director of 
Workforce Policy; Rob Gregg, Legislative Assistant; Richard 
Hoar, Professional Staff Member; Kimberly Ketchel, 
Communications Staff Assistant; Stephanie Milburn, Professional 
Staff Member; Jim Paretti, Workforce Policy Counsel; Molly 
McLaughlin Salmi, Deputy Director of Workforce Policy; Deborah 
L. Emerson Samantar, Committee Clerk/Intern Coordinator; Jo-
Marie St. Martin, General Counsel; Loren Sweatt, Professional 
Staff Member; Toyin Alli, Staff Assistant; Jody Calemine, Labor 
Counsel; Michele Evermore, Legislative Associate/Labor; Tylease 
Fitzgerald, Legislative Assistant/Labor; Joycelyn Johnson, 
Minority Clerk/Office Manager; Tom Kiley, Press Secretary; 
Ricardo Martinez, Legislative Associate/Education; Michele 
Varnhagen, Senior Labor and Benefits Counsel; and Mark 
Zuckerman, Minority Staff Director.
    Chairman Boehner [presiding]. The Committee on Education 
and Workforce will come to order.
    We are holding this hearing today to hear testimony on U.S. 
immigration policy and its impact on the American economy.
    Under Committee Rule 12(b), opening statements are limited 
to the chairman and ranking member. Therefore, if other members 
have opening statements, they will be included in the hearing 
record.
    And with that, I ask unanimous consent for the hearing 
record to remain open for 14 days to allow members' statements 
and other extraneous material referenced during the hearing to 
be submitted for the official hearing record.
    Without objection, so ordered.
    Thank you and good morning. I want to welcome my colleagues 
on the committee, and I look forward to hearing from our 
witnesses today.
    President Bush has announced his principles for immigration 
reform, and Congress is expected to act on corresponding 
legislation in the weeks and months to come. Many of these 
reforms concentrate on border security and other high-profile 
issues that have been covered prominently by the media and 
debated frequently here on Capitol Hill.
    However, often overlooked is the impact on workers of 
current immigration policy and proposed immigration policy 
changes. Indeed, two of the more important policy discussions 
taking place here in Washington focus on the need for reform of 
our nation's immigration laws and the need for a bold approach 
to keep our economy and our workforce competitive at the outset 
of the 21st century.
    These two discussions happen to intersect at a very unique 
way, right here at the Education and Workforce Committee, and 
they are front and center at this hearing today.
    For years, this committee has focused on a 21st century 
competitiveness agenda. From raising the bar in our public 
schools to ensuring that higher education is within reach of 
anyone with a desire to obtain it and strengthening and 
streamlining our job training and retraining programs, our 
committee has been at the forefront with legislation designed 
to strengthen American competitiveness in a rapidly changing 
global economy.
    Today, we are going to view this same issue through a very 
different lens, and we have assembled, I believe, a diverse 
panel of witnesses to join us in doing so.
    The stakes for today's hearing has been set by some very 
distinct trends, both in terms of immigration, generally, and 
its impact on the U.S. economy, more specifically. For example, 
the United States Census Bureau found that in 2004, 34 million 
of the nation's 288 million people, that is 12 percent of the 
U.S. population overall, were foreign-born. This is the highest 
percentage in 70 years.
    More specific to the American workforce, one of every seven 
people working in our nation last year was born elsewhere. That 
is more than 21 million workers. Just a decade ago that number 
was closer to one in 10 workers.
    As more of our workforce approaches the age of retirement, 
this trend will only continue and have an increasingly dramatic 
impact, both in the short term and years down the road, on 
worker wages, benefits and opportunities. Today, our committee 
will take its first step in the process of determining just 
what the impact could be and how Congress should respond.
    It is no surprise to say that immigration, both legal and 
illegal, plays a significant role in our economy. In 
determining how best to address the issue, I strongly believe 
that efforts should focus on the causes of the problem, not 
merely the symptoms. I remain committed and I trust that my 
committee colleagues do as well, to addressing all aspects of 
the immigration issue in a responsible fashion. Whether this 
means through a comprehensive measure or an incremental one, we 
must avoid disjointed attempts at reform.
    Last week, the Congressional Budget Office released a 
timely study, ``The Role of Immigrants in the U.S. Labor 
Market.'' This report analyzes the characteristics of the 
immigrant workforce and its effect on U.S. wages and the 
economy.
    We are fortunate to have the Director of the CBO, the 
Honorable Douglas Holtz-Eakin with us today to present the 
findings of this important study. The Director recently 
announced that he will be leaving the CBO by the end of the 
year, and we thank for his years of service at CBO.
    So many congressional hearings have a clearly determined 
agenda, even before the gavel to order. However, today, I think 
we are going to have a hearing in the truest sense of the word. 
We will hear testimony from a philosophically diverse panel who 
will share with us their unique perspectives during this 
information gathering forum.
    We are here to listen, we are here to ask questions and to 
learn just what the broad and complicated subject of U.S. 
immigration policy means to the American worker, their families 
and our nation's economy. Simply put, this issue is too 
important to leave to the law of unintended consequences, and 
that is why the testimony we are about to hear, I believe, will 
be valuable for all of us.
    And with that, I would like to yield to my friend, the 
gentleman from Arizona, Mr. Grijalva.

  Prepared Statement of Hon. John A. Boehner, Chairman, Committee on 
                      Education and the Workforce

    Thank you all for coming. I welcome my colleagues on the Committee, 
and I look forward to hearing from each of our witnesses.
    President Bush has announced his principles for immigration reform, 
and Congress is expected to act on corresponding legislation in the 
weeks and months to come. Many of these reforms concentrate on border 
security and other high-profile issues that have been covered 
prominently by the media and debated frequently on Capitol Hill. 
However, often overlooked is the impact on workers of current 
immigration policy and proposed immigration policy changes.
    Indeed, two of the more important policy discussions taking place 
here in Washington focus on the need for reform of our nation's 
immigration laws and the need for a bold approach to keep our economy 
and our workforce competitive at the outset of the 21st Century. These 
two discussions happen to intersect in a very unique way right here at 
the Education and the Workforce Committee, and they are front-and-
center at this hearing today.
    For years, this Committee has focused on a 21st Century 
competitiveness agenda. From raising the bar in our public schools to 
ensuring that higher education is within reach of anyone with the 
desire to obtain it to strengthening and streamlining our job training 
and retraining programs, our Committee has been at the forefront with 
legislation designed to strengthen American competitiveness in a 
rapidly changing global economy. Today, we're going to view this same 
issue through a very different lens, and we've assembled a diverse 
panel of witnesses to join us in doing so.
    The stage for today's hearing has been set by some very distinct 
trends--both in terms of immigration generally and its impact on the 
U.S. economy more specifically.
    For example, the United States Census Bureau found that in 2004, 34 
million of the nation's 288 million people--that's 12 percent of the 
U.S. population overall--were foreign born. This is the highest 
percentage in 70 years.
    More specific to the American workforce, one of every seven people 
working in our nation last year was born elsewhere. That's more than 21 
million workers. Just a decade ago, that number was closer to one in 10 
workers.
    As more of our workforce approaches the age of retirement, this 
trend will only continue and have an increasingly dramatic impact--both 
in the short-term and years down the road--on worker wages, benefits, 
and opportunities. Today, our Committee will take its first step in the 
process of determining just what that impact could be and how Congress 
should respond.
    It's no surprise to say that immigration--both legal and illegal--
plays a significant role in our economy. In determining how best to 
address the issue, I strongly believe that efforts should focus on the 
causes of the problem--not merely the symptoms. I remain committed, and 
I trust that my Committee colleagues do as well, to addressing all 
aspects of the immigration issue in a responsible fashion. Whether this 
means through a comprehensive measure or an incremental effort, we must 
avoid disjointed attempts at reform.
    Last week, the Congressional Budget Office released a timely study, 
``The Role of Immigrants in the U.S. Labor Market.'' This report 
analyzes the characteristics of the immigrant workforce, and its effect 
on U.S. wages and the economy. We are fortunate to have the Director of 
the CBO, the Honorable Douglas Holtz-Eakin, with us today to present 
the findings of this important study. The Director recently announced 
that he will be leaving CBO by the end of the year, and we thank him 
for his years of service.
    So many congressional hearings have a very clearly-determined 
agenda even before they are gaveled to order. However, today we will 
have a hearing in the truest sense of the word. We will hear testimony 
from a philosophically diverse panel, who will share with us their 
unique perspectives during this information-gathering forum.
    We are here to listen, to ask questions, and to learn just what the 
broad and complicated subject of U.S. immigration policy means to 
American workers, their families, and our nation's economy. Simply put, 
this issue is too important to leave to the law of unintended 
consequences, and that is why the testimony we are about to hear is so 
valuable.
    With that, I yield to my friend Mr. Miller.
                                 ______
                                 
    Mr. Grijalva. Thank you very much, Mr. Chairman, and I want 
to thank Ranking Member Miller for the opportunity to open this 
hearing. I want to thank you because I look forward to the 
witnesses, their testimony about U.S. immigration policy and 
the impact on our American economy.
    No serious effort has taken place on immigration reform in 
over 20 years at the Federal level, and it is a challenge 
before this Congress to do just that, to deal with immigration 
reform and deal with it in a solid way. If there is one thing 
all sides of the immigration issue can agree on, it is that the 
present system is broken. And because it is broken, it requires 
that we have a mini-tiered approach comprehensive approach to 
immigration reform.
    And immigration reform is complex, it is a vexing 
proposition, it demands solid information, it demands analysis, 
it demands facts, and I want to thank you again for beginning 
the process on a fact-gathering basis. Because immigration is 
an issue that is easily exploited. When I said it is complex 
and vexing it can be easily exploited, and it can be made 
simplistic, and there are no silver bullets in solving this 
issue.
    We have to talk about the impact of globalization. There is 
a simplistic definition that globalization is just about the 
movement of capital and goods and services across this globe. 
Well, labor and workforce also moves across this globe. One out 
of every four workers in this world are moving from their 
country of origin to another country to work. And so that is a 
phenomena of globalization, that is a phenomena of free trade, 
that is part of the solution when we deal with that.
    And like I said, this is an issue that is easily exploited, 
and unauthorized workers and immigrant workers in this country, 
as workers, are also easily exploited. There is no silver 
bullet, as I said earlier. Enforcement only is not the entire 
solution. Employer sanctions only are not the entire solution, 
mass deportation is not the entire solution. It requires a 
comprehensive approach, and I hope through the testimony today 
we begin to talk about the component of education and workforce 
protection that is part and parcel of a long-term consistent 
immigration reform in this country.
    Education enhancements are vital, workforce protections are 
vital, minimum wage is vital, displacement of low-wage workers, 
native low-wage workers is an issue that must be confronted and 
dealt with, and I believe in the end run there is a net benefit 
to immigrant workers, a positive equation in the ledger, what 
they bring to this economy. But I believe that today's 
witnesses are going to tell us one of the keys for immigrants 
and native-born Americans alike is education.
    And we should be expanding education, not cutting it. We 
need more programs to help immigrants learn English and job 
skills, not less. And that is the direction this country needs 
to be going.
    But, Mr. Chairman, I want to thank you. This issue requires 
some dispassionate dialog. This is does require facts, 
empirical facts that we can begin to craft a comprehensive 
immigration reform that both protects workers, raises wages and 
provides job security for working families in this country.
    And I look forward to the witnesses, and I yield back and 
appreciate the time.
    Chairman Boehner. Let me thank my friend from Arizona for 
his opening statement and suggest that I am not sure there was 
anything that was said in your opening statement that I 
disagree with.
    Let me caution members that there is no agenda here. This 
is a fact-finding hearing to get to the bottom of the issue, 
and I think all of you understand that this issue can be 
somewhat sensitive. There are passionate views on both sides of 
the issue, and I would just ask members today to keep that in 
mind as we hear from our witnesses and we ask our questions.
    With that, we have two panels of witnesses today. Our first 
panel is the Honorable Douglas Holtz-Eakin. He is the Director 
of the Congressional Budget Office. Previously, he served as 
Chief Economist for the President's Council of Economic 
Advisors and is a trustee professor of economics at the Maxwell 
School at Syracuse University. Dr. Holtz-Eakin has also served 
as chairman of the Department of Economics at Syracuse 
University.
    With that, Dr. Holtz-Eakin, it is all yours.

STATEMENT OF HON. DOUGLAS HOLTZ-EAKIN, DIRECTOR, CONGRESSIONAL 
                         BUDGET OFFICE

    Mr. Holtz-Eakin. Chairman Boehner, Mr. Miller, members of 
the committee, the CBO is very pleased to be able to be here 
today to discuss this important topic.
    Before doing that, if I could, I want to thank the chairman 
for his gracious introductory remarks and recognize for the 
committee Donald Marron, who is sitting behind me, who will 
take over as acting Director of the CBO upon my departure.
    My oral remarks will draw on three recent CBO studies in 
the area of immigration, and I will try to make a couple of 
points: No. 1, that the foreign-born are an important part of 
the population, as the chairman recognized in his remarks; No. 
2, that legal immigration is largely driven by the policies 
uniting families, although there is a smaller and explicit 
economic objective; No. 3, immigration has an important 
economic benefit.
    Those benefits accrue to the country of origin for the 
immigrant in the form of returned capital and sometimes the 
immigrant themselves. It has benefits for the United States in 
the form of additional members of the labor force and the 
skills that they bring, and also their consuming patterns as 
households. It has benefits for the immigrants themselves in 
the form of their earnings, and those will largely reflect 
their education.
    And then, No. 4, immigration also impacts the native-born, 
and in the labor force this impact has been largely focused on 
a sometimes contentious debate over the impact of immigration 
on the wages of the native-born.
    So this is a lot of material, and what I thought I would do 
is use some slides, which are in front of you and hopefully 
will show on the screen, and walk through these points quite 
briefly.
    So the first slide--if we could go to the next one, thank 
you--makes the point that the chairman made in his opening 
remarks that immigration is a very large part of the population 
of the United States. The green line shows the rise in the 
number of foreign-born in the U.S. population, and since the 
1970's you can see the sharp swing upward. The blue line shows 
immigrants as a fraction of the population and indicates that 
that fraction is now at levels comparable to the 1930's.
    And so we have seen a large influx of the foreign-born of 
the United States, and they constitute a large fraction of the 
population. In particular, they are now roughly one in seven 
members of the labor force.
    In the next slide is point No. 2. Legal immigration is 
largely driven by a policy which is to unite families. As the 
slide shows, family based immigration is about 66 percent of 
the immigrants in 2004. Those with explicit economic objectives 
are about 16 percent, the employment-based preferences that are 
in the immigration law. And, of course, there is a fraction of 
immigration to the United States which is unauthorized or 
illegal, and although the numbers there are far less precise, 
most estimates fall in the range of 7 million to 10 million 
current unauthorized immigrants in the United States.
    The composition of the foreign-born has changed 
dramatically. The notable feature of the next slide is the 
sharp rise in the fraction of the foreign-born that come from 
Mexico and Central America, the Americas, and also the rise in 
immigration from Asia as opposed to the large traditional 
concentration in Europe. And as we will see, many of the key 
features of the immigrant story break along those dimensions.
    Turning to the economic benefit, the first I mentioned was 
there are benefits to the country of origin. In a paper we 
released earlier, CBO documented the flow of remittances, 
payments back to the country of origin by the immigrants. This 
slide is simply meant to remind members that in some cases 
these are substantial parts of capital in-flows to these 
countries; in many cases, larger than official development aid 
and other official sources and in some cases also larger than 
private capital in-flow.
    So there are benefits that flow back in the form of monies 
to the originating countries. There are also benefits that come 
in the form of workers returning to the country of origin. 
About 30 percent of immigrants, on average, do return. They 
bring back with them not just dollars but skilled learned in 
the American labor force.
    At the heart of the debate in the United States, of course, 
is benefits to the U.S. economy. The key features of the next 
slide are, No. 1, the quantitative importance of immigration. 
Between 1994 and 2004, the labor force grew by a bit over 16 
million members. Of that rise, 8.5 million were foreign-born, 
so a bit above 50 percent of the growth in the labor force was 
in the form of immigration. Of that, an enormous fraction is 
from Mexico and Central America, and the rest of the world 
constitutes a fair amount as well.
    The difference between immigrants between those groups are 
largely in terms of the skills that they bring to the labor 
force. As this slide shows, the native-born have almost 14 
years of average education in 2004. Immigrants from the rest of 
the world, a little bit above that; whereas, those from Central 
America and Mexico, a bit above 9 years of education. And those 
skills will determine, to a great extent, their success in the 
labor market.
    Not all labor markets have the same impact, and there are 
six states which are the dominant states which receive most 
immigration into the United States. This slide shows you that 
in California, for example, one in three members of the labor 
force are foreign-born. In the next of the big five, about one 
in five are foreign-born. In contrast, for the rest of the 
country, it is a much smaller number, one in 12. And, again, 
the share divergence between those immigrants from Central 
America and Mexico and the rest of the world shows up there as 
well.
    Finally is the issue of the earnings of both the immigrants 
and the native-born interacting in the labor force. And here 
this slide compares the earnings of workers who immigrate 
directly. So on the top line, a male born in Mexico or Central 
America earns about half of what a native-born worker would 
earn. In contrast, the next generation, a person whose parents 
immigrated from Mexico or Central America, earns nearly 80 
percent.
    And so the message of this slide is twofold. First, 
immigrants earn less, although they earn more if they have more 
education, going to the right, and children of immigrants tend 
to look more like the native-born than did their parents.
    And in closing, let me just say that the final impact, 
which has attracted so much attention, is the impact of 
immigration on wages of the native-born. And it might seem 
obvious that the arrival of more workers would reduce their 
wages, but in the survey of the research, the CBO came to the 
conclusion that the ultimate impact is very difficult to 
quantify.
    And this is a tribute to the flexibility of the American 
labor market in which there are a variety of adjustments that 
can take place in response to an influx of immigration. 
Additional capital and incentives for the native-born to 
acquire more education are two of those key adjustments. And 
the horizon over which one looks also matters, direct impacts 
versus those 10 years later.
    So I acknowledge that is a lot of material very fast and 
not as fast as it should have been, but I look forward to the 
committee's questions.
    [The prepared statement of Mr. Holtz-Eakin follows:]
    The CBO paper, ``The Role of Immigrants in the U.S. Labor 
Market,'' can be viewed on the Internet at:

http://www.cbo.gov/ftpdocs/68xx/doc6853/11-10-Immigration.pdf

    Chairman Boehner. Well, let me thank you for your 
testimony. And I probably should have told you upfront that 
while typically witnesses have 5 minutes to present their 
testimony, given that you are by yourself on this panel and the 
importance of what you had to say, you should have ignored it.
    Last year the committee began its examination of the role 
of knowledge in our increasingly diverse 21st century workplace 
and in an economy based on knowledge and services far more than 
manufacturing or goods.
    In that light, one things that seems to be clear from the 
CBO's analysis is the fact that irrespective of immigration 
status, whether you are a native-born or a foreign-born, and no 
matter what part of the world you come from, perhaps the most 
significant factor ensuring prosperity is education.
    As chairman of this committee, I am proud of the work we 
have done by strengthening elementary education for all 
Americans through ``No Child Left Behind,'' how we have 
improved our job training systems and other education 
initiatives that we have undertaken across the board.
    But my question to you, does education represent the most 
accurate prediction of economic success?
    Mr. Holtz-Eakin. Certainly, for either the foreign-born or 
the native-born, education is the dominant characteristic for 
success in the labor market.
    Chairman Boehner. You talked about the impact on wages, and 
it was at the end of your testimony, and I know you thought you 
were out of time. Can you expand a little bit on what you did 
find in terms of our immigration policy, both legal immigrants 
and illegal immigrants, and what impact it has on wages in the 
marketplace?
    Mr. Holtz-Eakin. Certainly. I thought in mastering the 
talent of talking so very fast I got it all in, but let me say 
it slower. There are two sides to this coin. Certainly, the 
dominant impact for those coming into the United States is what 
skills they bring and their education. And the report, I think, 
lays out very clearly that those with lots of skills, 
particularly those outside of Central America and Mexico, have 
earnings that are comparable to the native-born and their 
children even more so.
    For the native-born in these labor markets, it might seem 
just common sense that with more competition from the 
immigrants their wages are going to fall, and so we looked at 
the literature that tried to analyze this phenomenon and really 
came to the conclusion that there is not a striking bottom line 
to the large amount of research that has been targeted at this 
question.
    Now, why might that be the case? First is that it depends 
about the horizon over which you look. If you look at a large 
influx of immigrants and you look shortly after their arrival, 
certainly that is a lot more people competing in that labor 
market. You would expect to see a bigger impact. If you wait 10 
years, you might see much less. And so that is an important 
distinguishing characteristic in the study is you get a 
different answer depending over how far you look out.
    Second is that there are ways for the participants in the 
labor market to adjust. The native-born workers seeing greater 
competition, say, for a job that doesn't require lots of 
education may choose to get more education. And so, again, with 
time, the native-born population changes its characteristics in 
response to the immigration, and you get a very different 
answer.
    And employers with an influx of workers who, again, may 
have low skills where that has been the center of attention may 
take that opportunity to invest in greater capital. And the 
striking characteristic of the U.S. economy over long periods 
of time is that investments in capital raise the productivity 
of workers given whatever skills they may have, and the workers 
benefit from that. They capture part of those increased gains 
in the form of higher wages. So, again, you get an offsetting 
effect. It makes it hard to find a direct impact from 
immigration on the wages.
    I think that is the key in thinking about this: You want to 
look at different time periods, and you want to ask the 
question clearly, do we or do we not allow both other 
participants in the labor market and employers time to adjust? 
And if so, you will see different answers.
    Chairman Boehner. In your slide where you talk about the 
average weekly earnings of various full-time workers, the first 
line, you talk about a worker born in Mexico or Central 
America, male, makes 54 percent of the average wage, but a 
parent from Mexico or Central America makes 79 percent.
    Mr. Holtz-Eakin. A worker whose parent was from.
    Chairman Boehner. Correct.
    Mr. Holtz-Eakin. This is the next generation.
    Chairman Boehner. Help shed some light on that for us. Is 
that acquiring skills?
    Mr. Holtz-Eakin. This is the mirror image of education 
matters in the same way that, for example, the average 
education of an immigrant from Mexico or Central America is 
about 9 years. In our study, you find that instead of being 
well behind the native-born population, the children catch up. 
They have nearly the same education, about 1 year less, on 
average, than do the native-born. So one generation later they 
have acquired more education and they, as a result, are 
rewarded comparably in the labor market.
    Chairman Boehner. What are the typical skill sets that 
employers would be looking for when they are looking at hiring? 
And obviously there is some pool of immigrants, typically, in 
line there.
    Mr. Holtz-Eakin. I don't have a hard and fast answer. It is 
going to differ by employer. But, obviously, in addition to the 
details of matching the person skills to the job requirements, 
there are some threshold skills that matter. The ones that come 
up right away are mastery of the English language and general 
education that allows the worker to respond to new 
circumstances. Employers are looking for workers who can do 
more than one thing and show some initiative, and those two 
characteristics, I think, are the ones that stand out.
    Chairman Boehner. My time has expired.
    Let me yield to my friend from California, Mr. Miller.
    Mr. Miller. Thank you, and welcome to the committee, and 
let me join in thanking you for all of your work on behalf of 
the Congress.
    Mr. Holtz-Eakin. Thank you.
    Mr. Miller. Wish you well.
    What do you know from your study in terms of the 
contributions of immigration, the necessary contributions of 
immigration to the American workforce over the next 10, 25 
years? It is very often stated that we are going to need to 
continue in-flow of immigration. Obviously, this country was 
built on that in-flow, but you are going to need this in-flow 
to keep the American economy going, to provide the human 
resources to the capital resources to keep it going. Where is 
that going, and how is that measured?
    With the current immigration population, the birth rates of 
that population, I assume that when people look at that model 
they look at the overall population increases and educational 
attainment, the rest of that for the whole population. So what 
does that tell us about the future? Just leave out legal, 
illegal for a moment. What are the demands that this economy is 
anticipating to put on the need for immigrants?
    Mr. Holtz-Eakin. If you look, first, just at counting 
bodies, the striking fact is that the native-born population in 
the United States has a below replacement rate level of 
fertility, so that mechanically, in the absence of immigration, 
the population will not grow; in fact, it will decline.
    Mr. Miller. That was your first chart that we were seeing 
there.
    Mr. Holtz-Eakin. And we have spelled that actually in 
greater detail in other reports the CBO has done over the long 
term. I would be happy to get those to you.
    So just in bodies it is clear that immigration is central 
to the future demography of the United States. Part and parcel 
to that is the future looks even more like the past 10 years 
under those circumstances. Half of the labor force growth was 
by immigration in the past 10 years. In the future, it is 
obviously central to labor force growth.
    Below counting just the number of bodies, it will depend on 
the characteristics of the workers that come in, and I hope 
that the message that the report conveyed was that is a first-
generation impact. The characteristic that matters the most in 
the labor market is education, for example. The next generation 
looked much more like the native-born and as a result the 
skills that they will have are more dictated by what they do 
here than their country of origin.
    Mr. Miller. But the demand is going to continue to be 
there. How we manage that population, again, whether it is 
going to come illegally or legally and what restraints we are 
going to put on that, the fact of the matter is the demand is 
going to be there from the internal growth of the economy.
    Mr. Holtz-Eakin. The mechanics of economic growth are that 
you get more in the future by adding more workers and more 
skills for those workers, adding more capital through saving 
and accumulating assets for the future and by adding new 
technologies that allow you to use both the capital and the 
workers more effectively.
    If you cut down on the ability to grow resources in the 
human part, you would have to rely much more heavily on the 
others in order to continue to have rates of growth that are 
comparable in the future.
    Chairman Boehner. Would my colleague yield for a moment? I 
want to get to the point of what Mr. Miller is bringing out 
here, just as a basis for where our economy is going in the 
future. We have got the largest generation in American history 
on the verge of retirement, and we are going to live longer, 
healthier, more productive lives than any generation in 
history. But we are followed by succeeding smaller generations 
of Americans. And if we are going to see growth in our economy 
and growth in GDP, we don't have a domestic labor force in 
order to support that. Is that the point that you are making?
    Mr. Holtz-Eakin. You have got three things going in to get 
more coming out. It is people, capital and technologies. And if 
the labor force doesn't grow, it is going to be much more 
difficult to get comparable levels of overall economic 
expansion in the future.
    Chairman Boehner. And I think the point that you made in 
your opening testimony and to Mr. Miller is that over the last 
10 years half of our growth in the labor market has come from 
foreign-born workers.
    Mr. Holtz-Eakin. Yes.
    Chairman Boehner. Thank you.
    Mr. Miller. Thank you.
    Chairman Boehner. The Chair recognizes the gentleman from 
California, Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman.
    I also want to thank you for the work that you have done at 
the CBO----
    Mr. Holtz-Eakin. Thank you.
    Mr. McKeon [continuing]. And wish you all the best.
    I am from California and we have--I just bought a new home, 
and most of the people that worked on the home from all phases 
were speaking Spanish. I speak Spanish, so I was able to 
communicate a little bit. And I notice, as I see people working 
in the--doing landscaping, all of them are speaking Spanish. 
All of the people that are doing the landscape maintenance seem 
to be speaking Spanish, and as you go to restaurants, hotels, 
service industries, many of them are speaking Spanish.
    Now, what I am wondering is, I see the high percentage, one 
in three workers in California comes from Mexico or South 
America. How do you get these numbers? How do we know how many 
people are here legally and how many people are here illegally? 
How do you find those numbers out?
    Mr. Holtz-Eakin. There are a variety of data sources to 
which one can go. There are the administrative records for 
authorized immigration, and one can keep track of those who 
entered either on family preferences or those targeted toward 
economic reasons. One can also go to survey data census and get 
information from those.
    And then one is left with the difficulty in both those 
circumstances of trying to guess at the fraction of the 
population that is here illegally, that does not show up in the 
administrative data and may not answer the questions on a 
survey in a way that revealed that they were here on 
unauthorized status.
    And so that is the part of this that is, quite frankly, the 
most difficult to judge. And the estimates range pretty widely, 
7 to 10 million illegal immigrants is a standard bound for that 
estimate at the moment.
    So I won't pretend to say that we have a great deal of 
precision in all parts of these calculations.
    Mr. McKeon. Most of the trades that I mentioned are--I 
mean, some of the jobs are pretty well paid, I would think, in 
the construction industry. Most of the service jobs would be on 
the lower scale, I would think, of economically--we haven't 
talked at all about H1B visas or people that we are bringing in 
that are on the higher end of the scale. And I would imagine 
that if we have figures, most of those people that are on the 
higher end of the scale would be here legally. Do you have 
anything that shows any----
    Mr. Holtz-Eakin. We can get back to you with what we have 
on that, but I don't think we have a real discrete breakdown in 
the illegal immigrant population in terms of the skills they 
brought.
    Mr. McKeon. This illegal versus legal causes so much--you 
know, when we have town hall meetings, we get--it really is 
emotional, the kickback on people. But I think if you took all 
of the people in California that are there illegally, and, 
again, we are just guessing at these numbers because nobody 
really knows. You can't ask people. In my area where I live, 
you can see people standing along the street waiting for jobs, 
you can see the same thing here in Northern Virginia, and I 
think people probably assume that they are here illegally, but 
nobody really knows.
    If all of those people were picked up and removed from the 
country immediately, I don't know what that would do to the 
economy. Is anybody even thinking about that or looking at 
that? I know there are a lot of people that would like to see 
that done, but it seems to me that the service industry, the 
agricultural industry, the construction industry would 
basically shut down where I come from.
    Mr. Holtz-Eakin. Let's take 10 million as a round number, 
easy to work with. Suppose there are 10 million members of the 
labor force who are here illegally and they were suddenly to 
disappear from the economy. The labor force is 140 million 
people, roughly, so you are looking at something that is a bit 
under 10 percent of the labor force, 10 percent of the 
available labor to the U.S. economy. If that were to be 
unavailable in a very short period of time, that would have a 
dramatic economic impact, there is no question.
    Mr. McKeon. Mr. Chairman, my time is up, but if I may ask 
just one more question. One of the things that has really 
concerned me is it is fairly easy to get a phony Social 
Security card. If a person gets one of those, goes to an 
employer, gets a job, the Social Security is withheld from 
their wages, sent back here to Washington, what ever happens to 
that money? It is not paid out because somebody's not going to 
collect on a phony Social Security card. What happens to that 
money?
    Mr. Holtz-Eakin. The Social Security Administration has a 
fund where it has earnings records that it can't match up with 
beneficiaries, either present or in the future, and the 
presumption is that fund reflects the contributions of those 
who are here illegally who are paying Social Security taxes, 
and it has accumulated over the years to be a large sum of 
money--over $400 billion.
    Mr. McKeon. Four hundred----
    Mr. Holtz-Eakin. Billion dollars.
    Mr. McKeon. With a ``B.''
    Mr. Holtz-Eakin. With a ``B.''
    Mr. McKeon. So what is the incentive then for the 
government to fix this problem?
    Mr. Holtz-Eakin. I think you are in a better position to 
answer that question than I am, sir.
    [Laughter.]
    Mr. Johnson. Thank you.
    Thank you, Mr. McKeon.
    The Chair recognizes the gentleman from Virginia, Mr. 
Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    I wanted to follow up on that same line of questioning as 
to what effect immigration policy has on the long-term solvency 
of Social Security. You have kind of talked around it. Are we 
suggesting that a more liberal immigration policy might solve 
the Social Security problem?
    Mr. Holtz-Eakin. I am not suggesting that. I would say that 
the broad demography of the country is heavily influenced by 
immigration, particularly going forward, no question about 
that. It would be the case that if immigration were to increase 
above the levels expected in projections such as ours, that we 
would age slower, and that to the extent that the form of 
people paying Social Security taxes and not yet getting 
benefits, it would transitorily put off some of the 
difficulties in financing Social Security.
    It would not, however, solve the problem over the long 
term. Eventually, those same immigrants would collect 
immigrants, and that would go the wrong direction from the 
point of view of Social Security finances. So the key policy 
problem of benefits promised being above revenues dedicated to 
Social Security would remain, it would just change the timing 
and the scale.
    Mr. Scott. But the solvency of Social Security can be 
affected--the calculations are affected by immigration policy.
    Mr. Holtz-Eakin. Certainly.
    Mr. Scott. H1B visas, I have heard some say that they 
actually increase employment and help the economy, because for 
every one that comes in, they have to have assistance and 
everything, and they help stimulate the business. What effect 
do H1B visas have on the economy?
    Mr. Holtz-Eakin. We have not done a direct study of H1B 
visas. I would say that in trying to answer the question about 
how immigration affects the wages of the native-born, it is 
those kinds of adjustments that are important. When a person 
arrives in the labor market, they arrive with several things. 
They arrive with skills. H1B visas are targeted to high skill 
individuals. They sometimes bring assets, and that wealth is 
available to the economy. And they bring consumer demand.
    The next impact, as a result, can be to attract additional 
workers that are a complement to that skill, make capital 
investments more profitable because they complement that skill, 
and the earnings and the wealth are available for purchases. So 
it is clear that those impacts are present. Separating out just 
the H1B visas versus others, we haven't done that.
    Mr. Scott. We can't be the only country that has an issue 
of immigration. What other countries do? How do our immigration 
policies compare to immigration policies of other countries?
    Mr. Holtz-Eakin. I am not conversant with the law on 
immigration policies in other countries. I do know that from an 
economic perspective, the basic population dynamics that are 
present in the United States are both more dramatic and 
happening quicker in Europe, which is aging quite rapidly. It 
also will be true in the future for China, which will age very 
rapidly. And in all those circumstances, immigration has the 
potential to change the future demography.
    And so I think while I am not conversant with the laws, the 
fundamental pressures are the same in many other parts of the 
globe.
    Mr. Scott. If we wanted to limit immigration, how realistic 
is the border control as a strategy?
    Mr. Holtz-Eakin. Not my area of expertise.
    Mr. Scott. Other than border control, what other strategies 
would be available to try to discourage illegal immigration?
    Mr. Holtz-Eakin. Immigration is driven by the combination 
of push and pull factors. So conditions in the country of 
origin, the economic and social conditions are an important 
part of the decision to leave that country.
    To the extent that if you look at the kinds of policies 
that the U.S. has adopted, some reflect economics, some reflect 
families, but some also reflect the desire to provide asylum 
and refuge for immigrants. So there are political and social 
aspects to the country of origin that the U.S. may be able to 
influence. There is the economic prosperity in the country of 
origin an the ability to influence that is far more limited, 
obviously.
    So there is a set of things that may or may not have 
dramatic impacts but which one could go to.
    On the pull side, it is the performance of the U.S. 
economy, which has been simply outstanding by international 
standards. It is a country that has grown rapidly, certainly 
compared to other developed countries. It has, as a result, 
greater opportunities for individuals when they come and join 
the labor force. It rewards labor market skills, so if you have 
skills and can display them, that is an opportunity.
    So in between you can put an immigration policy, maybe 
including border controls, but the core issues are what are 
situations in the countries of origin, what are the attractions 
in the United States?
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Johnson. You bet.
    Let me ask you a question. You indicate that you understand 
what the education level is, but if we have got--and you say 7 
to 10 million. I have heard numbers higher than that. 
Obviously, we have got a lot that are illegal that you don't 
have your finger on. So how do you extrapolate between those 
that are really illegal and here that we don't know about, and 
how do you judge the education level?
    If they are from Mexico or Central America and heavily 
concentrated in certain industries, a lot of which require very 
little formal education, is there any evidence in your instance 
that those workers are moving out of those jobs and into 
occupations that require more advanced skills or are they 
likely to remain stationary in the certain jobs and industries 
of the lower skill level?
    Mr. Holtz-Eakin. First, as I stressed, I would not oversell 
the precision of any particular estimate of the size of the 
illegal immigrant population. The numbers that we presented 
today are based on census data, so the questions that one would 
ask a respondent would be, what is your country of origin, the 
United States or otherwise, and how much education do you have. 
And that is the foundation for the numbers that we presented.
    In terms of post-entry mobility, the evidence is that those 
individuals in the labor market, native-born or foreign-born, 
who have more experience get paid more, so there is a natural 
return to continued participation in the labor market. There is 
some evidence as well that the foreign-born actually get a 
little faster growth than do the native-born, so that with 
additional experience they will make more, and often that 
involves changing jobs. We don't have a particular study of 
switches from occupation to occupation, but the profiles are 
consistent with that.
    Mr. Johnson. Well, you said you had no indication of H1B 
visa people, but do you have anything on student visas?
    Mr. Holtz-Eakin. Similarly, no.
    Mr. Johnson. You haven't done a study on them, is what you 
are saying.
    Mr. Holtz-Eakin. No, but if there are details that we could 
provide, we would be happy to work with you on that.
    Mr. Johnson. Thank you. You know the higher percentage of 
immigrants in 6 states, and I wonder if you can describe the 
labor market in those states compared to the other 44, which 
only receive 8 percent of the immigrant population. Are they 
being admitted on an employment-based preference or through 
family connections or what? Is it just easier for them to get 
to those states?
    Mr. Holtz-Eakin. I don't have those details on either side, 
either the characteristics of the categories for which they 
were admitted or the characteristics of the native-born 
population. But I guess in a hearing on immigration, which is 
global mobility of labor, what I would certainly urge the 
members to remember is that there is national mobility of labor 
as well, and to think of these states as labor markets isolated 
from other states is certainly misleading.
    The native-born population dominantly arrives in these six 
states, but we have seen over periods of a decade far greater 
prevalence in other states as well. So there is internal 
migration of the foreign-born and there is well-documented 
migration of the U.S. native-born population. It is a very 
mobile society. It is not really safe to say there is a 
California labor market and a New York labor market.
    Mr. Johnson. OK. Well, you know, some of them come in, they 
are other than Mexican or Central American, but they give them 
Mexican names, and how do you assess that information? Because 
in Texas alone, just in the last 6 months, we think there are 
around 60,000 that have come in illegally that are other than 
Mexican. How do you determine what that segment of population 
does or do you?
    Mr. Holtz-Eakin. We rely on other sources, and I will have 
to get back to you about the details of how they do the 
classification.
    Mr. Johnson. Thank you very much.
    The Chair recognizes Mr. Grijalva for 5 minutes.
    Mr. Grijalva. Thank you. Let me just go back, and I think 
it is just one question, and it has probably been asked 
already.
    The correlation established between education, English 
acquisition, in terms of not only mobility in the labor market 
but the rising standards of wages, if you could just elaborate 
for the committee and for myself on that point.
    Being first-generation American, my dad came from--he was 
foreign-born, that seems to be a traditional pattern amongst 
first-, second-, third-generation native-born Americans that 
you see that economic-social progression as it goes along. And 
if you could just elaborate on those points.
    Mr. Holtz-Eakin. Well, I think that the key features of 
that are, No. 1, the labor market rewards education, and that 
is a well-documented empirical regularity in the United States, 
and that reward education, sometimes known as the skill 
premium, sometimes known as--if you get a college degree what 
the bonus is in lifetime earnings for doing that. That is not 
something that is different for native-born versus foreign-born 
workers. The labor market rewards skills.
    The table I showed, which has way too many numbers in it, 
was designed to show that for any particular set of immigrants, 
higher skills are better, and that seems to be a clear 
empirical regularity, that what we have seen in the foreign-
born population is this bifurcation between a large fraction 
from Mexico and Central America who arrive with relatively low 
education and the rest of the world, which arrives with 
relatively high education, and the earnings reflect that. The 
latter group looks much more like the native-born population in 
its earnings.
    And then the third point is simply that children of 
immigrants look very different numerically than do the parents, 
and that is because underneath their rising earnings is rising 
educational attainment. And so I think that whether the 
immigrants of the United States acquires more skills and 
education and more experience and experiences, rising wages or 
whether their children simply acquire greater education prior 
to entering the labor market, the same basic economics are at 
play. Education matters, skill matters, and rewards rise 
accordingly.
    Mr. Grijalva. And how does your report, if you do at all, 
account for one job category--and I will put it as migrant 
worker, agricultural worker--among the foreign-born? Is there 
even a guesstimate as to what that percentage would be when we 
are looking at job classifications?
    Mr. Holtz-Eakin. We have in the report some details on 
immigrant foreign-born workers by industry and occupation. And 
so the agriculture industry, for example, has a sort of fairly 
small total labor force but a fairly high concentration of 
immigrants from Mexico and California or Central America.
    Mr. Grijalva. And the last general question, and you 
touched upon it in your comments and in your report, and maybe 
just to expand a little bit on that point, how do foreign-born 
jobs lead to the creation of jobs for the native-born, if you 
understand my question?
    Mr. Holtz-Eakin. The mechanics of growth are always to 
increase the capacity to produce goods and services, and so an 
immigrant with skills increases that capacity, and then the 
tandem requirement is that there be a desire to purchase that 
capacity. And if a high school person comes in and makes a fair 
amount of money, they will buy things as well. And in the 
presence of those, you will see the economy continue to not 
only maintain its current level of employment but to actually 
grow, and that would bring jobs to additional members of the 
labor force, including the native-born.
    Mr. Grijalva. Economically, not politically, economically, 
can our country afford to, say, eliminate the 6 to 10 million 
unauthorized workers in this country, and what would that do to 
the economy?
    Mr. Holtz-Eakin. The economics are that this is a resource 
for the economy, regardless of the legal status of the 
immigrant. They represent an economic resource in both their 
time they can spend at work, at the skills they bring to that 
work and the purchasing power they bring as consumers.
    Taking away those resources would limit the economy to some 
extent. The cost of that and whether it is ``worth it'' would 
be in the eye of the beholder. But, mechanically, this is a 
resource, and diminishing your resources lowers your capacity 
to produce.
    Mr. Grijalva. Thank you, sir.
    Yield back, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentleman from 
Georgia, Mr. Norwood, for 5 minutes.
    Mr. Norwood. Thank you very much, Mr. Chairman. It seems 
pretty clear to me that if one of the purposes of our hearing 
is to establish do we need some foreign workforce in our 
country to sustain our economy, that is pretty clear. I don't 
think anybody would much disagree with that. Nor would they 
disagree with that is probably going to hold for years to come.
    The problem is we don't control that workforce. Therefore, 
there are so many illegally coming into the country that it 
indeed does affect native workers, at least where I am from.
    Maybe you know exactly but how many people are allowed 
legally to come into our country each year to work that come 
through the normal system?
    Mr. Holtz-Eakin. It is a number that we can give you, but I 
don't know off the top of my head. There are employment 
preferences in the immigration law, and they have caps.
    Mr. Norwood. Anybody behind you know the answer to that? 
Well, let's ask the next question while they are looking.
    Can you give me an idea of how many people come into our 
country to work illegally each year?
    Mr. Holtz-Eakin. That is the number that is the most 
difficult to pin down, and so, no, we don't have a precise 
estimate of the annual flow. And, as I said, estimates of the 
total that have immigrated over the years range in the vicinity 
of 7 to 10 million, although many numbers have been talked 
about.
    Mr. Norwood. Well, they range from 7 to 15 million. And I 
think you probably could be fairly reasonable to say it has 
been about 1 million a year. It has been somewhere in that 
area, and maybe it is 1.5 million 1 year and a half another 
year, but it is right in that range.
    Where I am going here is that I want to know if we are 
allowing enough people to come into our country to work 
legally. We should know what that number is, how many are 
legally allowed to come.
    Mr. Holtz-Eakin. The numbers that we have in the slides, 
the total for 2004 was a bit under 1 million, 950,000. Of that, 
600,000, roughly, were family based immigrants, and so that is 
unlimited for immediate family members and more limited for 
more distant family members. And then about 155,000 in the 
explicit employment-based preference, H1Bs and the many other 
categories. So that is 155,000 in economically targeted 
admissions preferences out of a little under 1 million total.
    Mr. Norwood. But others of those came seeking work. I would 
assume most of them either come to seek work or either go to 
school, and most of those you are talking about--I shouldn't 
say most--some of those you are talking about, in fact, aren't 
working, they are dependents, so they are a part of our 
society, and do we need to raise that number so that we can get 
a proper number of legal workers in this country, so we can 
balance it with the needs of native workers after we secure the 
border? So do we need to raise the number or not? If we are 
going to need more workers in the next 25 years, why don't we 
raise that number?
    Mr. Holtz-Eakin. It is certainly among the options that the 
Congress has for thinking about the future immigration policy. 
The economy will adjust. I think the important economic lesson 
is the economy will adjust to whatever demography evolves. The 
question is whether it is preferable to have that demography be 
the largely native-born, low-fertility future or one which has 
a greater allowance for immigration.
    Mr. Norwood. I know it adjusts for your on your big 
numbers, but it doesn't adjust for my friend in Decatur, 
Georgia who lost his job because the textile plant closed, 
because it went to Mexico and now can't get a job in the 
poultry industry because illegal aliens have the jobs. He views 
it a little differently than you do.
    You seem to indicate you know the cost to us concerning 
Social Security. I think you said $400 billion?
    Mr. Holtz-Eakin. There is an account that the SSA keeps, 
which is the total payroll taxes which cannot be properly 
matched up, and the presumption is that a large fraction of 
that is due to the work of illegal immigrants and the taxes 
paid on them.
    Mr. Norwood. So if we didn't have illegal immigrants, we 
wouldn't have that income? Is that what you were saying?
    Mr. Holtz-Eakin. No. I think there would be an adjustment 
so that perhaps we would have the native-born either in those 
jobs or making more in the jobs that they have or some other 
economic future, but it wouldn't be a dollar for dollar 
subtraction.
    Mr. Norwood. It is interesting that you say weren't they 
there we would have native-born taking those jobs, paying 
Social Security, so we would have no slack in Social Security.
    Just one last question: Do you have any idea what it costs 
this country for illegal alien workers in terms of our cost of 
the health care system and the education system and the welfare 
system? Is that anybody factoring that cost in to all of this?
    Mr. Holtz-Eakin. The impact of immigration on both state 
and local and Federal budgets is a very important question. 
Among the studies that we are planning to do is a study in that 
area. We have a series of immigration reports which were 
requested by the Senate Finance Committee, and that is in our 
future.
    Mr. Norwood. So we realize that that is an extreme cost or 
a large cost.
    Mr. Holtz-Eakin. We will be happy to share with you the 
results when it is done. I won't prejudge the answer.
    Mr. Norwood. Thank you, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentlelady from 
California, Ms. Woolsey.
    Ms. Woolsey. Thank you, Mr. Chairman.
    And let me first express my thanks to you, Mr. Holtz-Eakin. 
The work you have done as Director of CBO puts a high standard 
for anybody in a government Director's position like yours, and 
I wish you luck in the future. And I also wish your successor 
luck in hope that that individual be as non-partisan as you 
have been able to be in your job. I respect that very much. 
Thank you.
    So now, I am from California. Do you think that the states 
like California with a high population of immigrants need to do 
a little bit more in studies or are these studies conclusive 
enough about questions like, are immigrants taking jobs from 
native-born Americans? How are we doing in educating new 
immigrants, particularly non-English speakers?
    And are immigrants staying in school when they come to our 
country and reaching the goal of graduation or what is 
happening? But, mostly, are they are really taking our jobs, 
and are we treating them fairly for what we get out of them?
    Mr. Holtz-Eakin. All very good and all very difficult 
questions, many of which, I would suggest, can be answered very 
well by members of the second panel, so I encourage you to ask 
the question again.
    To the extent that the studies we have done shed light on 
this, I think we have seen the facts on educational attainment 
of the second generation and beyond. So is it the case that 
there is education going on to which the immigrant population 
has access? Yes. I mean, the numbers suggest that.
    Are the foreign-born workers taking the jobs of native 
Americans, a very contentious and difficult question, and it is 
most difficult for an economist because it is hard to think of 
a job with a label on it that says, ``Dug hole, taken.'' I 
indeed am about to lose my current label and go do something 
else, and that is the key characteristic of the American labor 
market on both the employer and the employee side, that options 
shift continuously and people respond to the incentives of 
those new options, and that is on both the employer and 
employee side.
    So what we tend to see is a job market that rewards skill 
and in particular mastery of the English language. If you don't 
have those skills and you don't have mastery, you are at a 
disadvantage, and so the foreign-born with those 
characteristics end up with the jobs where they face the least 
disadvantage. They are not going to get the best jobs. It is 
hard to point in to the native-born population and say, ``That 
was supposed to be X or Y's job.'' Not a very economic notion.
    Ms. Woolsey. Well, maybe I could ask--I know this is 
opinion and maybe you won't say, ``Yes, we studied this"--but 
in my district we grow grapes and have wine, and we have cows 
and produce the dairy products for the Bay Area. Well, it isn't 
the native-born that are milking the cows or picking the 
grapes. If we raise the salaries of those jobs, would native-
born individuals take those jobs? I don't believe they will, 
but do you think they would?
    Mr. Holtz-Eakin. It is hard to find an economist who 
doesn't immediately appeal to the notion that if you pay people 
more, they will be more willing to do it. So I would suggest 
that it is certainly a degree of magnitude. If you turned those 
into $100,000 a year jobs, I would suggest that you could 
probably get a pretty good applicant list. Where then, how much 
would the pay scales, the benefits, the working conditions have 
to change to change the mix of employment? That is the harder 
question.
    But the key is the American labor market does make those 
changes, it does adjust, and pay rates, working conditions, 
compensation are not frozen in stone.
    Ms. Woolsey. Absolutely not. So would then the American 
economy--would the consumer be willing to pay a lot more for a 
head of lettuce or a bottle of wine or a glass of milk so that 
their kids could milk the cows and pick the grapes?
    Mr. Holtz-Eakin. You will probably get a very different 
answer if you have got the lettuce, the milk and the wine, 
depending on which you view as a necessity. People tend to pay 
for necessities, and if costs go up, they take off their 
expenditure on the luxuries in life.
    Ms. Woolsey. Thank you very much.
    Mr. Holtz-Eakin. Sure.
    Ms. Woolsey. And thank you for your work.
    Chairman Boehner. The Chair recognizes the gentleman from 
Nebraska, Mr. Osborne.
    Mr. Osborne. Thank you, Mr. Chairman.
    Thank you for being here today.
    I come from an area where there are a lot of cows, a lot of 
meat packing, and I occasionally go to a meat-packing plant and 
sit down with the people who run the place and I will say, 
``You have got a lot of guys here who have come in here 
recently and are they all here legally?'' ``Oh, yes, they 
are.'' And I have a strong suspicion that is not always true.
    And I just wondered if you had a good feel as to if an 
employer really wants to know, I mean, if it is really a big 
deal to have accurate documentation, if there is a way to find 
out and to--because it seems to me like some of the onus needs 
to be put on the employers, and as long as they are willing to 
accept fake documents, which sometimes they know are fake 
documents, we will continue to have much of what we are seeing. 
So I wondered what your impression was of this problem.
    Mr. Holtz-Eakin. Well, it is certainly the case that 20 
years ago when Congress visited this issue it did put the onus 
on employers to verify the status of their employees. And I am 
not an expert in the degree to which it is possible to fool an 
employer, and I am not in a position to speculate on the degree 
to which they really push hard to verify the documents that 
they might receive.
    It is the case that from a pure economics point of view a 
participant in the labor force is a participant in the labor 
force. It is true, however, that this is a nation of laws and 
that if one is in violation if the law and if an employer is 
willing to hire in violation of the immigration laws knowingly, 
they may have a modest competitive advantage and it is no 
longer equal in that case. And so compliance with the law is a 
central part of how we mean to do business in America, and 
noncompliance changes the economics as well. It is not 
completely immaterial.
    Mr. Osborne. I guess my question is getting more at the 
point of do you feel the tools are there so if an employer 
really wants to push the issue and find out for sure whether 
they can or not? Because right now it is very convenient if 
somebody comes in with what looks like a pretty good set of 
documents and he can just kind of give it a wink and a nod and 
say, ``OK, you are acceptable.'' But what I am getting at is if 
the penalties were high enough and it really was something you 
have to figure out if the information is available.
    Mr. Holtz-Eakin. The success will be determined by two 
pieces: The incentives and the capacity. So if there is money 
to be made, there is an incentive. If there is a great penalty, 
a really substantial penalty, then that is a cost that most 
employers would hesitate to incur, and that would deter it. And 
in between is how well can they screen the documents? I just 
don't know, and we would be happy to work with you on that.
    Mr. Osborne. I have one other issue. I, like lots of 
people, have got a bill, probably a whole stack of them 
somewhere, nobody's going to read most of them. But there are 
really two problems. One is border security and the other is 
the issue of once people are here, once they are in the country 
and they are not documented, what do you do with them.
    And so one proposal I would like to float by you and see if 
you have an opinion on it is if someone is here illegally, they 
have a good work history, though, and they have a job, an 
employer will vouch for them, they have no criminal record, 
good family background, and if you filled out the paperwork 
here saying the employer likes him, wants him back, they went 
home to their country of origin, signed in with the consulate, 
came back with a work permit, I think the question many people 
have, well, how many people who are undocumented would be 
willing to take the risk, would be willing to come forward?
    And, again, I am asking you to speculate, but do you see 
anything like this, because, you know, you hear all the 
concerns about amnesty and if they are already here 
undocumented and we somehow give them the legal status while 
they are here, then it simply invites another wave of 
undocumented workers. Does something like this seem workable to 
you or this is beyond your expertise?
    Mr. Holtz-Eakin. Most of it is beyond my area of expertise. 
I think what you are asking is----
    Mr. Osborne. Beyond mine too. That is why I am asking. Go 
ahead.
    Mr. Holtz-Eakin. I think that a way to characterize the 
outcome that most people seek is how to bring everyone into 
compliance with the law and obtain that policy objective. 
Objective No. 2 is to take advantage of the skills and 
resources where employers value them and individuals have 
displayed them. And, No. 3, set up proper incentives so that 
that is reinforcing in the future and doesn't have to be 
monitored and redressed again.
    That is very difficult to hit all three simultaneously, and 
the costs of doing it are going to differ. So I really can't 
give you a firm answer on whether that strategy is going to be 
the best.
    Mr. Osborne. OK.
    Thank you, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentleman from 
Ohio, Mr. Kucinich, for 5 minutes.
    Mr. Kucinich. Mr. Chairman, I want to thank you very much 
for holding this hearing and to begin the hearing as you did in 
saying there is no particular agenda. I think that is 
important. I also think it is important for those of us who 
have been speaking to these issues for years to use this as an 
opportunity to point out that immigrant workers should have 
their basic human rights stated and protected as well as basic 
workers' rights stated and protected.
    Workers who come to this country should not have their 
immigrant status abused by being forced to accept sub-minimum 
wages of having working conditions that would be deplorable but 
which they can't object to because of the enormous power that 
employers have.
    Having said that, I think that it is important to realize 
that Hurricane Katrina left hundreds of thousands of people out 
of work, according to the Congressional Budget Office's 
September estimate. Many, many homes and workplaces were 
totally destroyed. The reconstruction effort will, in all 
likelihood, be the primary stimulus in employment in the 
foreseeable future. But will the victims of the hurricane get 
the jobs created by the reconstruction or will workers from 
outside the region, in some cases from outside of the U.S., get 
these jobs? Congress, to date, has done nothing to require or 
encourage the Federal reconstruction aid be tied to employing 
out of work hurricane victims.
    Now, Mr. Holtz-Eakin, I am holding in my hand a leaflet 
from the Accent Personnel Services, Inc. It is a labor force 
recruiter of Mexican labor that specifically markets Mexican 
workers for hurricane relief as an integral part of an 
employers' long-term workforce.
    The Christian Science Monitor reported that the Department 
of Homeland Security has informed employers that they no longer 
have to verify the immigration status of employees involved in 
the reconstruction. If recruiters, like Accent Personnel 
Services, Inc., are successful in placing immigrant labor in 
the large percentage of the contractor and grantee jobs created 
by the reconstruction, there will be significant effects on the 
local economy in the Gulf region.
    So I would like to ask first, has CBO estimated the number 
of immigrant workers who are currently employed in the 
reconstruction of New Orleans?
    Mr. Holtz-Eakin. No.
    Mr. Kucinich. Has CBO evaluated the prospects of hurricane 
victims to receive the jobs created by the reconstruction in 
light of the pressures created by labor recruiters to bring in 
workers from outside the U.S.?
    Mr. Holtz-Eakin. No.
    Mr. Kucinich. And what are the barriers facing hurricane 
victims?
    Mr. Holtz-Eakin. The barriers facing hurricane victims, 
from a broad perspective, are that, first, many have lost 
substantial amounts of wealth and their primary employers, and 
in some cases they are also no longer physically in the Gulf 
region. So they face barriers that are access to funds that 
would allow them to restore their homes, and there are Federal 
programs to assist them in that. They have, in some cases, the 
cost of getting back to the region, and then there are the 
issues associated with finding a new job, searching for a new 
employer, matching up your skills with the needs of those 
employers. And during reconstruction, the nature of economic 
activity will shift from that which was present before and the 
skills won't match automatically.
    Mr. Kucinich. Has CBO evaluated the additional cost to the 
U.S. Treasury that would be expended on unemployed victims of 
the hurricane in terms of unemployment insurance, disaster 
unemployment insurance, Medicaid, food stamps and other forms 
of Federal assistance if they cannot find work in 
reconstruction?
    Mr. Holtz-Eakin. We have some estimates, broad brush 
estimates that are difficult to pin down on the impact of 
ongoing programs, whether they be the ones you mentioned or tax 
collections as a result of the hurricanes and the economic 
impacts. I would be happy to get those to you, but they are all 
entirely speculative at this point, because we have no firm 
knowledge of the precise employment loss in the Gulf region as 
a result of the Hurricanes Katrina and Rita.
    Chairman Boehner. The gentleman's time has expired.
    Mr. Kucinich. Could I ask one more question?
    Chairman Boehner. Go ahead.
    Mr. Kucinich. Has CBO estimated the savings that would 
result from the employment of hurricane victims?
    Mr. Holtz-Eakin. No, we have not.
    Mr. Kucinich. OK.
    Mr. Chairman, I asked those questions. I would appreciate 
it if the Chair would ask on behalf of the committee for us to 
get this information and to ask if CBO can move forward and 
create some of this data so that we can make a more effective 
evaluation of the impact of an immigrant workforce on a region 
that has been deprived of a lot of jobs and which people are 
desperate for employment.
    Chairman Boehner. The gentleman, like any other member, can 
request this information of CBO, and I would certainly--if you 
would like to ask them that question in writing, you are 
certainly welcome to do that.
    Mr. Kucinich. Well, we will submit it in writing and use 
this forum to ask if you would be willing to cooperate in 
providing a response?
    Mr. Holtz-Eakin. Certainly to the extent that we can, we 
will. We have already provided two letters to the Congress on 
our best guesses about the impacts of the hurricanes on 
programs like that. I would caution the congressman that there 
is not much more we are going to know, but we will certainly do 
our best.
    Mr. Kucinich. Chairman, I want to thank you, and I would 
like to submit this letter for the record.
    [The information follows:]
    
    
    Chairman Boehner. The Chair recognizes the gentleman from 
New York, Mr. Bishop, for 5 minutes.
    Mr. Bishop. Thank you, Mr. Chairman, and let me thank you 
very much for hosting this hearing. Of all the issues that we 
deal with as Members of Congress, I have not encountered any 
that engenders the level of emotion and passion that this issue 
does, particularly the more specific issue of illegal 
immigration.
    Several questions I had have already been asked and 
answered, and, thank you, by the way, very much for your 
testimony. I found it to be very helpful.
    One of the solutions that some propose to the problem of 
whether it is 7 million or 10 million or 12 million or 15 
million illegal immigrants in the country is mass deportation. 
You have already indicated to us, I believe, in response to a 
question from Mr. McKeon that such a solution would have an 
enormous impact on our economy if you were to extract 10 
percent of the workforce. You said that would have an enormous 
impact on our economy.
    Have you done any studies that would assess the logistics 
of such a decision? I mean, it strikes me as a relatively 
daunting exercise, both financially and logistically, to find 
and round up and then transport 10 million. Have you done any 
studies on that?
    Mr. Holtz-Eakin. No, we have not.
    Mr. Bishop. OK. Second issue: The whole issue of the 
underground economy and people earning money on which they 
don't pay taxes. You have indicated to us that there is a fund 
of some $400 billion that the Social Security Administration 
cannot correctly link with an eligible recipient, and you have 
indicated that some significant portion of that presumably is 
related to undocumented workers who have false Social Security 
identification.
    Have you done any estimates of the revenue that accrues to 
the Federal Government paid by this undocumented workforce or 
the revenue that accrues to state and local governments as a 
result of sales tax that is paid by this undocumented 
workforce? Have you any way of determining that impact on, if 
you will, public revenue?
    Mr. Holtz-Eakin. We have not done any studies of that type. 
There are two different issues. One is the earnings and 
payments by illegal immigrants into various state, local and 
Federal coffers. And then the second issue is the degree to 
which there is an underground economy and evasion of legally 
owed taxes, which of course doesn't divide on native-born 
versus foreign-born lines. So we don't have any particular 
information on those. We have relied on the reports of other 
agencies.
    Mr. Bishop. One more question. Mr. Norwood was asking some 
questions having to do with the impact on hospital costs and 
school costs. The whole issue of unreimbursed care for our 
health care system, as you know, is a huge issue. Have you done 
any assessment of what proportion of the unreimbursed care 
problem is related to this undocumented workforce and how much 
is related to the fact that we have an enormous number of 
native-born people who don't have health insurance themselves?
    Mr. Holtz-Eakin. No. We don't have that decomposition. To 
the extent that there is interest in the impacts of immigration 
on various programs even at the state and local level and then 
as the immigrants stay, work, get higher earnings, there is a 
National Academy of Sciences study a little over a decade ago 
that looks at the payments over the life of an immigrant and 
the drawing of benefits early, taxes paid later, and that is 
probably the best source at the moment.
    Mr. Bishop. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentleman from 
New Jersey, Mr. Holt, for 5 minutes.
    Mr. Holt. Thank you, Mr. Chairman.
    And thank you, Mr. Holtz-Eakin. I appreciate the way you 
are letting the facts speak rather than ideology speak, and I 
suppose the measure of how successful you have been in steering 
a fact-based course is how many people you have made mad on 
both sides of the aisle. I thank you for your good work and 
wish you the best.
    In your report, you talk about the importance of native-
born workers in various occupation groups and they are 
particularly important in computer and mathematical sciences, 
architecture and engineering, life, physical-social sciences. 
The National Academy of Sciences and a number of education 
groups have talked about the downturn in recent years of 
foreign-born students, particularly in the sciences and 
technical fields. There may be a slight turnaround in recent 
months, in the current year.
    One of the questions that I wanted to understand is, how 
those foreign-born students enter these occupational 
categories. Are they temporary, are they long term? Will this 
downturn that we have seen in recent years leave us with 
employment shortages in those areas?
    So I mean, I guess I would like to ask you--I don't think 
you have been able to address this but I would like to ask the 
importance of this downturn in foreign-born students for the 
research and educational effort itself, but maybe you are not 
able to answer that and maybe we will ask the other panel. But 
maybe you can answer how this foreign-born educational cohort 
gets into the workforce, whether it stays and whether this is 
likely to lead to a long-term shortage?
    Mr. Holtz-Eakin. There are two components to the answer. 
The first, just for concreteness, imagine an individual coming 
to the United States to go to graduate school, get an advanced 
degree. The evidence is that those individuals tend to stay in 
the United States. If you look out 2 years later, they tend to 
still be in the United States.
    We don't have precise estimates of exactly how long, how 
many stay in the United States as opposed to go back to their 
country of origin, but, roughly speaking, there is a 
substantial persistence. So they come, they get jobs here, they 
bring those skills into the U.S. labor market.
    So to the extent that fewer show up and then fewer stay on, 
mechanically you see the impact pretty directly.
    The harder part of the answer----
    Mr. Holt. Do you have numbers or can you point us to 
someone who does have numbers?
    Mr. Holtz-Eakin. We can get some things for you on that.
    The harder part to answer is, how then, if that were to go 
on for a substantial amount of time, how everyone else reacts. 
I mean there are now opportunities to make good money if you 
instead of stopping at a B.A. or B.S. go on to get a master's 
or a Ph.D. And over the long haul those incentives do matter, 
and maybe those incentives will be taken up by the native-born 
population and they will end up with the degrees. And they will 
fill in what would be perceived to be a gap. That is a question 
of time and magnitude and it is hard to pin down.
    Mr. Holt. Yes. One other question I wanted to make sure I 
understand. In one of your graphs, you talk about the average 
years of education completed for native-born members of the 
workforce and for foreign-born members of the workforce. And I 
was interested to see that for foreign-born members of the 
workforce, it is about a year less of education.
    So in your remarks you say there is enormous difference in 
the amount of education, but here it sounds like it is kind of 
a 10 percent difference in the number of years of education. Is 
that even meaningful to look at the average, because it is 
probably bimodal, where you have one segment of the non-native-
born population that is undereducated, another segment of the 
non-native-born population that is highly educated? Do you 
think it is meaningful to talk about average years of education 
completed?
    Mr. Holtz-Eakin. I regretfully announce that you have 
described our study better than I did. That is exactly what is 
going on. It is bimodal. The foreign-born from Mexico and 
Central America have substantially less education, both than 
the native-born population and less than other immigrants who 
are above the native-born population, on average. So it is 
always better to look at the details, and in this case it 
really does break apart into those two groups pretty cleanly.
    Mr. Miller. Russ, would you yield for a second?
    Mr. Holt. Yes.
    Mr. Miller. Thank you for yielding.
    Mr. Holt. I would yield to the ranking member.
    Mr. Miller. You want to hear the answer to this question. 
You know you want to hear it.
    Mr. McKeon [presiding]. Go ahead and yield your unyieldable 
time.
    Mr. Holt. I yield my nonexistent time to the gentleman from 
California, Mr. Miller.
    Mr. Miller. Thank you. I have spent most of my life 
operating on other people's nonexistent time.
    [Laughter.]
    If there is a clash to take place, looking at the 
information that Mr. Holt just presented to you and in your 
charts, it would appear that it is that grouping in the 
population that is somewhere between 9 and 13 years of 
education, that if you are going to have a serious competition 
for relatively few jobs at that area, that is where it is more 
likely to take place. Is that a fair interpretation of that 
data or is that completely wrong?
    Mr. Holtz-Eakin. Rather than answer that question, let me 
give you a different answer. One of the charts we showed was 
the average weekly earnings, and we showed it by education 
level, and I think what, if one looks at in the report, 
especially in the report where there is more detail, you would 
see that the high school degree matters. And so tipping over 
the line to getting a high school degree does affect labor 
market success to a great extent, and that is in that 9 to 13 
years.
    Mr. Miller. So if you think this is a problem, you ought to 
stay in school?
    Mr. Holtz-Eakin. Yes.
    Mr. Miller. OK. Thank you. Thank you for yielding your 
nonexistent time and for your answer to the right question.
    [Laughter.]
    Mr. McKeon. Gentleman yields back his time.
    The Chair recognizes the gentlelady from California, Ms. 
Davis, for 5 minutes.
    Mrs. Davis of California. Thank you. Thank you, Mr. 
Chairman, and thank you very much for being here, for all that 
you have done to really help open our eyes to many of the 
issues in the budget. I appreciate that.
    If I could continue with the chairman's question and also 
with my colleague, it is the American-born workers--if we were 
to listen to many of the concerns that are out there--and they 
certainly are there in California, they are certainly there in 
my community of San Diego--it does appear that people are most 
concerned often about the American worker who somehow is 
displaced by an immigrant worker, be that, in most cases, 
undocumented.
    What do we know about what happens to those native-born 
workers who leave their job or suffer wage decreases as a 
result of being replaced? Have we undertaken enough work to 
know whether are they retrained, do they end up going back into 
the workforce in a reasonable amount of time and in fact 
increase their wages? What can you tell me, and perhaps this 
goes into the next panel.
    Mr. Holtz-Eakin. The next panel, I am sure, can be helpful 
in this regard. We can give you greater detail, but there is a 
large literature that looks at the impact of displacement--mass 
layoffs, whatever it may be--on the future labor market success 
of individuals. And that displacement is not focused on 
competition from immigrants, legal or otherwise. But in looking 
at that, certainly, the----
    Mrs. Davis of California. Can we choose out those factors, 
though? I mean, why haven't they looked at that? It seems like 
that would be an important factor to understand.
    Mr. Holtz-Eakin. The nature of the displacement is not 
really the key. The key is how does the individual respond and 
how does the market reward that individual. Higher educated 
individuals also both reattach to jobs quicker and suffer less 
but not entirely are immune from earnings losses. It gets 
harder as less skills are present, takes longer.
    And there are training programs, and I don't think that 
there is anyone who can point to a silver bullet training 
program that works in the sense of getting a worker back to 
work really quickly and restoring their wages. Those are costs 
of adjustments in the labor force, and they are borne by those 
individuals.
    Mrs. Davis of California. Do you see in the work that you 
did--and I know that there were a number of studies that you 
cited as well--is there a major difference in terms of regional 
areas, not only California, where you have higher number, 
obviously, of immigrant workers there with higher densities? 
What about this is very consistent in your work and that which 
is not when you look at those particular regional differences?
    Mr. Holtz-Eakin. I think that the part that is not 
difficult to document and is not controversial from a research 
point of view is the concentration of newly arrived immigrants 
in those 6 states in our case and then the diffusion out to a 
number that looks more like 10 or so and documenting the skills 
of those workers. That is all pretty straightforward.
    The harder parts are impacts on, say, earnings in those 
different labor markets. And there even situations where there 
were very large influxes of immigrants, the Mariel boatlift in 
South Florida, for example, there is far from a consensus among 
very good economists about exactly what went on in that very 
particular instance. And I think that is evidence of the 
difficulty of coming up with a quick answer about how 
immigrants ``affect earnings.'' It is very hard.
    Mrs. Davis of California. So is it fair to say, I mean, the 
wages are going to fluctuate where you have those greater 
densities to a greater extent than they would in other areas? 
And you had mentioned earlier that you don't necessarily track 
documented versus undocumented workers and those wages. Can we 
not filter out some of those issues as well?
    Mr. Holtz-Eakin. I think the bottom line that I gave from 
the report is that our survey reveals no, sort of, strong 
consensus estimate, that there is a lot of uncertainty about 
the impact and that that uncertainty really is dictated by the 
circumstances, concentrated arrival versus not, and the time 
period for which you look. And so the nice pat answer, while it 
might be appealing, is not something I am prepared to offer up.
    Mrs. Davis of California. What do you think people are 
missing most in this discussion?
    Mr. Holtz-Eakin. What do people miss most in this 
discussion?
    Mrs. Davis of California. Yes.
    Mr. Holtz-Eakin. From an economics perspective, the 
difficult part of convey is the vast and difficult to itemize 
capacity of employers and workers to adjust to new 
circumstances. We give it names, the flexibility of the 
American economy, we talk about incentives and all those 
things, but the reality is that it is pretty tough to knock the 
U.S. economy off course. And immigration is one source of 
shifts in circumstances, much like others, whether they be oil 
price shock, whether they be terrorism events. The economy is 
pretty flexible and tough, and that is hard to convey.
    Mrs. Davis of California. Yes. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. McKeon. The Chair recognizes the gentleman from 
Massachusetts, Mr. Tierney, for 5 minutes.
    Mr. Tierney. Thank you, Mr. Chairman.
    Thank you for your service as well as for your time here 
today.
    Can we take from your work that an individual who is here 
as an immigrant illegally and who gets more education or has 
more education is going to have a more positive impact on the 
economy than an illegal immigrant worker who has less of an 
education?
    Mr. Holtz-Eakin. I think you could safely draw the 
conclusion that having more skills gives a greater capacity for 
the economy.
    Mr. Tierney. That being the case, you also mention second-
generation families, foreign-born families generally get more 
of that education and, in essence, contribute more positively 
to the economy of the country as well; is that right?
    Mr. Holtz-Eakin. Yes. Their earnings tend to be higher, 
reflecting their greater productivity.
    Mr. Tierney. So assuming we have a situation where the 
second generation is here, the family having come illegally, 
and there is no indication that the child of the second 
generation is going to go home at any point in time, does it 
not make sense for us to encourage the further education of 
that individual so that as they stay here and as they get 
employed, they will in fact have a more positive impact?
    Mr. Holtz-Eakin. The rewards that I mentioned have nothing 
to do with legal versus illegal, so the returns to greater 
education are the same in both cases.
    Mr. Tierney. I guess what I am getting at is we have this 
debate in my state, at least, and I suspect other places as 
well, as to whether or not children that might have been 
brought here when they were 3, 4, 5 or 6 illegally and now are 
at that point where they are graduating from high school, might 
have done very well and are eligible for college, whether or 
not it makes sense to get them through college, get them more 
of an education, knowing that they are going to stay, hopefully 
that they will contribute more. And I am just trying to track 
that down. Do you have any insight on that?
    Mr. Holtz-Eakin. And I am very carefully trying to not 
expanse on that. What I can say is----
    Mr. Tierney. Well, I guess, I didn't mean to make it more 
political. I am just trying to break it down so it wouldn't get 
political as to just what do the facts show on something like 
that?
    Mr. Holtz-Eakin. The typical breakdown on this in both 
dimensions are, first, consider a person getting more 
education, K to 12 education versus college and above. There is 
a lot of evidence that for college and above the additional 
earnings that you will accrue during your working career more 
than compensates for the cost of college, that it is worth it, 
in some economic sense, for an individual to go to college, and 
if they recognize that, no particular inducement would be 
necessary.
    Earlier education, different story there. The kinds of 
things from which the society may benefit may not just be 
things and earnings. They are an educated and literate voting 
populous and citizenship and all the broader dimensions of 
education. So that is just the education story.
    In terms of if a son or daughter of an illegal immigrant or 
not, it is really one of these classic policy conflicts. The 
economics of it I have laid out. On the other hand, there is a 
violation of the law, and adherence to the law is a policy 
objective, and so you have to come to a conclusion about how 
you feel about those two things.
    Mr. Tierney. Right. I was setting aside the legality issue 
by just assuming that the person is here illegally and assuming 
that in this particular instance I was laying out that the 
person isn't going to go home. They are either going to end up 
somewhere else in the economy here or whatever and not 
returning back, and that if they go on to school or whatever 
and they get a higher paying job, then they can pay more taxes 
and economically maybe in the end it will work out on that. I 
thank you for helping me work through that.
    I yield back, Mr. Chairman.
    Mr. McKeon. The Chair recognizes the gentleman from 
Maryland, Mr. Van Hollen for 5 minutes.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    And, Mr. Holtz-Eakin, let me also thank you for your 
service at the Congressional Budget Office. And best wishes to 
you. Is it the Council of Foreign Relations I see?
    Mr. Holtz-Eakin. Yes.
    Mr. Van Hollen. Good luck. Our loss is their gain, and so 
thank you for your service.
    We have talked a lot about and debated the impact on native 
workers or foreign workers. Much of the discussion in public 
has been focused on low-scale workers and illegal immigration, 
what impact they will have on earnings or unemployment rates.
    Let me just talk a little bit about the impact of higher-
skilled workers because, as you know, there is a lot of 
discussion around here every time we talk about the H1B visa 
policy and raising the cap. And while employers here are 
supposed to make a certification that they haven't found 
another person here with similar skills willing to take the 
job, that continues to be an area of debate.
    So my question to you is, is there any evidence to suggest 
that the H1B visa program or other programs where we bring in 
higher-skilled workers are displacing native-born American 
workers or having an impact on their wages?
    Mr. Holtz-Eakin. As I said earlier, we haven't done a 
particular H1B study, but you can get some guidance out of the 
literature, such as it is. It has been difficult to pin down an 
effect of immigration on the earnings of the native-born, in 
general. Those numbers are large, as I have emphasized. H1B is 
a much smaller component of the labor market, and one would 
suspect that with a smaller impact you would get a smaller 
response.
    Mr. Van Hollen. Any studies that show what impact in terms 
of economic growth that program or those programs have? As you 
say, it is relatively small given the overall labor force.
    Mr. Holtz-Eakin. We can check into that. I don't have that 
at my fingertips.
    Mr. Van Hollen. How about the issue, we talked about the 
fact that there is a possibility that American-born workers 
would be displaced by foreign-born lower-skill workers. What 
are the incentives that would exist for a company to move its 
operations overseas, for example, to Mexico or Latin America, 
if a company here were unable to find a labor force? Do you 
think that the foreign-born workforce here in the United 
States, legal or illegal, reduces the incentives for some 
companies to actually move their entire operations overseas?
    Mr. Holtz-Eakin. They are certainly related. International 
trade in goods is essentially international trade in the 
services and the capital embedded in those goods. And in the 
absence of the ability to trade goods internationally, there 
will be greater incentives to move capital and labor 
internationally.
    The flipside is also true. Absent the ability to move 
capital and labor affects the desire to import goods. And, 
certainly, the location of operations, a capital investment 
decision, depends on the markets to which you will have access.
    So it is impossible to tease one of those out separately 
from the rest and say, ``That is it.'' They interact----
    Mr. Van Hollen. Right. Mr. Norwood asked you some questions 
about the impact of displacement of native workers to the 
foreign-born workers, and some of the others who are going to 
testify after you their testimony is that there is a 
significant impact, especially among lower-skilled workers with 
respect to displacement.
    As I understand your testimony, I want to be clear in 
reading the report, you have sort of chronicled the different 
studies out there, but the conclusion that you have drawn, you 
say, range from negligible impact to an earnings reduction of 
almost 10 percent, in terns of the studies that are out there. 
Have you drawn any conclusions yourself with respect to what 
the actual numbers are?
    Mr. Holtz-Eakin. I think, first of all, we didn't do 
original research. The purpose of the report was to summarize 
this state of knowledge and that means the research of the 
others. And for that reason, you will find researchers have 
strongly held opinions on their particular outcome. And I have 
been that way at times in my life, so I understand that.
    But I think the bottom line we drew was this is an impact 
that is difficult to quantify; that is, we are often asked in 
CBO to give a number. If we had 10 percent more immigrants, 
what would be the impact on native workers' earnings? And that 
is difficult to do and probably unwise to do, because the 
nature of the question you are asking matters. Is it the impact 
on workers if we don't get additional capital investment that 
allows the immigrants to be more productive? Is it the impact 
on workers in the absence of 10 years to adjust or is it this 
week?
    I think that is one of the reasons you get these strikingly 
different answers. And for that reason, I think it is 
inappropriate to put a single number on it.
    Mr. Van Hollen. Thank you.
    Thank you, Mr. Chairman.
    Mr. McKeon. The Chair recognizes the gentlelady from 
Minnesota, Ms. McCollum, for 5 minutes.
    Ms. McCollum of Minnesota. Thank you, Mr. Chair.
    Sir, I have heard my colleagues up here, and in your 
reading through your documentation, the term, ``unauthorized, 
undocumented, illegal.'' Are they all in exchange for one 
another? Is there a legal term that we should be using?
    Mr. Holtz-Eakin. I am not a lawyer and I won't pretend to 
be. I have used them interchangeably. If that is a mistake, I 
will go back, and the general counsel of CBO will scold me, I 
promise you.
    Ms. McCollum of Minnesota. And we have too.
    Mr. Holtz-Eakin. I think the term, ``unauthorized,'' would 
be a sensible term to focus on. We have authorized immigration 
on a permanent basis. Those are the categories I mentioned 
earlier. They are authorized temporary visas for a variety of 
activities, and sometimes people change status, so there are a 
whole series of authorizations which constitute the legal 
pathway to presence in the United States.
    Ms. McCollum of Minnesota. And you could be unauthorized 
while you are waiting for your paperwork to get finished and 
you were here in authorized status earlier on.
    Mr. Holtz-Eakin. You could have begun authorized on a 
temporary visa and overstayed the visa's expiration and become 
unauthorized.
    Ms. McCollum of Minnesota. And sometimes we are not 
processing people's paperwork very fast either, but that is a 
different study.
    Mr. Holtz-Eakin. That is not my----
    Ms. McCollum of Minnesota. And the reason why I bring this 
up is because part of this discussion not only is with what is 
happening with displacement of our workforce, it is the 
security of our borders. And so if someone is here who intends 
no harm to the United States, though a worker might be harmed 
by being displaced by someone who is here unauthorized versus 
someone who comes in here illegally with the intent to do harm 
to this country, I think these terms sometimes conjure up 
certain images when we are talking about border security, and 
that is why I mentioned it.
    Your study appears to be silent on an issue I have had 
great difficulty ever getting any research on, and maybe you 
can point me in a direction. I served in the Minnesota state 
house before coming here, and we were having discussions in 
Minnesota. As you know, we have a lot of legal immigrants who 
hold visas who do all different types of jobs as well as having 
unauthorized group of people who are working illegally in our 
state.
    And I wondered then and I wonder now what is the state and 
Federal Government's compilation of fines that have been given 
to employers who have hired people illegally? What happens when 
employers repeat, knowingly look the other way, even when 
someone presents documentation that looks suspect. And the 
Department of Treasury certainly encourages retailers to really 
get to the bottom of that phony $20 bill that they might be 
receiving.
    But I am not saying that we have done very much in the way 
of really presenting what happens to employers when they do 
this? What happens to employers who knowingly go down and 
solicit people to come up to Minnesota and as part of the catch 
of having people come, they say, ``By the way, your health care 
will be provided.'' Well, yes, it will--MinnesotaCare. 
``Housing will be provided.'' Yes, it will, but it was 
subsidized housing that employers came and actually lobbied for 
at times from the state, that we were doing with the best of 
intentions for U.S. citizens and people who are here legally as 
guests working in this country. Never intended to be used for 
illegal.
    So I am wondering if you can either point us in the 
direction so we can find out what is going on, because if this 
is something where we are punishing a person who has been 
recruited to come here and we are not punishing the recruiter, 
then there is very little justice in our system, and I believe 
that that needs to be addressed.
    The other point that Representative Kucinich brought up in 
one of his questions that I would like to let me know if you 
have taken a position on, many of the workforce in Katrina that 
was removed from the area, some of these individuals being put 
on airplanes, being told they were going one place and landed 
up in another or being told that, ``You have no choice. You 
have to go.'' If they want to come back and work and be part of 
the reconstruction of their community, do you know, are we 
working on a policy to bring that workforce back down there, to 
find them housing and to pay for their return transportation? 
After all, we did transport them, some of them very 
unwillingly, to locations now they find themselves glad to be 
at or they find themselves stuck in.
    Mr. Holtz-Eakin. In both cases, we don't have direct 
studies of either. We can certainly point you toward some 
information on enforcement efforts in the immigration area, 
both with respect to immigrants themselves but also employers 
to the extent it is available.
    And on the latter question, I quite frankly don't know, but 
we can check and get back to you.
    Ms. McCollum of Minnesota. Mr. Chair, I think it is 
important, as this committee proceeds forward, because we are 
about employee and employer relations, and we need to know what 
is going on with enforcement, both at a local and a national 
level. If we have repeat employers that are constantly being 
cited for this and just getting slapped on the wrist, then they 
are encouraged to repeat it again.
    And we also know of instances where employers have held 
people who have been brought in illegally into this country and 
have been subject to what I would call near slavery. And what 
has happened to those employers? So I think we have an 
obligation to look at both sides of this issue, and I hope as 
we move forward we do that.
    Mr. McKeon. The gentlelady yields back her time.
    Dr. Holtz-Eakin, thank you for spending the time here with 
us today, and we will now excuse you and wish you all the best 
in your future endeavors. Thank you very much.
    Mr. Holtz-Eakin. Thank you.
    Mr. McKeon. I would like to ask our next panel if they 
would take their place at the table, and at the outset 
apologize to you that many of our members have had to leave to 
go to other assignments on the Hill. We will let you know and 
assure you that your testimony that they will read and they 
will pay attention to as we move forward in this issue.
    It is my understanding our first witness on this panel is a 
constituent of the gentleman from Maryland, and pursuant to the 
committee rules, I recognize Mr. Van Hollen for the purpose of 
introducing our first witness.
    Mr. Van Hollen. Well, thank you very much, Mr. Chairman.
    Let me welcome all the witnesses and also thank you for 
your patience.
    It is my privilege to introduce a gentleman who is a 
constituent of mine, both he and his family.
    Professor Harry Holzer, welcome to you. Dr. Holzer has 
served as a professor of public policy at the Georgetown Public 
Policy Institute since the fall of 2000 with concurrent 
affiliations at the University of Michigan's National Poverty 
Center, Harvard University's Program on Inequality and Social 
Policy and the University of Wisconsin at Madison's Institute 
for Research on Poverty.
    Prior to joining the faculty at Georgetown, Professor 
Holzer held a variety of posts in and out of government, 
including chief economist at the Department of Labor, senior 
fellow at the Urban Institute and professor of economics at 
Michigan State University. He has taught and published 
extensively in the areas of social policy, labor markets and 
poverty. He is a graduate of Harvard University where he also 
earned his Ph.D. And, as I say, I am proud to have him as a 
constituent.
    Welcome.
    Thank you, Mr. Chairman.
    Mr. McKeon. Thank you.
    And our next panelist will be Dr. Steven Camarota, who is 
director of Research at the Center for Immigration Studies here 
in Washington. He is the lead researcher on a Census Bureau 
project examining the quality of foreign-born data in the 
American community survey. Dr. Camarota earned his master's 
degree from the University of Pennsylvania and his doctorate 
degree from the University of Virginia.
    And then we will hear from Mr. Daniel Siciliano, the 
executive director of the Program in Law, Economics and 
Business at Stanford Law School.
    You get the award for coming the furthest today. Thank you.
    He is a research fellow with the Immigration Policy Center 
and studies the long-term economic impact of immigration policy 
and reform. Mr. Siciliano received his bachelor degree from the 
University of Arizona and his law degree from Stanford 
University.
    Thank you all for being here. Let's hear first from Dr. 
Holzer.

 STATEMENT OF DR. HARRY J. HOLZER, PROFESSOR OF PUBLIC POLICY, 
             ASSOCIATE DEAN, GEORGETOWN UNIVERSITY

    Mr. Holzer. Thank you. I wanted to summarize a little bit 
of what we heard. We have heard quite a bit in the first panel 
already, so I will just try to supplement what we heard.
    There was some discussion this morning of the labor market 
effect for native-born workers and the fact that there is some 
range of different estimates on this. My reading of that 
literature is that with the exception of the impacts on native-
born high school dropouts where some of the estimates are 
larger, all of the estimates suggest very modest effects on the 
domestic labor force, even in the short run, and even less 
effect in the long run.
    And it raises an interesting question of why are all these 
effects so modest given that there are over 20 million 
immigrants in the labor market? Several different reasons. 
Immigrants are consumers as well as workers. They, therefore, 
raise the demand for goods and services and for labor as well 
as the supply of labor. Immigrants, as said earlier, remain 
concentrated in a limited number of states and in a limited 
number of sectors, which means most native-born workers can 
avoid direct competition with those immigrants in a variety of 
ways. And of course all of this depends on the strength of the 
labor market.
    If we go back to the very strong labor markets of the 
1990's, demand was so strong that it is hard to imagine that 
immigrants were really displacing or taking jobs from any 
native-born workers. In the past 5 years, labor markets have 
been somewhat weaker. Perhaps the degree of competition has 
grown, although we don't expect that to last forever.
    So most workers, with the exception again of the high 
school dropouts, there is consensus that the effects are 
modest, if they are negative at all.
    I want to focus on a few of the more positive effects of 
immigrants on the economy. Some of these have already been 
earlier alluded to. Immigrants do reduce consumer prices in 
several important sectors. Because of where immigrants are 
concentrated, the sectors of food, clothing and housing all end 
up with lower consumer prices because of their presence. It is 
hard to quantify how big those are, but we believe they are 
significant.
    And this is especially important for low-income consumers 
who spend the vast majority of their disposable income exactly 
on these products--food, clothing and housing.
    There are perpetual shortfalls of workers in some key 
sectors of our economy, notably health care and especially 
elder care. Immigrants are now helping to meet those shortfalls 
already at all different levels of skill, the level of nursing 
and further down the ladder, nurse's aids and personal aids as 
well.
    And, of course, as was said earlier, as the baby boomers 
retire, the shortfalls in these sectors will really become 
quite dramatic, and immigrants will be important in helping to 
meet those needs.
    Of course, there are also fiscal benefits of immigrants 
over the next several decades as immigrants and their children 
will become taxpayers while so many native-born retirees start 
to draw their retirement benefits.
    Immigrants also provide large numbers of graduate students 
in science, math and engineering. To the extent that large 
numbers of them do stay here, as many of them do, they will 
help our economy remain competitive in these sectors, vis-a-vis 
the growing competitiveness of other countries like India and 
China. So I think that is an important benefit as well.
    When we come to policy discussions, some analysts recommend 
that we change our legal immigration laws to put a lot more 
emphasis on skill and education rather than family ties. And 
those arguments do have some merit. I simply want to point out 
a few other things.
    No. 1, the benefits of immigration that we derive occur at 
all levels, even for relatively unskilled workers. The skill 
level of the workers grow over time, as we said earlier, 
especially across generations. And, finally, it is possible 
that if we limit the legal immigration of skilled workers, that 
we might raise the illegal immigration of those unskilled 
workers. I don't know if we have effective and politically 
feasible ways of limiting those increases, and I think we need 
to be concerned about that.
    Perhaps we need to think about alternative mechanisms 
whereby over time some of those illegal workers can become 
legal and then they would start being paid market wages and 
paying taxes, and they would do less to undercut the wages of 
native-born workers and the economy. So I think we need to 
think about those alternatives.
    And, finally, with my few remaining seconds, let me just 
say, less educated native-born workers in the United States 
have been hurt in the last few decades, in some cases quite 
dramatically, mostly because of forces that have nothing to do 
with immigration. They have to do with new technologies, they 
have to do with trade patterns, they have to do with the 
weakening of domestic institutions, like the minimum wage and 
collective bargaining.
    If we want to help low-wage workers in the United States, I 
encourage the U.S. Congress to consider education and training 
policies, minimum wage policies, collective bargaining 
policies, also health care, child care and parental leave 
policies, which all of us in this room take for granted in our 
jobs. I think these would have very positive effects on native-
born workers and in many ways more important than the impact on 
controlling immigration.
    Thank you very much.
    [The prepared statement of Mr. Holzer follows:]

Prepared Statement of Dr. Harry J. Holzer, Professor of Public Policy, 
                 Associate Dean, Georgetown University

    There are currently nearly 40 million foreign-born residents of the 
U.S., and about 22 million of them are in the workforce. They 
constitute about 15 percent of the workforce. Immigrants have been 
arriving in the U.S. at a consistent rate of about 1.3 million per year 
over the past decade or so. Perhaps 10-11 million residents, and 6-7 
million workers, are undocumented (or illegal) immigrants.
    Over two-thirds of all immigrants reside in six states (CA, NY, TX, 
FL, NJ and IL), though their concentrations in these states have been 
declining over time. Immigrant workers also concentrate quite heavily 
in a limited number of industries, such as agriculture, construction, 
accommodations, food preparation and nondurable manufacturing. Nearly 
30 percent of immigrants are high school dropouts, but about a fourth 
are college graduates. Immigrants constitute large fractions of the 
current population of U.S. graduate students, especially in science and 
engineering.\1\
Employment Effects
    One of the most controversial issues surrounding immigration has 
always been its impact on employment outcomes of native-born workers. 
Do immigrants take jobs from U.S. citizens, and thus reduce their 
earnings and employment levels? What is the extent of competition 
between these groups?
    Professors George Borjas and Lawrence Katz of Harvard University 
have recently calculated that immigration in the period 1980-2000 might 
have reduced the earnings of native-born U.S. workers by 3-4 percent, 
with larger negative impacts among high school dropouts but smaller 
among all other education groups (Borjas and Katz, 2005). Their 
estimates are at the high end of those generated by labor economists; 
others, including Professor David Card of the University of California 
at Berkeley, have found fairly negligible negative effects (Card, 
2001). These different estimates represent two different statistical 
approaches to estimating the impacts of immigration, both of which are 
plausible but each having its own limitations. But a consensus view 
among labor economists would probably suggest that immigration has 
reduced the earnings of less-educated native-born Americans by a modest 
amount, and perhaps somewhat more among high school dropouts.
    Given the magnitude of migration to the U.S. in recent years, why 
has immigration not had an even larger negative effect on the earnings 
of native-born workers? The modest impact of immigration is probably 
due to the following factors:
     Immigrants are consumers as well as workers. They raise 
the demand for goods and services where they reside, as well as the 
supply of labor.
     Immigrants remain quite heavily concentrated in a small 
number of states, and in a small number of occupations and industries 
in those states. Many, though not all, of the least-educated immigrants 
work in low-wage jobs to which the supply of native-born labor is 
limited, while those who are more heavily educated work in fields (such 
as science and engineering) where employment growth remains very 
strong.
     Native-born workers tend to offset the effects of 
immigration by moving elsewhere, thereby further reducing the amount of 
direct competition for jobs between the two groups.
    It is also important to note that some employers prefer immigrants 
to native-born workers in low-wage jobs, at least partly because the 
undocumented status of some allows employers to pay them below-market 
wages; the degree of competition between these workers and the native-
born is thus exacerbated by the illegal status of many among the 
former. Employers also tend to perceive a stronger work ethic among the 
immigrants, even at comparable wages (Kirschenman and Neckerman, 1991). 
On the other hand, in the absence of these workers, some employers 
would have to pay somewhat higher wages and benefits, and might well 
attract more and higher-quality native-born labor.
    The extent of competition over jobs between native-born and 
immigrant workers also depends, to some extent, on the overall strength 
of the U.S. labor market. The rate of new immigration to the U.S. has 
been constant over the period of the past 15 years. During the very 
tight labor markets of the late 1990's, demand for workers was very 
strong in the U.S., and native-born workers enjoyed high employment 
rates and strong wage growth despite the presence of many immigrants. 
On the other hand, the slowdown in U.S. labor markets since 2001 has 
likely exacerbated the competition between these groups (Sum, 2004; 
Holzer, 2005).
Other Economic Effects
    Immigration tends to have other effects on the U.S. economy. For 
instance, by reducing the costs and prices of domestically-produced 
items such as food, clothing and housing, immigration confers some 
benefits on the U.S. consumer--especially low-income consumers, who 
spend large fractions of their disposable incomes on these items.
    The exact magnitudes of these effects are somewhat hard to quantify 
(Borjas, 1995; Card, 2005), though rising numbers of immigrant workers 
in any sector leads to both greater competition over jobs and greater 
benefits to consumers.
    By providing workers at different skill levels to the health care 
and elder care industries, foreign-born workers tend to reduce labor 
shortages that might otherwise occur, and thus help increase the supply 
(and reduce the cost) of health care services to Americans.\2\ And by 
providing more students and professionals in the fields of science and 
engineering, they help the U.S. to maintain its international 
``comparative advantage'' in these fields.
    As we look to the future, these contributions in many areas may 
grow more important. For example, as ``baby boomers'' begin retiring in 
large numbers over the coming decade, the supply of immigrant labor to 
the health care and elder care fields will become even more critical 
for averting shortages of services in these areas. By supplying more 
younger workers and fewer retirees, new immigration will help reduce 
the nation's fiscal imbalances over the next several decades. And by 
replenishing the nation's supply of scientists and engineers, highly-
educated immigrants will be critical to the preservation of U.S. 
strength in technological innovation, especially as other countries 
(like China and India) become more competitive in these areas (Freeman, 
2004).
    There are some other economic costs to immigration. For example, 
since immigrants are more heavily concentrated among low-income 
Americans, they tend to draw payments from means-tested programs at a 
higher rate than do native-born Americans. On the other hand, the 
reforms to welfare and other programs in the 1990's reduced this 
greater dependence, to some extent (Borjas, 2001; Fix, 2001).
    Overall, these data imply some significant economic benefits to 
immigration, both now and in the future, and especially to low-income 
consumers. It imposes some modest fiscal costs on the U.S. right now, 
though its fiscal benefits will grow over time.
Policy Implications
    The discussion above suggests that it would be economically unwise 
to drastically curtail immigration to the U.S. The prices of some 
important categories of consumer goods would rise significantly, while 
employment shortfalls would be exacerbated in some key sectors as well.
    To the extent that illegal immigration imposes greater costs on 
U.S. workers, it might be helpful to curb that component of 
immigration. But there is no obvious method of doing so. Much stiffer 
employer sanctions for the hiring of undocumented workers might 
accomplish this, though its practicality from an enforcement 
perspective (and also politically) remains unclear. On the other hand, 
by providing some means for undocumented immigrants to ultimately 
obtain legal status, we could help ``level the playing field'' between 
these immigrants and native-born workers with whom they compete for 
some jobs.
    Some analysts (e.g., George Borjas of Harvard University) have 
argued for a new system that puts greater emphasis on the education and 
skills of prospective immigrants, and less emphasis on their family 
members in the U.S., as determinants of who obtains the right to enter 
legally. Indeed, such criteria are used more heavily in Canada, 
Australia, New Zealand, and elsewhere. This could also be accomplished 
with a major expansion of the H1-B visa program for highly-educated 
immigrants.
    This viewpoint has some merit, as the economic benefits of highly 
educated immigrants to the U.S. economy are quite substantial, while 
their costs (in terms of competition for jobs and fiscal drain) are 
more modest. On the other hand, it is important to remember that many 
of the benefits of immigration to the U.S.--in terms of reduced costs 
of commodity goods and greater supply of services to the health and 
elder care sectors--also derive from less-educated immigrants. And 
limiting the legal flow of immigrants might well exacerbate the flow of 
illegal immigrants to the U.S., whose presence is more costly to 
native-born workers.
    Of course, some less-educated Americans have been hurt by 
immigration, and more importantly by many other forces in the U.S. 
labor market--such as new technologies, foreign trade, the diminishing 
presence of unions, and the decline in the statutory levels of the 
minimum wage. It would be more helpful to these workers to focus on 
improving their skill levels (through better education and training), 
improving the quality of jobs to which they have access (through 
moderate increases in the federal minimum wage, reforms that make it 
easier for low-income workers to organize, and public supports for 
employers that provide training and advancement opportunities), and 
extending the work supports available to them (through child care, 
parental leave and health insurance) instead of threatening to curb 
immigration, whose economic impacts on lower-income Americans are more 
mixed.
    Finally, it is important to remember that immigration policy should 
be driven by both economic and non-economic considerations. The latter 
might include the economic benefits we confer on the residents of 
poorer nations in our hemisphere, the political stability and 
diplomatic benefits we derive from such help, as well as our values as 
a land of opportunity and inclusion to people from around the world.
References
Borjas, George. 1995. ``The Economic Benefits from Immigration.'' 
        Journal of Economic Perspectives, Spring.
Borjas, George and Lawrence Katz. 2005. ``The Evolution of the Mexican-
        Born Workforce in the United States.'' Paper presented at the 
        conference on Mexican Immigration and the U.S. economy, 
        National Bureau of Economic Research, Cambridge MA, February.
Borjas, George. 2005. ``Immigration Policy and Human Capital.'' Paper 
        presented at the Conference on the Future of Workforce Policy, 
        Urban Institute, Washington DC, November 11.
Borjas, George. 2001. ``Welfare Reform and Immigration.'' In R. Blank 
        and R. Haskins eds. The New World of Welfare. Washington DC: 
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Card, David. 2001. ``Immigrant Inflows, Native Outflows, and the Local 
        Labor Market Impacts of Higher Immigration.'' Journal of Labor 
        Economics, January.
Card, David. 2005. ``Is the New Immigration Really So Bad?'' Working 
        Paper, University of California at Berkeley, January.
Fix, Michael. 2001. Comment on Borjas paper. In Blank and Haskins eds. 
        The New World of Welfare. * * *
Freeman, Richard. 2004. ``Doubling the Global Workforce: The Challenge 
        of Integrating China, India and the Former Soviet Union into 
        the World Economy.'' Presentation at the Institute for 
        International Economics, Washington DC, November.
Holzer, Harry. 2005. Testimony to the Subcommitee on Immigration, 
        Border Security and Claim. U.S. House of Representatives. May 
        4.
Kirschenman, Joleen and Kathryn Neckerman. 1991. ``We'd Love to Hire 
        Them But * * *'' In C. Jencks and P. Peterson eds. The Urban 
        Underclass. Washington DC: Brookings.
Passel, Jeffrey. 2005. ``Unauthorized Migrants: Numbers and 
        Characteristics.'' The Urban Institute. Washington DC.
Stone, Robyn and Joshua Wiener. 2001. Who Will Care for Us? Addressing 
        the Long-Term Care Workforce Crisis. The Urban Institute, 
        Washington DC.
Sum, Andrew et. al. 2004. ``Foreign Immigration and the Labor Force of 
        the U.S.: The Contributions of New Foreign Immigration to the 
        Growth of the Nation's Labor Force and its Employed Population, 
        2000 to 2004,'' Center for Labor Market Studies, Northeastern 
        University, Boston MA.
                                endnotes
    \1\ These facts and figures are drawn from Borjas (2005), Passel 
(2005), and Sum (2005), among others.
    \2\ See, for instance, Stone and Wiener (2001). Shortages in the 
labor market for health care and elder care workers might persist over 
time because wages, limited in part by third-party reimbursement rules, 
cannot rise quickly enough to bring ``equilibrium'', or balance between 
supply and demand, to these markets.
                                 ______
                                 
    Mr. McKeon. Thank you.
    Dr. Camarota?

  STATEMENT OF DR. STEVEN A. CAMAROTA, DIRECTOR OF RESEARCH, 
                 CENTER FOR IMMIGRATION STUDIES

    Mr. Camarota. Well, thank you, Mr. Chairman and members of 
the committee, for inviting me here to speak about immigration. 
Clearly, this is a very important topic with 1.5 million new 
legal and illegal immigrants settling in the United States each 
year and a total foreign-born of about 36 million, about 11 
million of whom are illegal aliens. Immigration is clearly a 
very important issue to think about.
    Now, for policymakers who are thinking about the economics 
of immigration, I would argue passionately that it is probably 
best to focus more on the winners and losers from this policy 
rather than the overall economic impact. I say this because 
economic research indicates that the overall effect of 
immigration on the economy in the aggregate is actually very 
small or miniscule in the words of the nation's top immigration 
economist.
    And these effects are even smaller when we focus just on 
the one-fourth to one-third of immigrants who are illegal 
alien.
    The National Research Council in its 1997 study, ``The New 
Americans,'' estimated that the net gain to native-born 
Americans from immigration was equal to only about two-tenths 
of 1 percent of our economy at that time, or about $6 billion.
    This benefit was generated by reducing the wages of workers 
at the bottom end of the labor market by about 10 percent. And 
they estimated that about half the decline in wages for that 
group was caused by immigration.
    Now, the benefit is so small because people at the bottom 
end of the labor market already make very modest wages, so even 
flooding the unskilled labor market and reducing their wages 
still further cannot have a large overall impact.
    And this is an important point. People who argue there is 
very little wage impact sometimes make the mistake of saying, 
``But it saves consumers a lot of money.'' Those two things 
can't be true. If employers pay the same with or without the 
presence of immigrants, then there is no benefit for the rest 
of us to divide.
    Now, a more recent study published in the Quarterly Review 
of Economics suggested that the impact on the bottom 10 percent 
was more like 7.4 percent.
    Now, also I think important is the National Academy's 
fiscal estimate, what do immigrant families pay in taxes and 
use in services? And they found a negative $20 billion 
currently, much larger, actually, than the very tiny economic 
gain that we receive from immigration.
    Now, immigration's effects are also very small when we look 
at the aging of American society. It is true that immigrants 
tend to arrive young, but the fact is their differences with 
natives aren't that great, and they age like everyone else. In 
fact, in the 2000 census, the average age of an immigrant was 
39. The average age of a native-born American was 35.
    In addition, the Census Bureau, when it looks to the 
future, finds that if we have 150,000 immigrants come in a 
year, they estimate that the working age share, say, ages 16 to 
64, would make up about 59 percent of our population. If we had 
1 million immigrants a year, that is a lot more immigration, 
they estimate the working age share would be about 60 percent 
of the population.
    The impact is so small because immigrants are not just 
workers; they are human beings. So, naturally, they add to both 
the working age population and the population too old or too 
young to work.
    Now, although the impact of immigration may be very small 
on the economy, the impact on some American workers might be 
very large. The Quarterly Journal of Economics article that I 
cited suggested that immigration in the aggregate reduced wages 
for those in competition with immigrants by about $1,700 a 
year.
    Now, if we decided to have less unskilled immigration and 
began to enforce our laws, what would happen over time? 
Obviously, no one is suggesting mass deportations. It would 
take a while to begin a ratcheting up of enforcement to make 
illegals go home in much larger numbers.
    Now, if we did that, what would happen? Well, first, there 
would be a rise in wages and benefits offered by employers to 
retain natives or to attract new natives and legal immigrants 
to occupations. And this would improve the lives of the poorest 
American workers.
    Now, we need not worry that there is some kind of labor 
shortage of unskilled labor in the United States. There are 1.8 
million unemployed natives in construction, building cleaning 
and maintenance and food processing alone. In addition, there 
are 7.5 million natives not even in the workforce who haven't 
completed high school, and these are all adults. There are 13 
million natives who have only a high school education and no 
education beyond that who are also not in the workforce.
    Now, the other thing employers would do if we had less 
immigration is obviously they would begin to invest in labor-
saving devices and techniques. Now, if there are businesses 
that simply can't pay anymore to stay in business, then maybe 
those businesses should ship to other areas, because very low-
wage workers are a very bad deal with taxpayers, because the 
people work and they also qualify for a host of social 
programs.
    In conclusion, the latest research indicates that we can 
reduce immigration secure in the knowledge that it will not 
harm the economy. Those who support the current high level of 
unskilled immigration, including proposals to legalize illegal 
aliens rather than enforce the law and make them go home should 
at least do so with an understanding that the American workers 
harmed by such policies are already the most porous and most 
vulnerable.
    Thank you.
    [The prepared statement of Mr. Camarota follows:]

  Prepared Statement of Dr. Steven A. Camarota, Director of Research, 
                     Center for Immigration Studies

Introduction
    Few government policies can have so profound impact on a nation as 
immigration. Large numbers of immigrants and their descendants cannot 
help but have a significant impact on the cultural, political, and 
economic situation in their new country. Over the last three decades, 
socio-economic conditions, especially in the developing world, in 
conjunction with U.S. immigration policy, have caused 25 million people 
to leave their homelands and emigrate legally to the United States. 
Additionally, the Immigration and Naturalization Service estimates that 
the illegal alien population grows by 400,000 to 500,000 each year.\1\ 
The current influx has caused an enormous growth in the immigrant 
population, from 9.6 million in 1970 (4.8% of the population) to 35 
million (12.1% of the population) today.
    As in the past, immigration has sparked an intense debate over the 
cost and benefits of allowing in such a large number of people. One of 
the central aspects of the immigration debate is its impact on the 
American economy. While the number of immigrants is very large, as I 
will try to explain in this paper the impact on the overall economy is 
actually very small or ``minuscule'' in the words of the nation's top 
immigration economist. And these effects are even smaller when one 
focuses only on illegal aliens, who comprise one-fourth to one-third of 
all immigrants. While the impact on the economy as a whole may be tiny, 
the effect on some Americans, particular workers at the bottom of labor 
market maybe quite large. These workers are especially vulnerable to 
immigrant competition because wages for these jobs are already low and 
immigrants are heavily concentrated in less-skilled and lower-paying 
jobs. In this paper I will try to explain some of the way immigration 
can impact natives and the economy as a whole.
Four Reasons Immigration Can Impact Wages
    Immigrants Might Work for Less. For the most part, the research 
generally indicate that a few years after arrival, immigrant wages are 
very similar to those of natives in the same occupation with the same 
demographic characteristics. This may not be true in all places and at 
all times, but in general it seems that only newly arrived immigrants 
undercut native wages. This is probably true of illegal aliens as well. 
While immigrants as a group and illegals in particular do earn less 
than native-born workers, this is generally due to their much lower 
levels of education. In other words, immigrants are poorer than 
natives, but they generally earn wages commensurate with their skills, 
which as a group tend to be much lower than natives.
    Immigrants Are Seen as Better Employees. There is certainly a lot 
of anecdotal evidence and some systematic evidence that immigrants are 
seen as better workers by some employers, especially in comparison to 
native-born African Americans. It is certainly not uncommon to find 
small business men and women who will admit that they prefer Hispanic 
or Asian immigrants over native-born blacks. This is especially true of 
Hispanic and Asian employers, who often prefer to hire from within 
their own communities. We would expect this preference to result in 
lower wages and higher unemployment for those natives who are seen as 
less desirable.
    A study of the Harlem labor market by Newman and Lennon (1995) 
provides some systematic evidence that employers prefer immigrants to 
native-born blacks. Their study found that although immigrants were 
only 11 percent of the job candidates in their sample, they represented 
26.4 percent of those hired. Moreover, 41 percent of the immigrants in 
the sample were able to find employment within one year, in contrast to 
only 14 percent of native-born blacks. The authors concluded that 
immigrants fare better in the low-wage labor market because employers 
see immigrants as more desirable employees than native-born African-
Americans. I have also found some evidence in my work that in 
comparison to whites, there is an added negative effect for being black 
and in competition with immigrants.
    The Threat of Further Immigration. While no real research has been 
done on this question, the threat of further immigration may also exert 
a significant downward pressure on wages. To see how this might work 
consider the following example: Workers in a meat packing plant that 
has seen a sudden rise in the number of immigrant workers will very 
quickly become aware that their employer now has another pool of labor 
from which he can draw. Thus, even if immigrants remain a relatively 
small portion of the plant's total workforce, because of our relatively 
open immigration policy, the potential of further immigration exists. 
Therefore, native-born workers curtail their demands for higher wages 
in response to the threat of more immigration and this in turn holds 
down wages beyond what might be expected simply by looking at the 
number of immigrants in an occupation or even the country as a whole.
    Immigration Increases the Supply of Labor. By far the most 
important impact immigration has on the workforce is that it increases 
the supply of labor. Based on the March 2005 Current Population Survey 
there were almost 21 million adult immigrants holding jobs in the 
United States.\2\ However, they are not distributed evenly across 
occupations. In 2005, 30 percent of immigrants in the labor market had 
no high school education, and for those who entered in the preceding 
five years, 34 percent lacked a high school degree. In comparison, only 
8 percent of natives in the work force did not have a high school 
education. Overall immigrants comprise 15 percent of the total 
workforce. But they are 40 percent of those without high school 
diplomas in the work force, while accounting for 12 percent of workers 
with more than a high school education.
    The occupational distribution of immigrants also shows their high 
concentration in jobs that require relatively few skills. In 2005, 
immigrants made up 6 percent of persons in legal services occupations 
(primarily lawyers and support staff), and 9 percent of individuals in 
managerial jobs. In contrast, they comprised 34 percent of workers 
doing building clearing and maintenance, and 26 percent of construction 
laborers. This means immigration has increased the supply of the some 
kinds of workers much more than others. As a result, any effect on the 
wages or job opportunities of natives will likely fall on natives 
employed in less-skilled and low-paying occupations. Given that they 
face much more job competition, it should not be surprising that less 
educated workers generally have a less favorable view of immigration. 
In contrast, more educated and affluent workers who generally have a 
more favorable view of immigration; tend to see immigrants as only, 
``taking jobs Americans don't want.''
    Workers not in Competition with Immigrants. If immigration reduces 
wages for less educated workers, these wages do not vanish into thin 
air. Employers now have more money either to pay higher wages to more 
educated workers or to be retain as higher profits. The National 
Research Council, in a 1997 study entitled ``The New Americans,'' 
estimated that immigration reduced the wages of workers with less than 
a high school degree by about 5 percent. These workers roughly 
correspond to the poorest 10 percent of the workforce. But this 
reduction caused gains for the other 90 percent of workers equal to one 
or 2 tenths of one percent of their wages. The impact on educated 
workers is so small because workers at the bottom end of the labor 
market earn such low wages that even a significant decline in their 
wages only generates very modest gains for everyone else.
    For reasons explained in greater detail in the NRC report, the 
aggregate size of the wage gains for more educated workers should be 
larger than the aggregate losses suffered by Americans at the bottom of 
the labor market, thereby generating a net gain for natives overall. 
The NRC's findings mean that the wages of workers without a high school 
degree are $13 billion lower because of immigration, while the wages of 
other natives are roughly $19 billion higher for a net gain of $6 
billion. Of course, as a share of their income the losses to less-
educated natives is much larger than the gains to other workers. And as 
share of the total economy the gain is very small. The two Harvard 
economists who did the NRC's labor market analysis argued that the 
benefit to natives, relative to the nation's 8 trillion dollar at that 
time economy, is ``minuscule.'' \3\ However, it should also be noted 
that while the effect on natives overall may be minuscule, the 
immigrants themselves benefit substantially by coming here.
Empirical Research
    Attempts to measure the actual labor market effects of recent 
immigration empirically have often come to contrary and conflicting 
conclusions. Studies done in the 1980s and early 1990s, which compared 
cities with different proportions of immigrants, generally found little 
effect from immigration.\4\ However, these studies have been widely 
criticized because they are based on the assumption that the labor 
market effects of immigration are confined to only those cities where 
immigrants reside.
    Impact of Immigration Is National Not Local. The interconnected 
nature of the nation's economy makes comparison of this kind very 
difficult for several reasons. Research by University of Michigan 
demographer William Frey \5\ and others, indicates that native-born 
workers, especially those natives with few years of schooling, tend to 
migrate out of high-immigrant areas. The migration of natives out of 
high-immigrant areas spreads the labor market effects of immigration 
from these areas to the rest of the country. There is also evidence 
that as the level of immigration increases to a city, the in-migration 
of natives is reduced.
    In addition to internal migration patterns, the huge volume of 
goods and services exchanged between cities across the country creates 
pressure toward an equalization in the price of labor. For example, 
newly arrived immigrants who take jobs in manufacturing in a high-
immigrant city such as Los Angeles come into direct and immediate 
competition with natives doing the same work in a low-immigrant city 
like Pittsburgh. The movement of capital seeking to take advantage of 
any immigrant-induced change in the local price of labor should also 
play a role in preserving wage equilibrium between cities. Beside the 
response of native workers and firms, immigrants themselves tend to 
migrate to those cities with higher wages and lower unemployment. In 
short, the mobility of labor, goods, and capital as well as choices 
made by immigrants may diffuse the effect of immigration, making it 
very difficult to determine the impact of immigration by comparing 
cities.
    The National Research Council. One way researchers have attempted 
to deal with the problems associated with cross-city comparisons is to 
estimate the increase in the supply of labor in one skill category 
relative to another skill category brought about by immigration in the 
country as a whole. The wage consequences of immigration are then 
calculated based on an existing body of literature that has examined 
the wage effects of changes in the ratio of skilled to unskilled 
workers. The National Research Council (NRC) relied on this method in 
its 1997 report entitled The New Americans.\6\ The report was authored 
by most of the top economists and demographers in the field of 
immigration. The NRC estimates that immigration has had a significant 
negative effects the wages of high school dropouts. The NRC concluded 
that the wages of this group, 11 million of whom are natives, are 
reduced by roughly five percent ($13 billion a year) as a consequence 
of immigration. Not a small effect. Dropouts make up a large share of 
the working poor. Nearly one out of three native workers living in 
poverty lacked a high school education. The wage losses suffered by 
high school dropouts because of immigration are roughly equal to the 
combined federal expenditures on subsidized School Lunches, low-income 
energy assistance, and the Women Infants and Children program.
    Center for Immigration Studies Research. My own research suggests 
that the effect of immigration may be even greater than the estimates 
in the NRC report.\7\ I compared differences across occupations 
nationally and found that the concentration of immigrants in an 
occupation does adversely affect the wages of natives in the same 
occupation.
    My results show that immigrants have a significant negative effect 
on the wages of natives employed in occupations that require relatively 
few years of schooling, accounting for about one-fifth of the labor 
force. In these occupations a one percent increase in the immigrant 
composition reduces the wages of natives by .8 percent. Since these 
occupations are now on average 19 percent immigrant, my finding 
suggests that immigration may reduce the wages of workers in these 
occupation by more than 10 percent. It should also be added that since 
native-born blacks and Hispanics are much more likely than whites to be 
employed in the adversely impacted occupations.
    Other Research on Wages. Harvard professor George Borjas, who is 
regarded as the nation's leading immigration economist, found in a 
study published in 2003 by the Quarterly Journal of Economics that 
between 1980 and 2000, immigration reduced the average annual earnings 
of native-born men by an estimated $1,700 or roughly 4 percent.\8\ 
Among natives without a high school education, who roughly correspond 
to the poorest tenth of the workforce, the estimated impact was even 
larger, reducing their wages by 7.4 percent. The 10 million native-born 
workers without a high school degree face the most competition from 
immigrants, as do the 8 million younger natives with only a high school 
education and 12 million younger college graduates. The negative effect 
on native-born black and Hispanic workers is significantly larger than 
on whites because a much larger share of minorities are in direct 
competition with immigrants.
    While most of those adversely affected are less educated workers, 
Borjas's research indicates that the impact of immigration is 
throughout the labor market. The results for more skilled workers are 
particularly important because few of the immigrants in this section of 
the economy are illegal aliens, yet the effect is the same--lower wages 
for natives. This new research strongly indicates that the primary 
reason immigration lowers wages is not that immigrants are willing to 
work for less, rather lower wages are simply the result of immigration 
increasing the supply of labor.
    Impact on Employment. While most research has focused on wage 
effects of immigration some work has also found an impact on 
employment. A 1995 study by Augustine J. Kposowa found that a 1-percent 
increase in the immigrant composition of a metropolitan area increased 
unemployment among minorities by .13 percent.\9\ She concludes, ``Non-
whites appear to lose jobs to immigrants and their earnings are 
depressed by immigrants.'' A 1997 report published by the Rand 
Corporation, entitled ``Immigration in a Changing Economy: California's 
Experience,'' and authored by Kevin McCarthy and Georges Vernez (1997) 
estimated that in California between 128,200 and 194,000 people were 
unemployed or withdraw from the workforce because of immigration. 
Almost all of these individuals either are high school dropouts or have 
only a high school degree. Additionally, most are either women or 
minorities.
    Impact on Employment post-2000. More recent work done on 
immigration also suggests that immigration may adversely impacted 
native employment. A report I authored for the Center for immigration 
Studies in 2004, showed that the number of employed natives was 500,000 
fewer in March of 2004 than in March of 2000. In contrast, there has 
been a net increase of 2.3 million in the number of foreign-born 
workers holding jobs over this same time period. Put another way, there 
was a net increase of 1.7 million in the total number of adults working 
in United States, but all of that increase went to foreign-born 
workers.\10\ About half the growth in immigrant employment was from 
illegal immigration.
    Immigration has remained extremely high since 2000. By doing so at 
a time when the economy was not creating as many new jobs, immigration 
may have reduced job opportunities for natives and immigrants already 
here. We found that there was a 70 correction between native 
unemployment rates and the share of an occupation comprised of 
immigrants in 2004. One of the most troubling trends over this time 
period was an increase of 4 million in the number of natives 18 to 64 
not in the labor force. Detailed analysis shows that the increase was 
not due to early retirement, increased college enrollment, or new moms 
staying home with their babies.
    There is also little evidence that immigrants only do jobs 
Americans do not want. It is true that immigration has its biggest 
impact at the bottom end of the labor market, in relatively low paying 
jobs typically occupied by less-educated workers. But such jobs still 
employ millions of native-born workers. In job categories such as 
construction labor, building maintenance, and food preparation, 
immigration added 1.1 million adult workers in the last 4 years, but 
there were nearly 2 million unemployed adult natives in these very same 
occupations in 2004. Those arguing for high levels of immigration on 
the grounds that it helps to alleviate the pressure of tight labor 
markets in low-wage, less-skilled jobs ignore the very high rate of 
native unemployment in these job categorizes, averaging 10 percent in 
2004. The findings of our 2004 employment study are very consistent 
with research on this subject. Andrew Sum and his colleagues at 
Northeastern University have also published several reports showing 
that all or almost of job growth 2000 to 2004 went to immigrants.
    It would be a mistake to think that every job taken by an 
immigrants is a job lost by a native. Clearly many factors impact 
unemployment rates across occupations. But it would also be a mistake 
to assume that dramatically increasing the number of workers in less-
skilled occupations has no impact on the employment prospects of 
natives. Perhaps most important, the large number of unemployed natives 
calls into question the argument that America is desperately short of 
workers to do these less-skilled job.
Benefits of Immigration
    Of course, it is important to realize that wage losses suffered by 
the unskilled do not vanish into thin air. As already discussed, the 
NRC estimated that the gain resulting from the wage loses suffered by 
the unskilled is equal to about 1 or 2 tenths of one percent of our 
total economy. Thus, additional unskilled immigration can be justified 
on the grounds that it creates a very small net benefit for the country 
as a whole, though it is harmfulfor unskilled workers. There is some 
debate about the net benefit of immigration. A 2002 study published by 
the National Bureau of Economic Research (NBER) entitled 
``Technological Superiority and the Losses from Migration,'' found that 
there is no economic gain from immigration. In fact the loss to all 
natives totals nearly $70 billion dollars. But it must be remembered 
that neither the NRC study or NBER study take into account the benefits 
to immigrants.
Impact on an Aging Society
    Some observers think that without large scale immigration, there 
will not be enough of a working age to support the economy or pay for 
government. It is certainly true that immigration has increases the 
number of workers in the United States. It is also true that immigrants 
tend to arrive relatively young, and it is also true that they tend to 
have more children than native-born Americans. Demographers, the people 
who study human populations, have done a good deal of research on the 
actual impact of immigration on the age structure. There is widespread 
agreement that immigration has very little impact on the aging of 
American society. Immigrants age just like everyone else; moreover the 
differences with natives are not large enough to significantly alter 
the nation's age structure. This simple fact can be seen clearly in the 
2000 Census, which showed that the average age of an immigrants was 39, 
compared to 35 for natives.\11\
    Another way to think about the impact of immigration on the aging 
of American society is to look at the working age population. In 2000, 
66.2 percent of the population was of working-age (15 to 64), but when 
all post-1980 immigrants are not counted, plus all of their U.S.-born 
children, the working-age share would have been 65.9 percent in 2000. 
Immigration also does not explain the relatively high U.S. fertility 
rate. In 2000, the U.S. fertility rate was 2.1 children per woman, 
compared to 1.4 for Europe, but if all immigrants are excluded the rate 
would still have been 2.0. Looking to the future, Census Bureau 
projections indicate that if net immigration averaged 100,000 to 
200,000 annually, the working age share would be 58.7 percent in 2060, 
while with net immigration of roughly 900,000 to 1 million, it would be 
59.5 percent. As the Bureau states in the 2000 publication, immigration 
is a ``highly inefficient'' means for increasing the working age share 
of the population in the long-run.\12\ Census projections are 
buttressed by Social Security Administration (SAA) estimates showing 
that over the next 75 years, net legal immigration of 800,000 a year 
versus 350,000 would create a benefit equal to only .77 percent of the 
programs projected expenditures.
    Of course, it must be emphasized that immigration does not make the 
country older. In fact, the impact is slightly positive. But, one can 
advocate less immigration secure in the knowledge that it will not 
cause the population to more age rapidly. There is no doubt that the 
aging of the nation's population will create very real challenges. But 
the level of immigration is almost entirely irrelevant to this problem. 
America will simply have to look elsewhere to met these challenges.
Policy Discussion
    Knowing that low-skilled natives are made poorer or their 
unemployment increased by immigration does not tell us what, if 
anything, we should do about it. The extent to which we take action to 
deal with the wage and employment effects of immigration depends on how 
concerned we are about the wages of less-skilled natives. A number of 
scholars have argued that the inability of low-skilled workers to find 
work and earn a living wage contributes significantly to such social 
problems as welfare dependency, family breakup, and crime. One need not 
accept all the arguments made in this regard to acknowledge that a 
significant reduction in employment opportunities for the poorest 
Americans is a cause for real concern.
    Help Workers But Leave Immigration Policy Unchanged. If we wish to 
do something about the effects of immigration, there are two possible 
sets of policy options that could be pursued. The first set would 
involve leaving immigration policy in place and doing more to 
ameliorate the harmful effects of immigration on natives in low-skilled 
occupations Since the research indicates that the negative impact from 
immigration falls on those employed at the bottom of the labor market, 
an increase in the minimum wage may be helpful in offsetting some of 
the wage effects of immigration, though doing so may exacerbate the 
unemployment effect. Most economists think that the minimum wage tends 
to increase unemployment. Increasing the minimum wage and keeping 
unskilled immigration high, may make this problem even worse.
    Another program that might be helpful in assisting those harmed by 
immigrant competition is the Earned Income Tax Credit (EITC). There is 
little doubt that the Credit increases the income of low-wage workers. 
However, in addition to the high cost to taxpayers, the Credit may also 
hold down wages because it acts as a subsidy to low-wage employers. 
That is, employers have less incentive to increase wages because 
workers are now being paid in part by the federal government. Cutting 
low- and unskilled immigration, on the other hand, has no such down 
side for less-skilled workers nor is it costly to taxpayers. Moreover, 
the Credit only increases earnings for those with jobs, it does not 
address increased unemployment among the less-skilled that comes with 
immigration.
    Reducing Unskilled Legal Immigration. The second set of policy 
options that might be enacted to deal with this problem would involve 
changing immigration policy with the intent of reducing job competition 
for natives and immigrants already here. If we were to reduce unskilled 
legal immigration we might want to change the selection criteria to 
ensure that immigrants entering the country will not compete directly 
with the poorest and most vulnerable workers. At present, only about 12 
percent of legal immigrants are admitted based on their skills or 
education. Since two-third of permanent residency visas are issued 
based on family relationships, reducing the flow of low-skilled legal 
immigrants would involve reducing the number of visa based on family 
relationships. This might include eliminating the preferences now in 
the law for the siblings and adult children (over 21) of U.S. citizens 
and the adult children of legal permanent residents. These changes 
would not only reduce low-skilled legal immigration immediately, they 
would also limit the chain migration of low-skilled immigrants that 
occurs as the spouses of those admitted in the sibling and adult child 
categories petition to bring in their relatives.
    Reducing Unskilled Illegal Immigration. In addition to reducing the 
flow of low-skilled legal immigrants, a greater allocation of resources 
could be devoted to controlling illegal immigration especially in the 
interior of the country. About one half of the immigrants working in 
such occupations as construction, building cleaning & maintenance and 
food processing and preparation are estimated to be illegal aliens 
according to my own analysis and research done by the Pew Hispanic 
Center. A strategy of attrition through enforcement offers the best 
hope of reducing illegal immigration. The goal of such a policy would 
be to make illegals go home or self deport. The former INS estimates 
that 165,000 illegals go home each year, 50,000 are deported, and 
25,000 die. But some 800,000 to 900,000 new illegals enter each year so 
there is a net growth of 400,000 to 500,000 a year.\13\ If America 
becomes less hospitable to illegals, many more will simply decide to go 
home.
    The center piece to interior enforcement would be to enforce the 
law barring illegals from holding jobs by using national databases that 
already exist to ensure that each new hire is legally entitled to work 
here. In 2004, only 4 employers were fined for hiring illegals. The IRS 
must also stop accepting Social Security numbers that it knows are 
bogus. We also need to make a much greater effort to deny illegal 
aliens things like divers licenses, bank accounts, loans, in-state 
college tuition, etc. Local law enforcement can play an additional 
role. When an illegal is encountered in the normal course of police 
work, the immigration service should pick that person up and deport 
him. More agents and fencing are clearly needed at the border as well.
Conclusion
    As discussed above, the impact of immigration on the overall 
economy is almost certainly very small. Its short- and long-term impact 
demographically on the share of the population that is of working age 
is also very small. It probably makes more sense for policy makers to 
focus on the winners and losers from immigration. The big losers are 
natives working in low-skilled low-wage jobs. Of course, technological 
change and increased trade have also reduced the labor market 
opportunities for low-wage workers in the Untied States. But 
immigration is different because it is a discretionary policy that can 
be altered. On the other hand, immigrants are the big winners, as are 
owners of capital and skilled workers, but their gains are tiny 
relative to their income.
    In the end, arguments for or against immigration are as much 
political and moral as they are economic. The latest research indicates 
that we can reduce immigration secure in the knowledge that it will not 
harm the economy. Doing so makes sense if we are very concerned about 
low-wage and less-skilled workers in the United States. On the other 
hand, if one places a high priority on helping unskilled workers in 
other countries, then allowing in a large number of such workers should 
continue. Of course, only an infinitesimal proportion of the world's 
poor could ever come to this country even under the most open 
immigration policy one might imagine. Those who support the current 
high level of unskilled legal and illegal immigration should at least 
do so with an understanding that those American workers harmed by the 
policies they favor are already the poorest and most vulnerable.
                                endnotes
    \1\ See ``Estimates of the Unauthorized Immigrant Population 
Residing in the United States: 1990 to 2000'' available at uscis.gov/
graphics/shared/statistics/publications/Ill--Report--1211.pdf.
    \2\ Figures for 2005 are from a forthcoming study by the Center for 
Immigration Studies entitled, ``Immigrants at Mid-decade a Snapshot of 
American's Foreign-born Population in 2005.''
    \3\ George Borjas and Richard Freeman's New York Times Opinion 
piece can be found at http://ksghome.harvard.edu/?GBorjas/Papers/
NYT121097.htm.
    \4\ Altonji, Joseph G. and David Card. 1991. ``The Effects of 
Immigration on the Labor Market Outcomes of Less-skilled Natives'' in 
John M. Abowd and Richard B. Freeman editors, Immigration, Trade and 
Labor. Chicago: University of Chicago Press.
    Borjas, George. 1984. ``The Impact of Immigrants on the Earnings of 
the Native-Born,'' W.M. Briggs and M. Tienda, Editors, Immigration: 
Issues and Policies, Salt Lake City: Olympus.
    Borjas, George J. 1983. ``The Substitutability of Black, Hispanic 
and White Labor. Economic Inquiry, Vol. 21.
    Butcher, Kristin F. and David Card. 1991. ``Immigration and Wages: 
Evidence from the 1980s,'' The American Economic Review Vol 81.
    \5\ Frey, William H. 1993. Race, Class and Poverty Polarization of 
US Metro Areas: Findings from the 1990 Census, Ann Arbor, Mich.: 
Population Studies Center.
    Frey, William H. 1996. ``Immigration, Domestic Migration, and 
Demographic Balkanization in America: New Evidence for the 1990s,'' 
Population and Development Review. Vol. 22.
    \6\ Edmonston, Barry and James Smith Ed. 1997. The New Americans: 
Economic, Demographic, and Fiscal Effects of Immigration, Washington 
D.C.: National Academy Press.
    \7\ Steven Camarota 1998. ``The Wages of Immigration: The Effect on 
the Low-Skilled Labor Market,'' Washington D.C.: Center for Immigration 
Studies. Camarota, Steven A. 1997. ``The Effect of Immigrants on the 
Earnings of Low-skilled Native Workers: Evidence from the June 1991 
Current Population Survey,'' Social Science Quarterly, Vol. 78.
    \8\ For a technical version of Dr. Borjas research see http://
ksghome.harvard.edu/?GBorjas/Papers/QJE2003.pdf, for a more plain 
English version see www.cis.org/articles/2004/back504.html.
    \9\ Kposowa, Augustine J. 1995. ``The Impact of Immigration on 
Unemployment and Earnings Among Racial Minorities in the United 
States.'' Racial and Ethnic Studies, Vol. 18.
    \10\ The report ``A Jobless Recovery: Immigrant Gains and Native 
Losses'' can be found at the Center's web site www.cis.org/articles/
2004/back1104.html
    \11\ These figures and ones on aging that follow can be found in a 
2005 report by the Center for Immigration Studies entitled, 
``Immigration in an Aging Society: Workers, Birth Rates, and Social 
Security,'' which can be found at www.cis.org/articles/2005/
back505.html.
    \12\ See page 21 of the Census Bureau's ``Methodology and 
Assumptions for the Population Projections of the United States: 1999 
to 2100.'' The report can be found at www.census.gov/population/www/
documentation/twps0038.pdf
    \13\ See footnote number 1.
                                 ______
                                 
    Mr. McKeon. Thank you.
    Mr. Siciliano?

 STATEMENT OF DAN SICILIANO, ESQ., EXECUTIVE DIRECTOR, PROGRAM 
      IN LAW, ECONOMICS, AND BUSINESS, STANFORD LAW SCHOOL

    Mr. Siciliano. Mr. Chairman and members of the committee, 
thank you for the opportunity to appear here today.
    As said, I am Dan Siciliano. I am the executive director of 
Stanford Law School's Program in Law, Economic and Business. 
Part of what I do there is co-direct several projects related 
to institutional investors, venture capital and small business 
formation and growth. And a lot has been said today, so I will 
try to hone it down to maybe some relative supplementary points 
and try not to add too much to the number soup, which I think 
is starting to brew quite a bit.
    Your hearing is timely and important, I think, not only 
because this is a very complex and hard topic but because I 
think we are several years into a demographic transformation 
that has tremendous economic impact. I will cover three points 
briefly, and then hopefully we will all answer questions.
    First, the demographic reality, as concerns our workforce 
and supply of labor, is that we have too few workers going into 
a time when we hope to continue sustained growth. And it is 
both at the high end and at the lesser skilled worker level.
    My second point, I want to focus on the economic 
implications, while putting into context the fiscal 
implications, which are different things, including why more 
recent models of the economy show that there is little or no 
negative wage impact due to immigrant labor available in the 
economy and its growth.
    And, finally, and maybe most important in terms of it being 
a separate point that maybe hasn't been made, I want to talk a 
little bit about the remarkable economy that we have and that 
we talk about its resiliency and whether or not this immigrant 
labor availability has a lot to do with that resiliency.
    And I will comment a little bit on job formation and the 
risk of moving from what you might describe as a very difficult 
environment to start and grow small businesses, to an 
impossibly difficult environment if we misstep, as concerns the 
availability of willing workers in our economy.
    The demographic realities I think are fairly 
straightforward. I think the Congressional Budget Office has 
done among the best jobs of putting it all in one place for us. 
But, in short, the U.S. GDP growth forecast assumption from the 
Bureau of Labor Statistics data assumes 3 percent annual GDP 
growth through 2012. It looks like, hopefully, that might 
actually be a conservative number if we can manage to grow our 
available workforce to account for the growth from 144 million 
jobs right now to 165 million jobs by 2012.
    And just the difference in the jobs does not necessarily 
indicate the number of jobs that will need to be filled, 
because there is a vacancy created for departures from the 
workforce, not just because new jobs have been created. So 21 
million jobs will be the relative increase between 2002 and 
2012, but for every one of those jobs, we can expect about 2.5 
job openings. The numbers, though complex and not worth 
belaboring here, I think, because they have already been 
provided to you, show simply that we do not have sufficient 
labor supply without immigrants in order to fill those jobs.
    And as stated previously, the elements of economic growth 
are fairly straightforward. How they interact is complicated, 
but we know we need capital, we need labor, ad we know 
technology plays an important role. If you over-constrain one 
of those, we end up finding ourselves in a position where we 
have not achieved the growth that we want, and that means our 
children and our grandchildren, and if we do it with a terrible 
misstep, ourselves. We will not experience the growth in the 
economy we hope to see.
    Current immigration, therefore, temporary, permanent or 
otherwise, is essentially inadequate if we ratcheted down to 
what is legally allowed at this time.
    Let me make a comment on the dynamic versus static model of 
the economy where people discuss does it hurt current native-
born workers or does not hurt current native-born workers? I 
think the consensus is that it, by and large, only hurts, the 
influx of immigrant labor, a narrow portion of native-born 
workers.
    And the reason is because using a dynamic approach, meaning 
an understanding that immigrants themselves come to the United 
States and not only contribute to the workforce but contribute 
as consumers and investors and then, in turn, and this is the 
big difference, in the most recent studies coming out of both 
U.C.-Berkeley and U.C.-Davis, the business formation alters.
    People will redeploy capital in a way that accounts for the 
fact that there is available labor. This, in turn, allows the 
economy to grow and create more jobs, which maybe brings me to 
my final point. And that it is an art form in the Silicon 
Valley when we say, ``'What creates jobs, what builds 
companies, what allows us to move forward as an economy?"
    I don't think anyone has very hard and fast answers to 
that, but one thing we do know is that people are at the heart 
of that essential growth phenomena. And if we inadvertently 
constrain people at the low-skill end or the high-skill end, we 
may actually make it too hard to grow companies, too hard to 
form companies. And I think that is something that requires 
more study.
    And I wish I could have a ready-made answer for what the 
correct answer is, but I think one part of that, one important 
tool is to realize that immigrant labor, immigrants coming to 
the United States, documented and undocumented, have 
historically played, and based on the demographics will 
continue to play, a very critical role in that.
    So thank you.
    [The prepared statement of Mr. Siciliano follows:]

Prepared Statement of Dan Siciliano, Esq., Executive Director, Program 
          in Law, Economics, and Business, Stanford Law School

    Mr. Chairman and members of the committee, thank you for the 
opportunity to appear before you today. My name is Dan Siciliano and I 
am the Executive Director of the Program in Law, Economics, and 
Business at Stanford Law School. I am also a research fellow with the 
Immigration Policy Center (IPC) at the American Immigration Law 
Foundation, a non-partisan, non-profit foundation focused on research 
and writing about the role of immigrants and immigration policy in the 
United States.
    Today's hearing on U.S. immigration policy and its impact on the 
American economy comes at a critical time. Efforts are underway in the 
House and in the Senate to repair a system that is generally 
acknowledged to be broken. I suggest that any reform to immigration 
policy should be evaluated by considering how immigrants directly, and 
as the evidence now seems to indicate, positively impact our nation's 
economic prosperity.
    Much of the public debate over immigration in the United States has 
focused on the rapid growth of the undocumented population over the 
past decade and a half. However, undocumented immigration is just one 
symptom of the larger disconnect between U.S. immigration policy and 
the reality of our economy's fundamental reliance on a diverse and, 
hopefully, growing pool of available labor. The U.S. economy has become 
increasingly reliant on immigrant workers to fill the growing number of 
less-skilled jobs for which a shrinking number of native-born workers 
are available. Yet current immigration policies offer very few legal 
avenues for workers in less-skilled occupations to enter the country. 
Undocumented immigration has been the predictable result of the U.S. 
immigration system's failure to respond effectively to actual labor 
demand.
    Many critics of immigration point to economic arguments that the 
presence of immigrants, particularly undocumented immigrants, has broad 
negative consequences for the native-born workforce. Some claim that 
immigration reduces employment levels and wages among native-born 
workers. This is generally not true. These arguments are largely the 
result of an over-simplified economic model used to measure the impact 
of immigration on the workforce, while ignoring the role that 
immigrants play in expanding the economy and stimulating labor demand 
through their consumer purchases and investments. Moreover, the 
empirical evidence indicates that businesses expand through the 
investment of more capital when the labor supply is not artificially 
constrained. Careful analysis and more recent studies add a dynamic 
component to the economic analysis of immigration by treating 
immigrants (both documented and undocumented) as real economic agents: 
earning, spending, and investing in the economy. Businesses, in turn, 
are considered dynamic as well: adjusting to the available resources 
and expanding accordingly.
    Few argue with the notion that immigration provides many benefits 
to the United States. As a nation of immigrants, our culture, customs, 
and traditions reflect the diverse backgrounds of the millions of 
individuals who have made their way to America over time. But more than 
cultural benefits, recent economic analysis, including work by Giovanni 
Peri of the University of California, shows that the United States sees 
real economic benefits from immigration. Native-born wages increased 
between 2.0 and 2.5 percent during the 1990s in response to the inflow 
of immigrant workers.\1\ Overall annual growth in the Gross Domestic 
Product is 0.1 percentage point higher as a result of immigration--a 
misleadingly small number that represents billions of dollars in 
economic output and, when compounded across a generation, represents a 
significant improvement in the standard of living of our children and 
grandchildren.
    The positive impact of immigration results in part from the fact 
that immigrants help to fill growing gaps in our labor force. These 
gaps develop as aging native-born workers, in larger numbers than ever 
before, succeed in attaining higher levels of education and 
subsequently pursue higher-skill, higher-wage jobs. If the United 
States were to reform the immigration system to better address the 
demand for foreign-born labor, largely through ensuring that such 
workers were a part of the transparent and competitive ``above ground'' 
economy, the economic benefits of immigration could be even greater 
that what we have already experienced. Immigrants and their employers 
would likely benefit from a more predictable workforce environment and 
less time and resources would be spent addressing the dysfunction that 
is a result of a strong demand for a labor force that our laws do not 
accommodate.
    Undocumented immigration is largely the result of two opposing 
forces: an immigration policy that significantly restricts the flow of 
labor and the economic reality of a changing native-born U.S. 
population. The extent to which the U.S. economy has become dependent 
on immigrant workers is evident in the labor force projections of the 
Bureau of Labor Statistics (BLS). According to BLS estimates, 
immigrants will account for about a quarter of labor force growth 
between 2002 and 2012. Given that roughly half of immigrants now 
arriving in the United States are undocumented, this means that 1 in 8 
workers joining the U.S. labor force over the coming decade will be 
undocumented immigrants. Many of the jobs that would be harder to fill 
without this labor supply are already associated with immigrant labor: 
construction, agriculture, meatpacking, and hospitality. A growing 
number of immigrants, however, are also filling jobs in fields that are 
vitally important to serving America's aging population, such as home 
healthcare. This indicates that while policymakers debate the relative 
merits of various immigration reform proposals, immigration beyond 
current legal limits has already become an integral component of U.S. 
economic growth and will likely remain so for the foreseeable future.
The Impact of Immigrants on Native-Born Wages
    Despite the critical role that immigration plays in preventing 
labor shortages that might impede economic growth, many critics of 
immigration argue that foreign-born workers reduce the wages of native-
born workers with whom they compete for jobs. However, this argument 
relies on an overly simplistic understanding of labor supply and demand 
that fails to capture the true value that immigrants bring to the 
economy. If you are to gauge accurately the economic impact of 
immigration, the role that immigrants play in creating jobs is just as 
important as the role they play in filling jobs.
    To analyze the impact of immigration on the U.S. economy as a 
whole, economists can use two models: ``static'' and ``dynamic.'' The 
static model is the simplest and most frequently used by critics of 
immigration, yet it is the least realistic because it fails to account 
for the multi-dimensional role that immigrants play as workers, 
consumers, and entrepreneurs. The dynamic model, on the other hand, 
offers a more nuanced portrait of immigrants as economic actors. The 
net economic benefits of immigration are apparent in both models, but 
are larger in the dynamic model.
    Under the static model, economists assume that immigrant workers 
serve only to increase the labor supply, which results in slightly 
lower wages and thus higher profits for the owners of capital. In other 
words, if there are more workers competing for a job, an employer might 
pay a lower wage for that job and pocket the difference. For instance, 
under the static model, the 125 million native-born workers in the 
United States in 1997 would have earned an average of $13 per hour if 
not for the presence of immigrants. However, the 15 million immigrant 
workers who were actually in the country increased the labor force to 
140 million and, under the static scenario, thereby lowered average 
wages by 3 percent to $12.60 per hour. Nonetheless, the net benefit to 
the U.S. economy of this decline in wages would have amounted to about 
$8 billion in added national income in 1997.
    Despite the seeming simplicity of this logic (more workers 
competing for jobs results in lower wages for workers and higher 
profits for businesses), the assumptions underlying the static model 
bear little resemblance to economic reality. Recent evidence supports 
the contention that the impact of immigration on wages is not as 
simple, or negative, as the static model would suggest. A 2004 study 
found that, despite the large influx of immigrants without a high-
school diploma from 1980 to 2000, the wages of U.S.-born workers 
without a diploma relative to the wages of U.S.-born workers with a 
diploma ``remained nearly constant.'' \2\
    The inability of the static model to explain this finding rests in 
part on the fact that the model incorrectly assumes immigrant and U.S.-
born workers are perfectly interchangeable; that is, that they 
substitute for each other rather than complement each other in the 
labor force. Common sense alone suggests that this is not always the 
case. For example, less-skilled foreign-born construction laborers 
enhance the productivity of U.S.-born carpenters, plumbers, and 
electricians, but do not necessarily substitute for them. More broadly, 
the different educational and age profiles of foreign-born and native-
born workers indicate that they often fill different niches in the 
labor market.
    More importantly, the static model fails to account for the fact 
that immigrants spend money or invest capital, both of which create 
jobs and thus exert upward pressure on wages by increasing the demand 
for labor. This amounts to more than a minor omission given the scale 
of immigrant purchasing power and entrepreneurship. For instance, in 
2004, consumer purchasing power totaled $686 billion among Latinos and 
$363 billion among Asians.\3\ Given that roughly 44 percent of Latinos 
and 69 percent of Asians were foreign-born in that year, the buying 
power of immigrants reached into the hundreds of billions of dollars.
    The dynamic model accounts for many of these additional economic 
contributions by immigrants. In the dynamic scenario, immigrant workers 
spend some of their wages on housing and consumer goods, which in turn 
increases the demand for labor by creating new jobs. Rising labor 
demand then increases wages relative to what would have existed if 
immigrant workers had not been present in the labor market. The result 
is a larger economy with higher employment.
The Impact of Immigrants on Native-Born Employment Levels
    An IPC research report released today provides strong demographic 
evidence that the impact of immigrants on native-born employment levels 
is extremely limited or, in some case, positive. The report examines 
the significant differences between the native-born workforce and the 
immigrant workforce and finds that immigrants are largely complementary 
to the native-born in education, age and skill profile. The 
complementary nature of immigrant labor makes it unlikely that 
immigrants are replacing a significant number of native-born workers, 
but are instead moving into positions that allow native-born workers to 
be more productive.
    As the number of less-skilled jobs continues to grow, it will 
become increasingly difficult for employers to find native-born 
workers, especially younger ones, with the education levels that best 
correspond to those jobs. In this sense, immigrant workers are a vital 
complement to a native-born labor force that is growing older and 
better educated. On average, foreign-born workers tend to be younger 
than their native-born counterparts and a larger proportion have less 
formal education. In addition, immigrants participate in the labor 
force at a higher rate. As a result, immigrants provide a needed source 
of labor for the large and growing number of jobs that do not require 
as much formal education.
Immigrant Workers are More Likely to Have Less Formal Education
    Immigrants comprise a disproportionate share of those workers who 
are willing to take less-skilled jobs with few or no educational 
requirements. In 2004, 53.3 percent of the foreign-born labor force age 
25 and older had a high-school diploma or less education, compared to 
37.8 percent of the native-born labor force. Immigrant workers were 
more than four times as likely as native workers to lack a high-school 
diploma. In contrast, immigrant workers were nearly as likely to have a 
four-year college degree or more education, amounting to more than 30 
percent of both the native-born and foreign-born labor force.
    In general, foreign-born workers are more likely to be found at 
either end of the educational spectrum, while most native-born workers 
fall somewhere in the middle. Roughly three-fifths of the native-born 
labor force in 2004 had either a high-school diploma or some college 
education short of a four-year degree, whereas three-fifths of the 
foreign-born labor force either did not have a high-school diploma or 
had at least a four-year college degree. Given their different 
educational backgrounds, most native-born workers are therefore not 
competing directly with foreign-born workers for the same types of 
jobs.
Immigrant Workers Tend to be Younger
    Immigrants also include a large number of younger workers, 
particularly in the less-skilled workforce. In 2004, 67 percent of the 
foreign-born labor force with a high-school diploma or less education 
was between 25 and 45 years old, as opposed to 52 percent of the 
native-born labor force with no more than a high-school diploma. While 
relative youth is not a requirement for many jobs, it is an asset in 
those less-skilled jobs that are physically demanding or dangerous.
    Given the different age and educational profiles of foreign-born 
and native-born workers, it is not surprising that immigrants comprise 
a disproportionately large share of younger workers with little 
education. In 2004, immigrants made up more than a quarter of all 
workers 25-34 years old with a high-school diploma or less, and more 
than half of workers 25-34 years old without a high-school diploma. 
Employers searching for younger workers in less-skilled positions 
therefore often find that a large portion of prospective hires is 
foreign-born.
The Fiscal Costs of Immigration
    Critics of immigration often focus on the fiscal costs of 
immigration instead of the economic benefits. These costs are often 
exacerbated by the undocumented status of many immigrants. An 
immigration policy that acknowledged the economic need for and benefits 
of immigration would significantly reduce these costs. To support the 
contention that immigrants are a net fiscal drain, critics cite studies 
indicating that immigrants contribute less per capita in tax revenue 
than they receive in benefits. However, these studies fail to 
acknowledge that this has more to do with low-wage employment than with 
nativity. Native-born workers in low-wage jobs similarly receive 
benefits in excess of the level of taxes paid. However, net tax revenue 
is not the same as net economic benefit. In addition, this analysis 
ignores the fact that in the absence of sufficient immigrant labor, 
unfilled low-wage jobs, regardless of the relative tax implications, 
hurt the economy.
Conclusion
    Immigration is a net positive for the U.S. economy and the presence 
of immigrants does not generally harm the native-born workforce. 
Studies that purport to demonstrate a negative impact on native-born 
wages and employment levels rely on an overly simplistic economic model 
of immigration and the economy. The most recent demographic analysis in 
conjunction with more sophisticated economic modeling reveals that most 
immigrants, including undocumented immigrants, do not compete directly 
with native-born workers for jobs. Instead, these immigrants provide a 
critical element of our nation's economic success and continued 
resiliency: a relatively young, willing, and dynamic supply of 
essential workers in areas such as healthcare, construction, retail, 
and agriculture. These are jobs that, once filled, enable our economy 
to continue the cycle of growth and job creation.
    Indeed, this makes clear that the implication of the government's 
own BLS data cannot be ignored. To prosper, our economy desperately 
needs workers at both ends of the spectrum: young and less skilled as 
well as more educated and highly skilled. As a nation, we are in the 
midst of a slow-motion demographic cataclysm unlike any we have 
previously experienced. Immigration is not the only tool for seeing our 
way clear of the coming storm--but it is one without which we will not 
prosper. Without a continued and normalized flow of immigrant labor our 
workforce will fall well short of the numbers needed to meet the 
emerging demand for labor. The result will be an erosion of both the 
growth and increased standard of living that our citizenry has come to 
expect and to which future generations are entitled. Until the United 
States adopts a more articulated and thoughtful immigration policy that 
accommodates these economic realities, the insufficiency of current 
immigration and the problematic nature of undocumented immigration, in 
particular, will continue to hobble the economy.
                                endnotes
    \1\ Gianmarco I.P. Ottaviano & Giovanni Peri, Rethinking the Gains 
from Immigration: Theory and Evidence from the U.S. London: Centre for 
Economic Policy Research, September 2005.
    \2\ David Card, Is the New Immigration Really So Bad? (CDP No 02/
04). Centre for Research and Analysis of Migration, Department of 
Economics, University College London, April 2004, p. 23
    \3\ Jeffrey M. Humphreys, ``The multicultural economy 2004: 
America's minority buying power,'' Georgia Business and Economic 
Conditions 64(3), Third Quarter 2004 (Selig Center for Economic Growth, 
University of Georgia).
                                 ______
                                 
    Mr. McKeon. Thank you very much.
    The Chair recognizes the gentleman from Maryland, Mr. Van 
Hollen, for 5 minutes.
    Mr. Van Hollen. Well, thank you, Mr. Chairman.
    Thank all of you for your testimony here this morning.
    Mr. Holzer, in his testimony, talked about the fact that he 
though there were a number of other factors that essentially 
depressed wages or made it harder for high school dropouts to 
get in the workforce, other than immigration, illegal or legal 
immigration. You ticked off a number of those new technology 
trade policies, workforce development, lack of increase in the 
minimum wage recently, collective bargaining policies, those 
kinds of things.
    And I think if you look at those parts of the country where 
you don't have a lot of immigrant labor, it is absolutely clear 
that those individuals that are high school dropouts, lower 
skills have the higher unemployment rate. It is not that they 
are not able to get jobs because there is someone else there to 
take it, it is that they have these lower skills.
    So I guess my question to all of you would be, what do you 
think about that analysis?
    Maybe you could expand on it, Mr. Holzer, but I would be 
interested in the response of the other two witnesses as to 
whether you think those are larger factors with respect to the 
challenges faced by high school dropouts than the competition 
from immigrant labor?
    Mr. Holzer. I certainly agree with your summary of my 
position. Let's look at high school graduates. Male high school 
graduate workers in the United States have seen as large 
declines in their wages as high school dropouts have, and there 
is no estimate to suggest that immigrants have played a big 
role in the decline of wages for high school graduates. That is 
almost certainly due to these other factors we have discussed, 
probably the most important one being new technologies, trade 
patterns, but as I sort of said, the decline of the 
institutions that traditionally have protected those workers.
    High school dropouts, you probably can make an argument 
that immigrants have played a somewhat larger role, but even 
there you have equally fine studies by different distinguished 
economists that come to very different conclusions. One study, 
cited by Mr. Camarota, defines a somewhat larger effect, at 
most half, of the shortfall for the dropouts and likely less 
than that. Other studies find only negligible effects.
    These other factors, the technology factors, the trade 
factors, the institutional changes almost certainly have hurt 
all of those groups, and there is very little disagreement 
among economists that those other factors predominate.
    Mr. Siciliano. I think it is certainly the case that it is 
no fun being on the receiving end of disruptive changes in the 
economy, and there are portions of the economy that win and 
there are players in the economy who do not win.
    And I think the issue then becomes one of distribution and 
the distributional consequences. I think it is important to 
separate the two issues. One is, what grows the economy well 
and what grows the economy in a net outcome sort of way? I 
think it is clear that immigration does do that.
    Then you need to assess carefully who got hurt in that 
process and how do we ameliorate that, how do we change that, 
how do we improve their outcomes? And I think those are 
separate discussions that are obviously related but one does 
not indicate you should abandon the tool which helps you grow 
the economy. I think that would be my additional contribution 
to that comment.
    Mr. Camarota. Let me tell you what the National Research 
Council when they looked at this question said. They thought 
the economy was national in scope so that you couldn't look at 
labor markets locally because the movement of labor, capital, 
technology, trade and so forth made it that you had to look 
nationally. They estimated half the decline in wages for the 
bottom 10 percent or workers who roughly correspond to that was 
due to immigration; the other half were some of the other 
factors.
    I think there is some confusion here about economic growth. 
Adding more workers most assuredly makes our economy bigger. 
Immigrants are generally poorer than native, so when we count 
them, our per capita income or our GDP is certainly smaller. 
But neither of those two facts, the fact that the overall 
poverty rate and the overall level of income or average income 
or per capita income is lower because we count out the 
immigrants or that the overall aggregate economy is bigger 
doesn't mean natives are better off.
    That is why when the National Academy focused, it discussed 
these questions and then found that the impact on natives in 
terms of benefit was extremely small, or miniscule in the words 
of the author who developed those estimates. Now, that could be 
wrong, but that study included most of the top demographers and 
economists in the immigration field.
    Mr. Van Hollen. Mr. Holzer, you mentioned the impact on 
consumers of lower prices. Mr. Camarota made the point that it 
is hard to have it both ways. It is hard to say that you can 
have lower prices for consumers as a result of immigrant labor 
without it being related to lower wages and pressure on lower 
wages. How would you respond to that?
    Mr. Holzer. I would respond to that by saying that within 
the relevant sectors we are talking about, within agriculture, 
within construction and within garments, immigrants do likely 
reduce wage costs for employers, and that is going to translate 
into lower prices for consumers.
    The reason that not all less educated workers suffer 
because of that is because most of those workers end up 
adjusting, moving to other local areas, other sectors of the 
economy where their wages are not necessarily in direct 
competition with those in those sectors.
    So the lower wages and lower costs in those sectors, which 
do benefit consumers, do not necessarily translate into lower 
wages elsewhere, because the competition can be reduced by a 
variety of these adjustments.
    Mr. Van Hollen. OK. Thank you.
    Thank you, Mr. Chairman.
    Mr. McKeon. Gentleman yields back his time.
    As I have sat here this morning and afternoon, I am 
reminded of the story of the three blind men describing an 
elephant, you know, the one that says it is a big wall that 
feels the side, the ones that grabs the leg and says it is like 
a tree, big trunk, and the one that grabs the tail and says 
like a rope. We are a large country and we have a large 
economy, and like you said, when you are talking about the 
national economy versus local economies, California is much 
different than Maryland; Texas probably much different than 
Wyoming.
    And I wish all of my constituents could have heard all of 
the discussion here today, because there are some that see the 
trunk, there are some that see the wall, there are some that 
see the rope. They see people that they perceive as being 
illegal in the country that are perhaps using medical services, 
educational services that are costing the people in California, 
taxpayers, a lot of money. And some of those people over there 
using those services may also be paying taxes.
    It is a very difficult thing. I think if we had all of our 
farmers here, they would say, ``How do I harvest, how do I 
plant my crops, how do I harvest my crops if I don't have 
immigrant workers, because there is not a lot of demand for 
those jobs?"
    I see it as a very complex issue that is a very important 
issue for me because we have people on one side saying, we just 
can't have people here that are here illegally. And the 
gentlelady that asked the question of all the different ways we 
describe, a lot of that is politically correct. If you are on 
one side of the issue, you use the word, ``undocumented;'' if 
you are on the other side, it is ``illegal.'' And guess if you 
come into the country illegally, you are also going to be 
undocumented, because there is no way to get legal documents if 
you entered the country illegally. But there is no simple 
answer to it, to the overall problem.
    Mr. Siciliano, your testimony where you explored the 
concept that certain native-born workers and lower-skilled 
immigrants are not actually competing for the same jobs. You 
defined this relationship as a complementary one versus one of 
substitutions. For instance, if they are immigrants and they 
are working in the labor field or construction industry versus 
the native-born that are working in that same field, how does 
that--they are competing for the same job but I guess there are 
some that feel if you are here illegally, you be paid less?
    Mr. Siciliano. Well, it actually depends. I think, in fact, 
in the short run, I would say that labor markets are somewhat 
regional, so it depends on the region, it depends on the type 
of activity. Let's take construction, for example, and I think 
it is legitimate to say that there are a range of skills that a 
carpenter or an electrician can exhibit. And so we might 
describe as low skilled an apprentice-level carpenter, but even 
that carpenter may have an assistant who does things that are 
not even at the level of an apprentice-level carpenter.
    And when we say that lesser-skilled immigrants don't 
necessarily compete head to head, we know and studies have 
indicated that I turns out that immigrants of the lesser 
skilled areas tend to compete with each other first and 
foremost. And in reality, there is a continuum of skill sets, 
even within what we broadly classify as lesser skilled. And in 
the construction example with whether a carpenter or 
electrician, you have carpenters' helpers, you have 
electricians' helpers, you have people who play a role which 
help other people with greater skills but still falling within 
our lesser-skilled category get their job done and get their 
job done quickly.
    Now, the long-term trend, I mean, what happens over 5 years 
and 10 years? Does that person move up as they garner skills? 
That is the interesting question. I think that is more 
important in some ways. But I think there are a lot of places 
where people who are hardworking but lesser skilled help people 
who are still somewhat lesser skilled and also hardworking and 
they get more done together. That is what we mean when they 
don't compete head to head.
    Mr. McKeon. As we try to solve this problem, the way the 
legislature works, people will submit bills and we will get 
together an we will discuss them. None of us will have the 
expertise that you gentlemen have. I hope that as we go through 
this process that you will stay in touch with us so we will be 
able to glean from your expertise, because otherwise we end up 
with something that causes more problems, unintended 
consequences at the rend of the road, and while we are well-
meaning and trying to solve problems we end up creating more 
problems.
    So I appreciate your being here today. I appreciate your 
testimony and hope that you will stay with us as we go through 
this process.
    Our committee has certain jurisdiction, other committees 
have other jurisdictions. Ours will be falling in the area of 
education and workforce laws and not so much the border control 
or those kind of things.
    But we really appreciate your efforts for being here with 
us today and for your testimony, and thank you for your 
patience and I wish more of us had been able to stay, but that 
is kind of just the way it works around here.
    Thank you very much.
    This hearing is adjourned.
    [Whereupon, at 12:56 p.m., the committee was adjourned.]
    [Prepared statement of Mr. Norwood follows:]

    Prepared Statement of Hon. Charlie Norwood, a Representative in 
                   Congress From the State of Georgia

    I thank the Chairman for holding this very important hearing that 
is long overdue. American immigration policy has a profound impact on 
the American economy in terms of jobs, healthcare, education and our 
entire way of life.
    But more importantly, American immigration policy directly impacts 
every one of our constituents, and they are crying out for reform.
    Why are they crying out for reform? Take my home state of Georgia 
for example: Since 1992, the number of illegal aliens statewide has 
increased by 777%. This invasion equates to an illegal immigrant 
population of nearly 250,000, making the Peach State home to the 7th 
largest illegal immigrant population in the country.
    The results of this invasion have turned my state upside down. 
Schools are overcrowded. Hospitals run incredible deficits. And jobs 
that once paid decent wages for the most un-skilled and underprivileged 
workers are simply not available.
    Yet there are those who might explain this phenomenon away. ``The 
ends justify the means,'' or ``illegal immigrants take jobs that 
Americans don't want,'' we are told. Well for those who subscribe to 
this line of thought, I invite you to try telling that to an unemployed 
textile worker in Toccoa who now can't even get a job on a poultry 
farm.
    These are the cold hard facts: Bureau of Labor Statistics (BLS) 
research suggests that in the construction, maintenance, food 
preparation and other labor-intensive industries where legal and 
illegal immigrant growth is most pronounced, American unemployment 
tends to be the highest.
    These are industries that our most vulnerable American workers, 
like the gentleman I mentioned from Toccoa, have come to rely on over 
the years in order to make a living. With little education and fewer 
high-tech skills, these hard working folks simply do not have other 
opportunities.
    Mr. Chairman, this Committee is working diligently to reverse these 
circumstances for America's most vulnerable workers. After all, 
Republican policies passed under your leadership are already breaking 
the chains of generational poverty, improving results in our nation's 
public schools and reforming the federal government's job training 
system.
    Yet unless we also commit to reforming America's broken immigration 
policies that are negatively impacting the American economy, our 
efforts will ultimately come up short.
    I look forward to the testimony of our distinguished witnesses on 
both panels, and respectfully yield back the remainder of my time.
    [Slides used during Mr. Holtz-Eakin's statement follow:]