[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
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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______
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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:
Brookings Institution.
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:]