[Senate Hearing 109-536]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-536
 
                     IMMIGRATION: ECONOMIC IMPACTS

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 25, 2006

                               __________

                          Serial No. J-109-69

                               __________

         Printed for the use of the Committee on the Judiciary






















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                       COMMITTEE ON THE JUDICIARY

                 ARLEN SPECTER, Pennsylvania, Chairman
ORRIN G. HATCH, Utah                 PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
JOHN CORNYN, Texas                   CHARLES E. SCHUMER, New York
SAM BROWNBACK, Kansas                RICHARD J. DURBIN, Illinois
TOM COBURN, Oklahoma
           Michael O'Neill, Chief Counsel and Staff Director
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director

























                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas........     2
    prepared statement...........................................    46
Kennedy, Hon. Edward M., a U.S. Senator from the State of 
  Massachusetts..................................................     4
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, 
  prepared statement and letter..................................    58
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     1

                               WITNESSES

Chiswick, Barry R., UIC Distinguished Professor, Department of 
  Economics, University of Illinois at Chicago, Chicago, Illinois     9
Freeman, Richard B., Professor of Economics, Harvard University, 
  and Program Director of Labor Studies, National Bureau of 
  Economic Research, Cambridge, Massachusetts....................     5
Holzer, Harry J., Professor of Public Policy, Georgetown 
  University, Washington, D.C....................................    11
Siciliano, Dan, Executive Director, Program in Law, Economics, 
  and Business, Stanford Law School, Stanford, California........     7

                       SUBMISSIONS FOR THE RECORD

Chiswick, Barry R., UIC Distinguished Professor, Department of 
  Economics, University of Illinois at Chicago, Chicago, 
  Illinois, prepared statement...................................    33
Freeman, Richard B., Professor of Economics, Harvard University, 
  and Program Director of Labor Studies, National Bureau of 
  Economic Research, Cambridge, Massachusetts, prepared statement    48
Holzer, Harry J., Professor of Public Policy, Georgetown 
  University, Washington, D.C., prepared statement...............    53
Siciliano, Dan, Executive Director, Program in Law, Economics, 
  and Business, Stanford Law School, Stanford, California, 
  prepared statement.............................................    63
Small Business California, Scott Hauge, President, San Francisco, 
  California, prepared statement.................................    69


























                     IMMIGRATION: ECONOMIC IMPACTS

                              ----------                              


                        TUESDAY, APRIL 25, 2006

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:32 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Arlen 
Specter, Chairman of the Committee, presiding.
    Present: Senators Specter, Kyl, Sessions, Cornyn, Kennedy, 
and Feinstein.

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Chairman Specter. Good morning, ladies and gentlemen. It is 
9:30, so the Committee on the Judiciary will now proceed with 
our hearing today on the economic impact of immigration, a 
matter of considerable importance on a far-ranging line of 
issues as to what effect immigrants have on our economy. That 
is only one of many considerations which are before us in our 
deliberations on immigration reform.
    We are concerned with the humanitarian aspects of the 
United States as a beacon of hope, as it has been for the 
centuries of our existence, even before the adoption of the 
Constitution, a beacon of hope which brought my parents to this 
country. The issue has very far-ranging foreign policy 
considerations. Senator Sessions and I spent some time over the 
recent recess in South American countries--in Colombia and Peru 
and Brazil--and then briefly in the Dominican Republic, and our 
immigration bill is being very closely watched, with our 
Southern neighbors realizing that we have a right to protect 
our borders, but also being very concerned about how we will 
treat many people from those countries who are in the United 
States, recognizing that many of them are here illegally.
    We face a situation with 11 million undocumented 
immigrants. Nobody is sure of the exact number. We recognize 
the needs for guest workers. The President has proposed a guest 
worker program, as has Speaker Hastert, as have the Senators 
who structured the Committee bill to have a guest worker 
program.
    Today we are going to be looking at a number of complex 
questions about what is the economic impact of immigration. Are 
the immigrants taking jobs that Americans are prepared to fill? 
There is considerable debate on that subject. Most people say 
that the immigrant workers take on jobs that Americans will not 
fill. Perhaps that is largely true, but perhaps there are jobs 
taken which Americans would fill. The panel of experts can shed 
some light on that.
    There are questions as to whether if they do not take jobs 
that Americans can fill, by and large, do the immigrants 
depress the wage scales generally? What is the cost of the 
immigrant with respect to taxes to State and local on health 
care and schools contrasted with their contribution? Certainly 
not an overriding factor, but one which has raised some serious 
issues. Do the immigrants contribute more to the gross national 
product than they take by way of wages? Another serious issue.
    We have met the deadline of the Majority Leader, coming 
forward with legislation which we reported out of this 
Committee, but we have realized that there remain some serious 
issues to be analyzed, which we will be continuing to do as the 
bill makes its way back to the floor, and I think it will come 
back. We know that we were unable to get it concluded before 
the last recess. A question arose as to how many amendments 
there would be. Questions arise as to what is going to happen 
in conference.
    I am pleased to see that the President has invited a group 
of Senators to the White House this afternoon to talk about 
immigration. It is my personal hope that the President will 
intervene and take a position.
    There is concern in the Senate about taking some hard votes 
and not knowing what will come out of conference and concern 
that there will be a conference report which will render those 
tough votes virtually meaningless. These are all issues which 
are before us, and today we will be taking a close look at the 
economic impact.
    We have been joined by the distinguished Senator from 
Texas--one of the distinguished Senators from Texas. Senator 
Cornyn, would you care to make an opening statement?

STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM THE STATE OF 
                             TEXAS

    Senator Cornyn. Thank you very much. Thank you, Mr. 
Chairman, for the opportunity. I do have just a brief opening 
statement.
    I want to first of all thank you for calling the hearing 
because I think it is very important that Congress have at its 
hands and disposal the facts on immigration reform, and there 
is no more controversial area than the costs associated with 
illegal immigration. And I think it is important that we get a 
factual basis to go forward.
    I would also say that we cannot explore the economic impact 
of immigration without considering how various reform proposals 
will impact the Federal deficit. The Congressional Budget 
Office estimates that the current Senate compromise bill that 
is on the floor will result in $27 billion in mandatory 
spending in the first 10 years alone, including $12 billion for 
Medicaid, $3 billion for food stamps, and $12 billion in earned 
income tax credits.
    Of greater concern is a proposal that would create a 
balloon payment in the second decade when millions of currently 
undocumented immigrants would be granted the full benefits of 
American citizenship and would become eligible for the panoply 
of Federal benefits. That also does not include the additional 
family members that those individuals would then be able to 
petition to bring into the country with them.
    The current CBO estimate does not account for that dramatic 
increase because it falls outside of the usual 10-year budget 
projection. What is clear is that a large-scale amnesty would 
cost U.S. taxpayers tens of billions of dollars, and the true 
impact may not be felt for years.
    Our immigration policy must be capable of adapting to 
economic conditions, and right now the United States is 
enjoying a healthy economy. The economy created 211,000 jobs in 
March and has created about 2.1 million jobs over the last 12 
months. More than 5.1 million jobs have been created since 
August of 2003, and unemployment is 4.7 percent, lower than the 
average of the 1960's, 1970's, 1980's, and 1990's. In a climate 
of strong job creation, foreign workers are less likely to 
compete with U.S. workers for jobs.
    But because we will not always enjoy a strong economy, our 
immigration policy must strike the appropriate balance between 
temporary and permanent workers. A temporary worker program 
built around a floating visa cap would allow the number of 
foreign workers in the United States to rise and fall based 
upon market demand and based on conditions in the economy. 
During a slow economic period, fewer visas would be issued, and 
U.S. workers would face less competition.
    But while the current proposal is described as a temporary 
worker program, it is anything but. All unskilled workers, 
325,000 a year, would automatically become eligible for green 
cards after working in the United States for 4 years. That 
model allows for no flexibility when there is a decrease in the 
number of jobs in the United States because of a downturn in 
the economy.
    Moreover, the current proposal does away with the 
requirement that an employer establish that there are no 
qualified U.S. workers before the company may sponsor an 
unskilled worker for a green card. The combination of permanent 
status for all unskilled workers and an erosion of U.S. worker 
protections will undoubtedly harm or potentially harm American 
workers.
    Finally, let me just say, so I do not abuse the Chairman's 
generous offer to allow an opening statement, let me just say 
this Committee must consider the impact of U.S. immigration 
policy on sending countries as well. Those countries 
increasingly are growing dependent on remittances sent by 
workers in the United States. From 2000 to 2001, remittances to 
Mexico and Central America grew by 28 percent to $13 billion. 
Mexican immigrants will send as much as $20 billion in 
remittances in cash this year. No country can buildup a diverse 
economy when the majority of its young motivated workers 
emigrate to another country. And by placing all unskilled 
workers on a direct path to permanent status, the pending 
proposal on the floor of the Senate takes us further away from 
the pattern of circular migration that would serve the economic 
interests of both the United States and those countries that 
currently are sending immigrants to America.
    Thank you very much, Mr. Chairman, for the opportunity and 
for holding this hearing.
    Chairman Specter. Thank you, Senator Cornyn.
    Senator Kennedy?

 STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE 
                     STATE OF MASSACHUSETTS

    Senator Kennedy. Thank you very much, Mr. Chairman, for 
convening this hearing on the economic implications in terms of 
immigration. it is a very important aspect of the issue itself, 
and we have some very distinguished, thoughtful students and 
professional people on this issue, and I look forward to 
hearing from them and thank them all for coming here today.
    Since our beginnings as a Nation, the immigrants have 
contributed in countless ways to our Nation and our families 
and our communities, our religious life, and our economic 
growth, and we are here today to learn more about the effects 
of immigration on our economy.
    As Americans, we know that immigrants bring with them a 
commitment to hard work and a deep desire for the American 
dream, and that is why they came to America, and each of us can 
tell stories of immigrants who have made a difference in our 
communities, if not from our own family histories, then of the 
hard-working immigrants in our neighborhoods who established 
successful small businesses, have worked in our vital 
industries, or cleaned our office buildings. These kinds of 
immigrant stories are replayed every day throughout our 
economy.
    In fact, every census since 1890 has found that immigrants 
are more likely than U.S. workers to be self-employed. A third 
of all startups in Silicon Valley, for example, were founded by 
immigrants. Nearly half the Nobel Prizes awarded to U.S. 
researchers in the last century were won by immigrants or 
children of immigrants, bringing pride and progress to our 
Nation.
    The overwhelming majority of immigrants, even those here 
illegally, work, pay taxes, pay into Social Security. In fact, 
undocumented immigrants pay an estimated $35 billion in taxes 
each year. One study reports that the average immigrant family 
pays $80,000 more in taxes then they consume in services.
    Clearly, in considering the effects of immigration and the 
appropriate steps for reform, our first priority is to our own 
citizens. We must ensure that the new laws we pursue not only 
enhance our National security but also our job security. In too 
many cases today, our outdated immigration laws displace 
American workers from their jobs or lower their wages. That is 
why our reforms are designed to guard against that abuse. They 
include support for immigrant wages, legal protections at the 
work sites, and the right to organize unions. They level the 
playing field by bringing hard-working immigrants out of the 
shadows and make it less likely that employers get away with 
paying substandard wages.
    There are few debates more essential to America than this, 
as immigration goes to the heart of what we are as a Nation of 
immigrants. We have a solemn obligation to get it right, and I 
commend our Chairman for holding the hearing today.
    Thank you, Mr. Chairman.
    Chairman Specter. Thank you very much, Senator Kennedy.
    Senator Feinstein, would you care to make an opening 
statement?
    Senator Feinstein. No. I am delighted, Mr. Chairman, to 
have these gentlemen here and to listen to them. I do have a 
statement. I would like to place it in the record, if I might.
    Chairman Specter. Without objection, it will be made a part 
of the record.
    Chairman Specter. We then turn to a very distinguished 
panel. Our first witness is Professor Richard Freeman, the 
Herbert S. Ascherman Profess or of Economics at Harvard 
University, and I pause for a personal note. I know Mr. 
Ascherman very well, and I compliment you on having his chair.
    Professor Freeman received his bachelor's from Dartmouth 
and Ph.D. from Harvard, serves as the faculty co-chair of the 
Harvard University Trade Program, is the director of the Labor 
Studies Program at the National Bureau of Economic Research, 
co-director of the London School of Economics' Centre for 
Economic Performance, is the author of 300 articles dealing 
with job marketing for a variety of professions, and has 
written on restructuring European welfare states and the 
Chinese labor markets, written or edited some 25 books. So that 
is quite a background, Mr. Freeman. We expect a lot of wisdom 
from you in 5 minutes.
    [Laughter.]

   STATEMENT OF RICHARD B. FREEMAN, PROFESSOR OF ECONOMICS, 
  HARVARD UNIVERSITY, AND PROGRAM DIRECTOR OF LABOR STUDIES, 
 NATIONAL BUREAU OF ECONOMIC RESEARCH, CAMBRIDGE, MASSACHUSETTS

    Mr. Freeman. First I better make sure the microphone goes 
on.
    I would like to organize my comments in three areas, and 
the first will resonate with some of the comments that have 
just been made.
    Immigration is one part of the globalization of the world 
today, and it is connected to what is going on in foreign 
countries, and it affects them. It also affects our trade and 
capital flows, and if you remember back when the NAFTA treaty 
was being discussed, one of the claims that turned out to be 
erroneous was that the trade agreement with NAFTA was going to 
reduce immigration, illegal immigration to the U.S. because of 
the belief then that there would be a substitution. The 
Mexicans would stay home, make goods, and they would come to 
the U.S.
    It turns out that is much more complicated than we 
imagined, the relation between trade and immigration, and 
immigration and capital flows. But whatever we do in 
immigration is going to have consequences for our trading 
position, our trade deficit, and for where businesses will put 
their capital in the future. So I think that should be a part 
of this.
    The second issue, you raised the question of effects on 
GDP. I think all economists believe from evidence that 
immigration raises not only the GDP in the United States, 
because we have more people now to do useful activities, but it 
also raises the part of GDP that goes to current residents in 
our country. Some people may lose from immigration because they 
will be competing with the immigrants in some job markets. But 
other people will benefit from the extra products and the lower 
prices because of that competition.
    If you look at the statistics and the various estimates of 
those effects--and there is some debate about them--I think 
they are generally--I would say the gains and losses to native 
Americans tend to be fairly moderate or modest. So it is very 
important to understand that the biggest beneficiaries from 
immigration tend to be immigrants, particularly if you are a 
low-skill immigrant. If you are a person who is working in 
Haiti, which is a disastrous--has been a disaster country for 
many years, and you can come and work in Boston, Massachusetts, 
the life is immensely raised. If you are a poor Mexican, your 
income in the U.S. will be 6 to 8 times what it is in Mexico.
    That means that in our deliberations or your deliberations 
in thinking about this, remember the big beneficiaries tend to 
be these people who are coming. Because they can change their 
entire lives, they are going to be trying to come under almost 
any possible circumstance, and, you know, the hope that the 
NAFTA treaty was going to lower the immigration did not succeed 
because Mexico did not succeed that much. But we do have to 
worry, as the Senator said, about the situation in these other 
countries.
    This also means, though, that many of these people are 
willing to pay sizable sums of money to be in our country. They 
are willing to pay sizable sums of money to become legal in our 
country. This is a tremendous change in their lives.
    Now I would like to talk a little bit about highly skilled 
immigrants, which is the other part of this. The country today 
lives on highly skilled, highly educated immigrants coming in 
and working in our universities and in our high-tech 
industries. We trade in the global economy high-tech goods. Our 
universities draw students from around the world. A key input 
into that are foreign-born, highly skilled and educate 
immigrants. There I think America makes a huge gain, and much 
of the gains are to us. Some of the gains are the immigrants, 
of course. That is why they come. Let me just give you one 
fact.
    Over half of the people in the U.S. who are working as 
Ph.D. scientists and engineers and are under the age of 45 are 
foreign-born. Over half. And the 1990's boom was fueled by 
highly skilled immigrants coming into science and engineering 
jobs. So that is another part of this.
    I assume I am done. I was watching this.
    Chairman Specter. You may make your next point, and I 
appreciate your being mindful of the clock. But you are right 
in the middle of a point you want to make. Go ahead.
    Mr. Freeman. OK. Well, there was one other point I did want 
to make because one of the concerns when immigrants come in 
that they may take some jobs from some Americans or drive down 
the wages of some Americans, and obviously, if there are a 
large number of immigrants coming in and if they are coming in 
at a bad economic time, this is something that is very likely 
to happen, and I think there is some evidence for that.
    If we talk about the highly skilled people, the concern is 
that immigrants come in and they reduce the opportunities and 
the incentives for Americans to go on in science and 
engineering, and that has been another big issue in Washington 
this spring. I do not think we should see this as a conflict in 
the following sense: There are a set of policies we can do to 
help our own workers, native workers, in this case native young 
people who want to go into science and engineering, which does 
not require us not to let in or to reduce or to be not so 
welcoming to foreign-born immigrant scientists and engineers. 
Every country in the world has policies for educating and 
training its own citizens. We have the National Science 
Foundation graduate research fellowships. We have had National 
Defense Education Act fellowships. So I do not want to deny 
that having a lot of immigrants coming in at the top--it does 
make it more difficult for young Americans to advance in those 
fields, but we can recompense the young Americans with separate 
policies.
    [The prepared statement of Mr. Freeman appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Professor Freeman.
    Our next witness is Professor Dan Siciliano, Director of 
the Program in Law, Economics, and Business at the Stanford Law 
School, bachelor's degree from the University of Arizona and 
law degree from Stanford University, has practiced immigration 
law and has very extensive experience in this field.
    Thank you for joining us, Professor, and we look forward to 
your testimony.

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

    Mr. Siciliano. Thank you, Mr. Chairman and Senators. Thank 
you for having me. I am going to focus primarily on the 
unskilled labor side of this debate only because I concur that 
the high-skilled labor issue is clear and necessary, and I do 
not think I have a lot to add.
    I am going to try to weave together three basic concepts, 
but let me tell you the perspective I am not taking. Though I 
am deeply sympathetic to the humanitarian side of immigration, 
I think for today's purposes I am going to focus on the 
economic side. And I have a deep motivation to do this. I think 
what you are about to decide in the coming weeks will have a 
profound impact for a generation, maybe two. I have two 
children, 4-1/2 and 2-1/2, and I think doing the right thing 
here versus doing the wrong thing will make a difference of my 
children reaching hopefully the peak of their careers while the 
United States is still at the peak of its economic powers. And 
to make the mistake of accidentally doing the wrong thing--and 
that would be, of course, only accidental, but to do the wrong 
thing could mean that my children reach the peak of their 
professional lives when we are no longer the dominant economic 
power.
    I have three main points that I will try to weave together, 
and then I hope we will all get to answer questions because 
there are so many nuances. If this were easy, you would already 
have done it, I think.
    First, there is the demographic dilemma that we face as a 
fundamental fact. Productivity growth is moderating. We 
experienced tremendous productivity growth over the last 
several years. I am hopeful we will still have high 
productivity growth in the United States, but it is not going 
to be like it was. It is moderating. We are going to go back to 
our norm of 2 to 3 percent at best.
    Labor force participation rates have also likely peaked. We 
are among the highest labor force participation rates among all 
industrialized countries, above 66 percent. This is a 
remarkable and wonderful achievement. People in our country 
enjoy working, do work, and are tremendously productive. But we 
are not going to have a higher portion of our country actually 
be able to work in all likelihood.
    Retirement is looming for tens of millions of people, and 
our work force, especially the U.S.-born work force, is older 
than ever before and aging. Nothing wrong with that, but that 
is just the way it is, and this has implications for small 
businesses and medium businesses, where I will focus my 
thoughts on the impact.
    And we are creating a bit of a conundrum because we have 
had some success in raising the average skill level of the 
U.S.-born worker. This is a great thing, but it does have an 
interesting impact, and that is that we have a growing skill 
gap misfit, meaning that as our U.S.-born workers become better 
educated and more skilled, we have the need for workplace jobs, 
jobs that demand less skills. And so there is a mismatch 
between our U.S.-born workers' age, skills, and willingness to 
work, and the jobs that are being created in the economy, in 
part as a function of our own demographics, whether they be 
elder care, retail, daycare, or other types of jobs.
    So our success, which we should be proud of, in helping 
raise the average skill level and education level of U.S.-born 
workers has created in turn a challenge which we need to 
manage. And if we do not manage it, we create our own problems.
    The way this impacts with job growth I think is the second 
key point. We have reasonably reliable Bureau of Labor 
Statistics data that assumes the presence of the current level 
of immigration, both undocumented and documented, and assumes a 
continued flow. This data set is for 2002 forecasting into 
2012. We assume kind of a trend line 3-percent GDP growth rate, 
which turns out to be, it looks like, about right.
    If we follow that, we have expected job increases in the 
range of 14.6 percent across this time period to 2012. This 
means we go from 144 million jobs in the United States to about 
165 million jobs. Our current rate of immigration and 
population growth implies a growth rate of 11.7 percent during 
that time, which means we will go from, you know, to about 162 
million available workers for those jobs.
    This has many possible implications, many of which can be 
debated, but one key take-away point is we know at least if we 
are currently utilizing--and I would assume that we would 
enforce wage and hour laws and utilize in a fair and equal way. 
But if we are utilizing immigrant work, whether documented or 
undocumented, to pull that out of the economy has some grave 
implications with respect to matching people to the jobs that 
we want to fill if we hope to have this growth.
    Finally, and I think maybe the most important point is: 
Does immigrant labor present in the United States negatively 
impact wages? I will concur with Professor Freeman, by and 
large, and point you to a most recent study by Giovanni Peri 
out of UC-Davis that changes one component of the model, and it 
says: Do we believe essentially that small and medium-sized 
businesses and business people are smart? Not necessarily book 
smart, but street smart. I would say yes. And then we say: If 
they have more options in the labor market, are they able to 
dynamically alter the way in which they run their business, 
open a lunch shift, open another hotel, expand their business 
if they have more options? And it looks like Giovanni Peri has 
demonstrated that the answer is yes. This means that U.S.-born 
workers benefit in large part from the influx of immigrant 
labor because one of the hardest things we know small and 
medium-sized businesses do is to procure effective and train 
effective and retain effective employees in the work force.
    It is going to be very hard to predict what will help us 
weather this much bigger storm of globalization, and I think 
one thing we do not want to do--and this is my concluding 
point--is we do not want to inadvertently increase the 
uncertainty and increase the challenges to the small and 
medium-sized business person because they have largely been the 
engine of robust resilience and economic growth through all the 
various storms that we have weathered. And if we impair them, I 
fear that we may, in fact, impair the economy. And we have the 
evidence in front of us that seems to say immigrants, 
documented and undocumented, have by and large benefited most 
of the economy.
    There are some offsetting components, and I think we will 
hear the debate. But it is nuanced, and I just do not want us 
to inadvertently tie the hands of the small and medium-sized 
business people who have been the important part of our 
economy.
    Thank you.
    [The prepared statement of Mr. Siciliano appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Professor Siciliano.
    We now turn to Dr. Barry Chiswick, head and research 
professor at the Department of Economics at the University of 
Illinois at Chicago, bachelor's degree from Brooklyn College, 
master's from Columbia, and a Ph.D. from Columbia. From 1973 to 
1977, he was senior staff economist at the President's Council 
of Economic Advisers. He has done extensive research in the 
economics of immigration and the economics of minority and 
income distribution. Eleven books, 130 journal articles, and 
most recent edited volume, ``The Economics of Immigrant Skill 
and Adjustment.''
    Thank you for joining us, Professor, and we look forward to 
your testimony.

 STATEMENT OF BARRY R. CHISWICK, UIC DISTINGUISHED PROFESSOR, 
  DEPARTMENT OF ECONOMICS, UNIVERSITY OF ILLINOIS AT CHICAGO, 
                       CHICAGO, ILLINOIS

    Mr. Chiswick. Thank you very much. It is a pleasure to be 
here. The issue before Congress is not whether to have a 
completely open door nor a completely closed door regarding 
immigration, and so the question then comes down to how many 
immigrants per year and what are the characteristics of these 
immigrants.
    I think it is not helpful to talk about immigrants as if 
they are an undifferentiated whole. I think it is much more 
helpful to understand the issues to think in terms of high-
skilled immigrants and low-skilled immigrants as a simple way 
of specifying the issues.
    Over the past 20 years, there has been a very large 
increase in not only the number of low-skilled immigrants 
coming to the United States legally and illegally, but also 
their share in the immigrant population. This has come about in 
part because of three factors. One was the 1986 amnesty, the 
Immigration Reform and Control Act which brought amnesty, but 
also brought employer sanctions, which were never effectively 
enforced. That amnesty actually encouraged additional low-
skilled illegal migration in the anticipation of future 
amnesties.
    The regular immigration system, where we issue about 1 
million visas per year, focuses on kinship ties. The question 
that this policy asks is: To whom are you related? And two-
thirds of the immigrants coming in come in under kinship 
criteria, and only about 7 percent are skill-tested. For only 
about 7 percent do we ask the question: What are your 
contributions to the American economy?
    As a result of these factors, we have had a large increase 
in low-skilled immigration, and this has had the effect of 
decreasing the wages and employment opportunities of low-
skilled workers who are currently resident in the United 
States.
    Over the past two decades, the real earnings of high-
skilled workers have risen substantially. The real earnings of 
low-skilled workers have either stagnated or decreased 
somewhat.
    Now, low-skilled immigration is not the only cause of this, 
but it is a significant factor in this development. Low-skilled 
immigrants make greater use of government benefits and transfer 
than they pay in taxes. So in terms of the public coffers, they 
serve as a net drain; whereas, high-skilled immigrants have the 
opposite effect. And the consequences of low-skilled 
immigration are pretty much the same whether they are in legal 
status or illegal status, although the net effect on the public 
coffers is actually more negative for legal immigrants, legal 
low-skilled immigrants. In the earned legalization program that 
some people are talking about, just a euphemism for amnesty, 
these individuals will eventually be getting full benefits from 
Government income transfer systems.
    The question before Congress is: Will the 21st century be 
the American century as the 20th century was the American 
century? In order for this to happen, for it to be the American 
century, we need to alter our immigration policies to increase 
the focus on attracting high-ability, high-skilled immigrants, 
the ones that Senator Kennedy referred to who did the startups 
in Silicon Valley, who won the Nobel Prizes.
    But we also need to look at the other end of the income 
distribution and provide greater assistance to low-skilled 
Americans in their quest for better jobs, for higher wages. And 
one of the ways that we can help them in this regard is by 
reducing the very substantial competition that they are facing 
from this very large and uncontrolled low-skilled immigration 
that is the result both of our legal immigration system and the 
absence of enforcement of immigration law.
    I urge Congress to think not in terms of piecemeal reform 
of immigration law, but to think in terms of a comprehensive 
reform of immigration law.
    Thank you very much.
    [The prepared statement of Mr. Chiswick appears as a 
submission for the record.]
    Chairman Specter. Thank you, Professor Chiswick.
    Our final witness on the panel is Professor Harry Holzer, 
Associate Dean and Professor of Public Policy at Georgetown, 
summa cum laude, Phi Beta Kappa, undergrad at Harvard, and a 
Ph.D. from Harvard. He served as chief economist for the United 
States Department of Labor, and his research has focused 
primarily on labor market problems of low-wage workers and 
other disadvantaged groups. His books include ``The Black Youth 
Employment Crisis,'' ``What Employers Want: Job Prospects for 
Less-Educated Workers,'' and ``Employers and Welfare 
Recipients: The Effects of Welfare Reform in the Workplace.''
    We appreciate your being with us, Professor Holzer, and the 
floor is yours for 5 minutes.

   STATEMENT OF HARRY J. HOLZER, PROFESSOR OF PUBLIC POLICY, 
            GEORGETOWN UNIVERSITY, WASHINGTON, D.C.

    Mr. Holzer. Thank you, Mr. Chairman. Good morning.
    I want to once again associate myself with the point of 
view that most economists believe that, on average, immigration 
is a good thing for the overall economy. It does lower costs. 
It lowers prices. It enables us to produce more goods and 
services and to produce them more efficiently, and I share that 
view. At the same time, there are at least some potential 
losers in this process. There are some costs as well as 
benefits. We need to consider the whole range of costs and 
benefits and to whom they accrue as we make our policy choices. 
So let me start by looking at this issue of the labor market 
and competition, especially at the low end of the market.
    Now, there is one view, Mr. Chairman, that you expressed 
earlier that maybe immigrants mostly take the jobs that other 
native-born workers do not want. The prototypical case of that 
would be jobs in agriculture, in which very few native-born 
workers are interested. On the other hand, there are jobs in 
industries like construction that I think are more appealing to 
native-born workers, and many native-born low-income men might 
be interested in more of those jobs, although employers often 
prefer the immigrants, especially in residential construction. 
Then there is a range of sectors in between those examples--
janitorial work, landscaping, food preparation, where the wages 
and benefits are generally low and the appeal is very limited 
to native-born workers.
    Now, absent the immigrants, employers might need to raise 
those wages and improve those conditions of work to entice 
native-born workers into those jobs. On the other hand, as that 
process starts, employers would have other options to consider. 
They might well substitute capital for labor, which simply 
means they would substitute machines and equipment for workers 
and their jobs as wages started to rise. Or they might move 
their resources to other lines of business, more productive 
lines of business. So businesses would have other options 
besides simply raising wages if the immigrants were not here, 
and I think they would exercise those options.
    The statistical studies generally show, on net, there might 
be some modest negative effect of immigration on the earnings 
of high school dropouts. There might be some modest negative 
effect, mostly in the short run. Over the long run, as capital 
flows adjust to the presence of workers, most of these negative 
effects disappear, and certainly we see little evidence of 
negative effects for anyone except high school dropouts. And 
even for them the effects seem modest.
    Two other points: as stated earlier, the amount of 
competition really does depend on the state of the economy. 
With the very strong economy in the late 1990's, no one really 
worried much about competition from immigrants. Maybe those 
days will return. But it also does depend on the legal status 
of the immigrants, and I believe that when immigrants are 
illegal, they do more to undercut the wages of native-born 
workers because the playing field is not level, and employers 
do not have to pay them market wages. So legalization might 
reduce the extent of competition these workers face.
    Now, there are other economic issues, the most important of 
which is reducing the prices of a wide range of consumer goods. 
Some of those lower prices do benefit mostly high-income 
consumers. When they hire gardeners, domestics, when they go to 
restaurants where the food is prepared by immigrants, the 
benefits mostly accrue to higher-income consumers. On the other 
hand, when immigrants work in construction, they reduce the 
price of housing. When they work in agriculture, they reduce 
the price of food. When they work in health care and elder 
care, they reduce the price of those services, and those will 
disproportionately benefit lower- to middle-income consumers. 
And I think those are important benefits.
    We have heard about the baby-boomers retiring. I think 
there will be many ways in which labor markets will adjust to 
the retirement of baby-boomers, but immigration is one 
adjustment mechanism. I think the presence of immigrants will 
be important in some key sectors during that time period. One 
is the science and engineering sector that Richard Freeman has 
already talked about, but there are other sectors where the 
less educated immigrants could really matter as well.
    For instance, take the health care sector. The demand for 
health care workers and elder care workers will be enormous 
when the baby-boomers retire and as they live longer. That is a 
sector where, because of caps on third-party reimbursements, 
expenditures are limited. The normal market forces will have 
trouble clearing those markets. And I think the presence of 
immigrants to help take those jobs will matter and will make 
those services more available.
    Finally, there are a range of fiscal issues that have 
already been alluded to. There are fiscal costs in the short 
run for schooling and a range of other services for immigrants, 
but I believe as time goes on, the fiscal balance becomes more 
positive. I believe that over time immigrants, their children, 
their grandchildren, will be working, contributing to the 
Social Security and Medicare systems. I believe, on net, their 
impact on those fiscal balances will be positive, largely--
probably not massively positive, but more positive than 
negative, and I think that is a good thing.
    So, finally, what does all this mean about policy? I agree 
with Professor Chiswick, we are not ready to open the 
floodgates on immigration. We will continue to have controls on 
immigration, and we need to find cost-effective and humane ways 
to limit those immigrants. I am not exactly sure what those 
methods are. I am not sure anyone knows, but we will continue 
to seek them. But I think paths to legalization for those who 
are here and those who will remain here make sense. Keeping 
them illegal hurts the immigrants themselves. It certainly 
hurts their children, many of whom are already American 
citizens and will stay here under any circumstances. And 
legalizing these immigrants, I believe, will reduce some of the 
competition that they provide to native-born workers by 
leveling the playing field and allowing them to earn market 
wages.
    I do not believe these paths to legalization will create 
dramatic increases in the flows of illegal immigrants. The 
flows have been fairly constant now over many years, despite 
various changes in policy. I think the incentives for them to 
emigrate will be large either way, so I do not expect massive 
new flows in response to any paths to legalization.
    Finally, I would say less educated workers in the U.S. have 
taken a beating in recent years, for many different reasons. I 
think immigration is one of the smaller reasons. If we want to 
help less educated native-born workers, there are a whole 
variety of things we could do to improve education and 
training, improve child care and health care, provide wage 
insurance to those displaced, and maybe even start to fix some 
of the broken laws and institutions that used to protect those 
workers more than they do now. I think these things would help 
native-born workers a good deal more than limiting immigration 
flows.
    Thank you.
    [The prepared statement of Mr. Holzer appears as a 
submission for the record.]
    Chairman Specter. Thank you, Professor Holzer.
    We will now go to the panel of Senators for 5-minute rounds 
of questioning. As a matter of scheduling, the Senate is in 
morning business until 10:45, and then there is going to be 10 
minutes before a vote starts, which will be shortly before 11 
o'clock, if the projections of time are accurate. So we will 
keep that in mind as we proceed with the round of questions.
    Professor Holzer, you eloquently articulate a large number 
of problems, and then you said you are not sure you know the 
answers. And then you added to that you are not sure anybody 
knows the answers.
    Well, we have got to make some judgments. Nobody could ever 
accuse Congress of knowing the answers or coming up with the 
answers, but we do have to legislate and we do have to figure 
out, as best we can--and I have been to a few of these 
hearings, and I cannot recall four witnesses who have more in 
their pedigree lines, more books, more titles, than you four. 
We do not want to take jobs away from Americans, although to 
the extent that it may be minimal, you cannot avoid it. But 
overall we want to direct our efforts to not taking jobs from 
Americans. And, also, to the extent we can, we do not want to 
lower wages.
    Now, we are trying to figure out what kind of a guest 
worker program to have. With the experience you professors have 
had, what methodology should the Judiciary Committee have in 
recommending to the Senate the structuring of the number of 
guest workers? Professor Holzer, you profess not to know the 
answers, but we need your best estimate here.
    Mr. Holzer. Senator, I have some skepticism about guest 
worker programs because there is at least a concern and I think 
some evidence--
    Chairman Specter. You have some skepticism? Now, wait a 
minute. Does that mean you would not have them? There is 
nothing we do around here without some skepticism, but the 
question is--
    [Laughter.]
    Mr. Holzer. I understand that.
    Chairman Specter. The question is: Will we have them?
    Mr. Holzer. I think they have limitations relative to my 
first choice, which is creating pathways to permanent legal 
status.
    Chairman Specter. They have limitations. Do they have 
advantages?
    Mr. Holzer. They also have some advantages for meeting 
demand, certainly in the short run, in those sectors where--
    Chairman Specter. How do we assess the demand?
    Mr. Holzer. I think one can look at a variety of measures: 
job vacancy rates in certain sectors, in certain occupations 
and industries, wage pressures, things of that nature.
    Chairman Specter. Could you take a look at those factors 
and others? You probably cannot do it in the 2 minutes and 38 
seconds remaining, but could you take a look at those factors 
and give us a professional projection as to what we ought to do 
by way of guest workers? Let me apply that question to the 
entire panel. We are really searching, and you men have written 
extensively and have studied this extensively. And without 
taking the time now to identify them, if you could do two 
things, identify the factors which are in play and assess for 
us how you would structure a guest worker program and what we 
ought to look for, we would be deeply indebted to you.
    Professor Chiswick, you say the last century was the 
century for the American economy, and we face a lot of 
challenges on the next century. The head of China was just 
here, and we are looking at very complex competition from 
China, perhaps from India and other sources. Is a guest worker 
program an indispensable item to have the 21st century an 
American economic century?
    Mr. Chiswick. Well, actually, I would say that the best 
guest worker program is no guest worker program. One of the 
maxims in the immigration research field is that there is no 
such thing as a temporary worker. The issue arises when the 
temporary contract, when the guest worker period is over. How 
does one get them to leave the country?
    Chairman Specter. Well, how about recognizing that they are 
not temporary but they are going to be permanent? How do we 
assess the contribution of the immigrant to the economy? Does 
the immigrant produce more by way of gross national product 
contribution to the economy than the immigrant is paid?
    Mr. Chiswick. Well, I think we have substantial research on 
that issue, and what we find is that high-skilled immigrants 
have a significant positive contribution and that low-skilled--
    Chairman Specter. Positive over what they are paid.
    Mr. Chiswick. In terms of the American economy, in terms of 
what they pay in taxes versus what they take in benefits, in 
terms of their increasing the productive capacity of the 
economy, in terms of their increasing productivity.
    Chairman Specter. I only have a few seconds left, and I see 
Professor Freeman nodding vigorously in the affirmative. You 
have got the balance of my time.
    Mr. Freeman. I wanted to make a comment more favorable to 
the guest worker programs, actually. I think it is very 
complicated. People are going to come in, and they are coming 
in, and they are working illegally. That would be the natural 
place where you would want guest workers if you want to reduce 
the illegal immigration.
    We know that Americans are hiring them, and Americans would 
get very upset if they were forced out. Business people would 
get very upset. So they are clearly contributing something that 
is showing up in the profits and the lower prices that 
Americans benefit.
    So I would think of the guest worker program or something 
of that nature is the extent to which it would substitute for a 
worse form of guest worker program, namely, an illegal guest 
worker program, which is what we are running today. So I do not 
think the comparison is between no guest worker or a guest 
worker. It is between a legalized program and an illegal 
program.
    Chairman Specter. Thank you, Professor Freeman.
    Senator Kennedy?
    Senator Kennedy. Thank you, and I think you put your finger 
right on it, Professor Freeman. We know at least 400,000 are 
coming in here. Ten years ago it was 40,000; now it is 400,000, 
sometimes 600,000 or 700,000. In the legislation it is 400,000 
to try and have those that are going to come in here come in in 
an orderly, legal way with labor protections in this country.
    Let me get to this point that the Chairman has made, Dan, 
with your analysis. You gave us some projections. You talked 
about the limitations in terms of productivity, the numbers in 
the labor force, retirement issues, and then the job growth. 
And you talked about GDP, 14 percent and 11 percent. You talked 
about legal and the illegal. Maybe you could just flesh those 
figures out a little bit. What you appear to be saying is that 
if you consider the numbers of both legal and illegal, you get 
a certain rate of growth, and without them you get another 
different rate of growth. And that is what I would be 
interested in.
    Maybe we cannot parse between the legal numbers the 
Chairman talked about, whether that is 500,000 or we are 
looking at just the general range of numbers now. Could you 
expand on that?
    Mr. Siciliano. Sure. Thank you, Senator Kennedy. I think 
this also answers Chairman Specter's question in part, which 
is: What is the true net economic contribution and where does 
it come from and why? And so from my viewpoint, and in light of 
the demographic numbers, it appears that our economy is on the 
trend growth rate, we hope, at 3 percent or better. Now, that 
growth rate of GDP is reliant on many factors. One of the key 
factors is available workers to fill the jobs that are created. 
So even while at the high-skill level you have Nobel Prize 
winners and other people inventing companies, somebody needs to 
build the buildings, clean the buildings, you know, service the 
lavatories in which these people are operating. And this is a 
part of the capacity for GDP to grow.
    So to put a finer point on it, if you look at the fiscal 
economic impact, which is the Government coffers impact, it 
might be true that lower-skilled workers, just like all of us 
on average, actually, at the moment because of deficit 
spending, have a negative impact on the fiscal bottom line. But 
that should not be confused--and this would be a mistake to 
confuse this. That should not be confused with the economic 
impact. It is a little like my younger sister who recently 
said, ``I am earning more, but look at all the taxes I am 
paying. I am paying more taxes.'' I said, `` Yes, but you are 
earning more.''
    And so we may have a modest net negative fiscal impact for 
all low-wage workers in the United States, not just immigrants. 
That is not unique to immigrants, documented or undocumented, 
but what we do know is it helps us achieve a higher rate of 
growth and national income goes up, which benefits everybody. 
It becomes your challenge, I think, to talk about how to, you 
know, work that out at who shares and how at the pie level. But 
it is clear that this divide between available workers and the 
demand for workers will slow down economic growth if we do not 
manage it appropriately.
    Senator Kennedy. Let me just get to the high-skilled/low-
skilled. I think most of us would like to believe that we are 
going to train our own people to be able to take these high-
skilled jobs. And we have under our current programs training 
resources that are paid into the fund to try to continue to 
upgrade skills for Americans. But we are not able to get quite 
there at the present time.
    Other countries, industrial countries, have required 
training programs. They pay--what is it?--in European countries 
a percent and a half, other countries, so that they have 
required training programs, which we do not have, continuing 
training programs which we do not have.
    So how are we going to adjust? What is your sense about how 
we are going to--we have seen a significant--actually, we are 
getting the skills, but where people that are going to into 
these high-skilled programs, but how are we going to get 
Americans up to speed so that those Nobel laureates are going 
to be the sons of native workers rather than foreign workers? 
What can you comment on that?
    Mr. Siciliano. I think there are two issues. One, you know, 
the expanded H-1B program with the continued diversion of 
moneys into special training programs is a good start, so we 
need the talent in the first place. We need that high-skilled 
talent to maintain our competitive edge, which gives us some 
runway into which to develop and train native talent. It cannot 
happen overnight. So the first question is: What do we do to 
make sure over the next 20 years we still get the world's 
absolute best and brightest, lure them to our best 
universities, have them pay for that education, make them 
enamored of the United States, and then they stay here and then 
have children.
    Now, you divert that money and you direct it into targeted 
training, and that is a bigger issue, I think, to entice U.S.-
born workers into the difficult and long-term training that 
will prepare them for a modern, very knowledge-based economy. 
But the start is to make sure we keep the industries here 
because we lure the right talent here, and then we do something 
over the next 20 years so that the 5-year-olds right now do end 
up getting the double Ph.D., electrical engineering and applied 
physics, and go on to win the Nobel Prize. But you are talking 
about the 5-year-olds, not the 25-year-olds. We need the 25-
year-old to get an H-1B, have their own Government pay to go to 
Stanford University, get that Ph.D. there, and then work at 
Google, stay here. Good deal for us.
    Senator Kennedy. My time is up, but, Professor, you talk 
about the more comprehensive. What we are not dealing with is 
the underlying immigration bill where you talked about the 
disparity between kinship and skills with only a smaller 
percentage in terms of skills and the other emphasis on 
kinship. Those are policy issues about reunification of family 
members here rather than just having the skills. So that is a 
broader kind of issue. I think it is obviously related to it, 
but as you correctly point out, that is not part of the current 
debate, but it is something we ought to think about.
    Thank you, Mr. Chairman.
    Chairman Specter. Thank you, Senator Kennedy.
    Under the early bird rule, we turn to Senator Cornyn.
    Senator Cornyn. Thank you, Mr. Chairman.
    I would like to turn to the issue of a guest or temporary 
worker program, and one of the things I would just note is that 
the choice of descriptions I think is a problem when it comes 
to talking about immigration because I do not know of any guest 
that you would invite into your home that would permanently 
move in and refuse to leave. And I am intrigued by the concept 
that there is no such thing as a temporary worker program 
because people will not leave.
    But let me talk just a bit, Professor Freeman, starting 
with you. We have heard, of course, the huge attraction that 
the American economy and the opportunity here for immigrants 
provides, but you seem to agree with at least some of what I 
said earlier on in talking about the benefits both to--assuming 
we can have a temporary worker program, people come and work 
temporarily and then return to their country of origin with 
savings and skills that they have acquired in the United 
States, perhaps to return again later, that there would be 
perhaps an advantage to the United States to be able to have 
people come when we need them, when the economy is doing well, 
when we need those workers, but then not come during times when 
they would be competing with American workers. And so it would 
be of some benefit to American workers not to have that 
competition when the economy is doing poorly. But, second, the 
importance of helping those economies which are now basically 
seeing a mass exodus of their young work force to the United 
States and the difficulty they will have of ever establishing 
jobs and an opportunity for their own people.
    So do you see some benefit to trying to figure out a policy 
that will restore this circular migration pattern?
    Mr. Freeman. You are clearly right. The circular 
migration--we have seen the circular migration pattern occur 
for the Koreans and for the Taiwanese, and also they have also 
created, you know, businesses that compete with ours, and they 
learned their skills here. At one point we are going to see the 
Chinese high-level immigrants begin to go back to China, and 
that will be a great sign for China and will be more 
competition for some American businesses.
    But I do not think we should be afraid of competition, and 
I think it is much better to build the skills in these other 
countries.
    I think obviously if we could control the flows, we would 
have the guest or temporary workers come in when we have a 
shortage and leave when we have a surplus. But people have 
their own lives, obviously, and there is a huge advantage to 
living in the U.S. than living elsewhere.
    Senator Cornyn. Let me ask you, Professor Chiswick, because 
you said there is no--I am paraphrasing. You said there is no 
such thing as a temporary worker because people will not leave, 
and Professor Freeman seems to agree that that is a challenge. 
But if we have incentives built into a program, let's say the 
money that you would ordinarily pay, the employer and employee 
pay for Medicare and Social Security would be put into an 
account that they would receive upon their return to their 
country of origin when their temporary visa expires, if we 
would be serious about worksite verification so that only 
authorized visa holders could legally work in the United 
States, would you see those as possibly some ways that we could 
make sure that we could actually enforce the term of those 
temporary visas?
    Mr. Chiswick. Well, I think you have pointed to a very 
important issue. The 1986 Immigration Reform and Control Act 
brought in employer sanctions, but there has really been no 
political will to enforce employer sanctions. Employers need a 
fool-proof way of identifying who has a legal right to work in 
this country and we have the technology to provide them with 
that information. And I would urge Congress to act speedily in 
terms of developing or authorizing the Government to develop 
such a system.
    But you also need to have the resources to enforce the law 
in terms of the inspectors and the inspections. We have relied 
on border control to enforce immigration law. The border is a 
sieve. Even if one strengthens border enforcement, there will 
still be ways of penetrating the border. Border enforcement by 
itself cannot effectively stem the flow of illegal aliens. It 
needs to be complemented by stringent enforcement of employer 
sanctions.
    Senator Cornyn. Let me ask you to explain just in 
conclusion your statement that amnesties encourage future 
illegal immigration. That will be my last question. Can you 
explain what you mean by that?
    Mr. Chiswick. Sure, because an amnesty sends the signal 
that when the pressure gets strong enough, there will be 
another amnesty forthcoming. So amnesties set the stage for 
future illegal migration, and actually the more talk there is 
of pending amnesty legislation--whether it is called amnesty or 
earned legalization, it is really the same thing--the more talk 
there is, the greater the incentive for people to enter the 
United States illegally so that when the amnesty has passed, 
they are physically present in the United States.
    Chairman Specter. Thank you, Senator Cornyn.
    Senator Feinstein.
    Senator Feinstein. Thank you very much, Mr. Chairman. May I 
enter into the record, please, a statement by the Small 
Business California Group?
    Chairman Specter. Without objection, it will be made a part 
of the record.
    Senator Feinstein. Thank you very much.
    I approach this, gentlemen, mainly from the California 
approach. The Department of Finance of the State has just done 
a report which shows that the number of illegal aliens in 
California is 2.4 million and that the entry rate is about 
73,000 a year.
    As I talk to individuals in the State, what becomes very 
clear to me is that the problem is the lack of opportunity in 
Mexico, and that is devastating that there is no hope, no jobs, 
no opportunity for people. Therefore, coming to the United 
States for many, most, really becomes a question of survival.
    Is there anything as economists you can recommend that the 
United States could do to help, or the people or the Government 
of Mexico could do to turn that around?
    Mr. Chiswick. I would be happy to take a stab at that 
question.
    Senator Feinstein. Please, quickly, if you could.
    Mr. Chiswick. I think NAFTA in the long run will have 
strong beneficial effects on the Mexican economy. But I think 
we also have to encourage the Mexican government to free up 
their economy, to reduce the extent of Government ownership and 
control of various sectors of the economy, to encourage private 
investment in the Mexican economy, to invest more resources in 
the educational system for the young people in Mexico.
    One of the negatives of the large low-skilled immigration 
from Mexico to the U.S. is that some of the most enterprising 
of people are leaving Mexico. So in some sense, we are hurting 
Mexican economic development by draining off some of their 
entrepreneurial talent.
    Senator Feinstein. Let me mention another point. I happen 
to believe that the weakest part of the bills that I have 
supported is the guest worker program. From a California 
perspective, it is impossible to say to somebody you can come 
here for at least 6 years by renewing your guest worker permit, 
but at the end of 6 years you have to go home. The experience 
we have had is quite simply people do not go home. Therefore, 
it seems to me that the H-2A program, where you bring someone 
for a limited period of time, has a much better opportunity to 
work because then they do go back and forth across the border.
    What do you believe is the optimum amount of time that an 
individual will come as a guest worker and then actually go 
home at the end of that period of time?
    Mr. Siciliano. Senator Feinstein, I think one thing to 
consider is that by limiting the amount of time that and 
employer may utilize a guest worker, it alters their behavior 
in terms of their incentives to invest even in a low-skilled 
guest worker. So even a low-skilled worker will require a 
certain amount of training and investment, and the shorter the 
duration of that opportunity for employment, the less 
investment there is, which is bad for everyone.
    I think one of the possible alternative views here is to 
recognize some of the limitations that occur if you create a 
temporary guest worker program and then instead try to identify 
those lesser-skilled individuals who, in the long run--if you 
created boundaries of wage and hour rules, allowable behavior 
on the part of businesses, and then screened up front for who 
you would allow to enter on that basis and create some path, 
assuming continuing employment, and a very high bar for 
behavior and civic behavior, then perhaps you can solve both 
problems, because I believe the evidence demonstrates and I 
think a lot of the arguments assume that the economy will work 
it out. If there are no opportunities, people will go back.
    Senator Feinstein. But that is difficult to do. Therefore, 
if you take the 10 to 12 million people that are here already 
that work in agriculture, construction, landscaping, 
housekeeping, et cetera, and provide a steady stream of 
employment and enable them to have a pathway to legalization, 
are you not really doing the best thing possible economically 
to see that there is economic upward mobility?
    Mr. Siciliano. I see. With that subset, yes, I would argue 
that that is the right path, and then on the other question I 
would defer. I am sorry that I don't have a solution.
    Senator Feinstein. Anybody else, quickly, 7 seconds?
    Mr. Chiswick. Well, I think that we can learn a lot from 
the European experience. They have their guest worker programs 
in most of the European countries and what they have found is 
that although some go back as the natural course of events--
there is always some return migration--they had a very 
difficult time in encouraging them to go back. The riots that 
we saw a number of months ago in the immigrant communities in 
France are an example of the consequence of failed guest worker 
policies, and I would not like to see the United States fall 
into that same trap.
    Senator Feinstein. Thank you very much. Thank you, Mr. 
Chairman.
    Chairman Specter. Thank you, Senator Feinstein.
    Professor Holzer, did you want to make a comment?
    Mr. Holzer. Just one small comment. It seems to me that 
there is probably no single optimal duration for guest worker 
policies. Following up on Professor Siciliano's point, it is 
going to vary a lot when you compare H-2A workers to H-1B 
workers. It seems to me to make a lot more sense to have 
perhaps longer durations for the H-1B workers because to get 
those individuals to come here, those individuals who want to 
make more investments, the kind of work they do requires 
greater startup, greater training. And at the end of the day, 
if those workers decide to stay, I think we all agree that the 
economy would benefit certainly from increasing the permanent 
presence of highly skilled workers.
    Senator Feinstein. Would you confine a guest worker program 
to those two programs?
    Mr. Holzer. Not necessarily. I think I am relatively more 
sympathetic to the H-1B program because, number one, certainly 
in the late 1990's it was so clear that the short-term demand 
in science and engineering was so strong, in the short run 
there was no way that we were going to meet that demand 
domestically.
    I also very much like the political compromise of taking 
the fees that we generated by raising the caps and investing 
those in the training of domestic workers. So to me, that was a 
very nice compromise that I think benefited all involved.
    Senator Feinstein. Thank you. I appreciate it. Thank you, 
Mr. Chairman.
    Chairman Specter. Thank you, Senator Feinstein.
    Senator Kyl.
    Senator Kyl. Thank you, Mr. Chairman. Thank you, panel. One 
of the arguments for not being as tough in enforcing the law 
especially at the border is that in the years past there was a 
lot of circular migration especially from Mexico and Central 
America, people who came here, worked for a while and then went 
back home. It wasn't hard for them to continue that process, 
but once we began strong border enforcement, then they were 
stuck and stayed.
    I don't know that there is any evidence to support that or 
refute it, but it has been the basis for a lot of people 
talking about this concept of circularity, and I want to get 
back to that concept and also ask you this question in view of 
the fact that at least a couple of you are very skeptical that 
a temporary worker program really ends up being temporary 
because people don't want to go home. I mean, what I just said 
may to some extent refute that, but clearly there are people 
that probably fall into both categories.
    What we haven't talked about here is the differentiation 
between a time like today when we are at very high employment 
and a time when in the future we will have a recession and we 
will have high unemployment. And let me stipulate for a moment, 
even though there is a little bit of argument about 
mechanization, and so on, that in the lettuce fields of Yuma 
County, it has always been hard to get Americans to do that 
work. It has been traditionally work done, by the way, by 
people who live in Mexico and come across everyday and go back 
home by and large, although there are some that stay longer.
    In Arizona, we can't find enough people to build houses 
today. Under the bill that Senator Cornyn and I have, we would 
be issuing lots of temporary visas right now. But we have also 
seen many economic downturns when you can't get a job in 
construction, no matter how skilled an American citizen you 
are. In that case, under our bill we wouldn't be issuing 
temporary visas. We would let the ones that are here expire; we 
wouldn't issue any more.
    I am troubled by the fact that all of you seem to be so 
skeptical that people would return. One concept was that, well, 
when there is not work, they will return. But isn't it just as 
likely that what they will do is under-bid Americans for those 
same jobs?
    I have gone through enough political times when we were in 
that high employment situation where Americans were looking for 
work. It is not a pleasant thing. So I am concerned about a 
program that lets people come in under today's circumstances, 
but who may not have a job, or at least there won't be enough 
jobs for everybody in tomorrow's circumstances.
    Given that fact, doesn't it make sense to consider the 
economic realities in how many permits you issue, and 
especially if you are saying folks won't go home, to be very 
careful about the number of visas that you issue for these low-
skilled workers because you have to consider tomorrow's lack of 
employment opportunity as well as today's full employment 
opportunity?
    I have sort of posited several different thoughts and 
questions inferred there. If you could just each give me your 
general take on what I have said.
    Mr. Freeman. You gave this model for the optimal 
determination of how many of these to give. What you are really 
suggesting--and I think it makes good sense--is that if you are 
giving these temporary worker permits or whatever, you don't 
want to do them to the amount you need at the boom. What you 
may want to do is figure out how many you would have at a 
recession. You can up that a certain amount, but that would be 
the more conservative, careful mechanism.
    As long as Mexico is right next door to us and their 
economy is not doing well, we are just going to continually 
face this pressure. One of the reasons they are not doing well 
is that we have had China and India come into the global 
economy and take up some of the businesses that we would have 
hoped the NAFTA was going to encourage in Mexico.
    Senator Kyl. Excuse me for interrupting, but let me give 
each of the panelists time to respond.
    Mr. Siciliano. Let me throw in one item, as well, to 
clarify. For all we know about business cycles, we still don't 
know a lot. One of the things, I think, to observe is that as 
we go into a down business cycle, we make macro adjustments to 
the cost of capital as a way of spurring the economy 
potentially and creating jobs and creating businesses through 
capital formation.
    It is worth thinking about--and I don't think it is a 
conclusive answer for you, but it is worth thinking about the 
fact that available labor supplies during a downturn is its own 
form of self-corrective mechanism. And I would fear second-
guessing at a micro level the small and medium-size businesses 
who might be reformulating strategies to alter their response 
to global competition and need the liquidity that is provided 
by available work force. And we do suffer through a terrible 
time which is short and hence has changed, but it might be akin 
to cost of capital.
    Labor is one of the critical inputs to all of economic 
development and we tinker with it at a micro level, we might 
inadvertently prevent ourselves from emerging as quickly as we 
might otherwise have from a recession.
    Senator Kyl. But it is also true that for the laborer who 
is without a job for a year and the taxpayer subsidizing that 
individual's life, this represents a real cost both to them 
individually and to the government side of things even though 
for the economy in the long run--but as you know, in the long 
run we are all dead.
    Let me get each of the--
    Mr. Chiswick. I have two reactions to the questions that 
you pose.
    Senator Kyl. Was it Galbreath, Professor Siciliano, that 
said in the long run we are all dead?
    Mr. Chiswick. Keynes, John Maynard Keynes.
    Mr. Siciliano. Yes.
    Senator Kyl. Of course. I am sorry.
    Mr. Chiswick. Both economists.
    Cyclical targeting in terms of labor markets is very, very 
difficult to do. In the post-war period, our downturns have 
been relatively short. So cyclical targeting would probably 
mean that it would be counterproductive because by the time the 
bureaucracy changes the number of visas, you will be in a 
different phase of the business cycle.
    I am glad you brought up the Arizona lettuce farms because 
actually ``Nightline'' earlier this month devoted a segment to 
that very issue and the same county that you made reference to. 
I was struck that the farmer said that if he didn't have these 
low-skilled workers who were picking lettuce by hand, he would 
mechanize; that there are mechanical lettuce pickers and that 
the only reason he is not mechanizing and employing more highly 
skilled American workers is the availability of such low-wage 
labor. So in a very real sense, the use of low-skilled 
immigrant labor is retarding further mechanization of 
agriculture.
    Mr. Holzer. I share the view that the cyclical use of the 
guest worker program sounds great in theory and it is hard to 
implement. I think about the long-run costs. Take your 
construction contractors in Arizona. Even when they hire these 
immigrants, there is some expectation that this employment 
relationship is going to last a while. There are costs of 
training them even for the low-end jobs to be dry-wallers and 
things like that.
    Once those investments have been made, I hesitate to force 
those employees to leave for a temporary downturn that might 
last who knows how long and then might come back. I think given 
these long-term employment relationships, we ought to focus 
more on the long-term issues involved in immigration and maybe 
less on the short-term fluctuation.
    Senator Kyl. I appreciate that. In view of the fact that 
there is only one more to question, might I just offer a 
comment? All of that is fine in economic theory. As I said, I 
have had to stand in town hall meetings with 3 or 400 Americans 
that don't have jobs.
    I appreciate what each of you are saying, but I do think we 
have got to be sensitive to the fact that there are costs to 
taking care of Americans who don't have jobs temporarily 
because there are folks here who will under-bid them in those 
jobs because we haven't been willing to restrict their entry 
here. It is a problem I would like each of you to think about 
for the next round.
    Chairman Specter. Thank you very much, Senator Kyl.
    We have developed quite a number of people standing in the 
back. There are a few chairs up front. You are welcome to come 
and sit there.
    Senator Sessions.
    Senator Sessions. Thank you, Mr. Chairman, for having this 
hearing. I think it is important that the American people 
engage in the debate. I think there are a number of strawman 
arguments out there that we need to dispense with.
    The first is that there is any support in Congress for 
stopping immigration. There is no support in Congress for that, 
and this Congress will act sooner or later to deal fairly and 
generously with people who have come here illegally. The 11, 12 
million, 20 million, whatever is here--they are going to be 
treated fairly and justly.
    But I do think it is important for us to ask ourselves what 
is the limit to our immigration, what is the right number, and 
it ought to be in our National interest, not whether somebody 
would like to be here.
    I had the great pleasure of traveling with Senator Specter 
last week to South America, and in State Department clips was a 
poll from Nicaragua that said that 60 percent of the people 
would emigrate to the United States if they could. That was a 
stunning poll. I mentioned it to the Ambassador in peru and he 
said, well, they just had a poll here 2 months ago that 70 
percent of the people in Peru would emigrate to the United 
States. Well, I am not sure how accurate those polls are, but 
it just points out that the numbers on an open border system do 
not make good sense to me. We obviously need to ask ourselves 
who and what numbers are relevant.
    I am not sure who to ask this question to, but if anybody 
would speak up and give me a thought on it, I would appreciate 
it. Is there a difference economically in the effect of a 
temporary or a permanent worker? Does anybody have any thought 
about that?
    Mr. Siciliano. Senator Sessions, I will address one small 
part so that others can comment, and that is I think we know 
intuitively that renters and owners treat their properties 
differently. Renting to own may be a compromise, but I would 
say that we have recent evidence citing Giovanni Peri's paper 
out of UC-Davis in November that we know that the 
entrepreneurial behavior of those immigrants who feel that they 
have some possibility of being here in the long term is 
increased because they are more likely to invest their capital 
here in the United States to engage in skill-building that 
resonates better in the United States and they get better 
returns on.
    So my one comment would be we know we sometimes get very 
efficient and good behaviors for our National interest from 
immigrants of all skill levels if they think they may have a 
long-term role to play here both about themselves and their 
children.
    Senator Sessions. Would it be in our interest, therefore, 
to attempt to identify the people that bring the most skill 
sets and the most ability to the country when we allow whatever 
limited number we have to come here legally?
    Mr. Siciliano. At both ends, yes.
    Mr. Chiswick. Absolutely. What we want to do is attract 
those immigrants who would have the largest positive 
contribution to the American economy, and they will be highly 
skilled immigrants, immigrants with high skills in literacy, 
numeracy, scientific knowledge, technical training. Current 
immigration law pays very, very little attention to the skills 
that immigrants bring to the United States.
    Senator Sessions. Let me point out that when we visited the 
Dominican Republic, the person in charge of issuing the visas 
told us, I think, 95 percent of the visas are chain migration, 
family visas. So, obviously, we are asking no questions about 
what skill or capacity they bring to our country. It is just 
automatic based on your relative connection.
    Professor Freeman.
    Mr. Freeman. The Canadians and the Australians both use 
much more occupational qualifications, the Australians have a 
very interesting system which we could think about because they 
also get a lot of people who come as students to the 
universities. We have a huge international student flow. We are 
able to judge how good they are. Our companies will offer jobs 
to them. Our universities will offer them fellowships and 
scholarships, and so on.
    What the Australians do is give those people a leg up in 
getting citizenship, so on a point system they get extra 
points. We certainly could think of something like that to all 
of these foreign students who come here who are learning the 
latest and best technologies and who are generally among the 
best in the world. We tend to keep a lot of them in any case 
through whatever mechanism the firms do keep them here, but 
that could be regularized and made much more attractive. We are 
competing with these other countries for these very bright, 
young people.
    Mr. Chiswick. The only aspect of public policy in the 
United States that I am aware of in which we encourage nepotism 
is in our immigration policy.
    Senator Sessions. Otherwise, we are a meritocracy. That is 
our American ideal. Is that not correct?
    Mr. Chiswick. Yes.
    Mr. Holzer. If I could add something to that, I think what 
we sometimes call nepotism in labor markets is really the 
efficient working of flows of information through informal 
networks. I think even for less educated workers--and we all 
share the view that it would be positive thing to increase the 
flow of skilled immigrants, scientists and engineers.
    I want to emphasize again that there are benefits to the 
American economy that even some of these less-educated 
immigrants provide, and I think what we are calling nepotism--
really, in many cases employers, having hired one or two 
immigrants and being very, very pleased with their performance 
and their work ethic, then encourage them to bring in their 
relatives, their friends, their cousins because they are so 
pleased. In many cases, that is an efficient way for many of 
these lower-wage labor markets to operate.
    Senator Sessions. Well, let me just make one thing clear to 
anybody who is listening. Essentially, the so-called compromise 
legislation that is on the floor--nothing about it is temporary 
or guest workers. They all get to come here and they all get to 
stay as long as they want to and on a path to citizenship, 
virtually every one of them. That is what it does.
    The cap on green cards goes from 140,000 to 450,000, and 
family members don't count against the cap. Almost one million 
workers a year come in and they can apply for the green card, 
their employer can, the first day they arrive in the country. 
So these are not temporary workers. We need to get straight 
about the language of this legislation when people discuss 
that.
    I would note for the record a study by the Center for 
Immigration Studies. There is a deficit today of more than $10 
billion a year based on the calculated benefit in taxes paid, 
plus the cost on the social system of our economy today for the 
average immigrant. I don't think that matter is real clear.
    Mr. Chairman, my time has expired. I am sorry to run over.
    Mr. Freeman. Can I make a comment on the--
    Chairman Specter. Go ahead, Professor Freeman.
    Mr. Freeman. I was on the special academy panel that looked 
at immigration on particularly fiscal cost things and what we 
found was that is incredibly variable over time. And as long as 
we are running a huge deficit, the immigrants are going to be 
negative-contributing.
    If we began to run a surplus, suddenly they would be 
contributing more taxes and would therefore be reducing our 
deficit. So it is less what they are doing than what our 
overall fiscal stance is. If we had a more balanced budget and 
we ran a surplus, they would be paying more in taxes.
    Senator Sessions. Why is that? I don't want to interrupt.
    Chairman Specter. Go ahead.
    Senator Sessions. Why would it make a difference? First, 
project for me when we are going to have a surplus. Second, why 
does it make a difference?
    Mr. Freeman. I will do the surplus first because at the 
time we did our calculations, no one dreamed there would be a 
surplus. I do believe we had one four or 5 years ago, so these 
come through magic, if I can phrase it right, sudden economic 
boom.
    When we are running a surplus, the government is taking in 
more taxes than the money they are putting out. And just assume 
that an immigrant is also paying more taxes than he or she is 
consuming in government funds. Therefore, in that situation, 
having another worker come in who pays more in taxes than they 
are taking out means we can reduce our National debt. So it is 
just very dependent upon what the overall fiscal stance is.
    Mr. Siciliano. Mr. Chairman, I am familiar with the study. 
I can answer the specific question, if I may.
    Chairman Specter. Go ahead, Professor Siciliano.
    Mr. Siciliano. Thank you. That particular study has two 
types of expenditures--direct payments to immigrants and 
immigrant households, so it includes sometimes U.S. citizen 
children, and indirect attributive costs which are the general 
expenses by the government divided by the number of households 
in the United States.
    The study is actually dominated by the general government 
expenditures component of those costs. So, in other words, you 
take the government expenditures, you divide it by the number 
of households, and then you take that number. And that number 
is a large number right now because we have high levels of 
expenditures relative to tax collections.
    That is why it is driven by our fiscal state as a Federal 
Government, as opposed to simply the behavior of the 
immigrants. The direct payments are an important component, but 
they are actually dominated by and outweighed by the general 
expenditures share, which is interesting, but I think it 
overstates the interest of that particular number that you have 
cited. It is not irrelevant.
    Mr. Chiswick. But those statements are based on the average 
immigrant, and if you do the analysis separately for high-
skilled and low-skilled immigrants, what you would find is that 
even in a period of surplus, low-skilled immigrants would be 
paying less in taxes than the burdens that they would be 
putting on the government expenditures.
    Mr. Siciliano. Just like low-skilled U.S. workers.
    Mr. Chiswick. Just like low-skilled natives, yes.
    Mr. Siciliano. Yes, in no different way than low-skilled 
U.S. workers.
    Mr. Chiswick. But low-skilled natives are here and low-
skilled immigrants--do we want them in the country or not?
    Senator Sessions. Thank you.
    Chairman Specter. Thank you very much, Senator Sessions.
    Senator Sessions and I just made a trip to South America 
and had a good deal of conversations with officials about a 
variety of aspects on immigration. In both Colombia and the 
Dominican Republic, we were told of governmental programs there 
which sought to keep track of guest workers. President Uribe, a 
very impressive man, told us that they had arrangements with 
both Spain and Canada, so that when their workers went there, 
they were kept track of by the Colombian officials, and their 
ability to go back depended on complying with the legalism of 
returning when their stay was up.
    Professor Freeman, do you think that is a realistic way to 
bring them back?
    Mr. Freeman. It is easier if they are far away. So if you 
are going to Colombian to Spain where you have airplane trips, 
I think it would be more difficult to do this with a border 
with Mexico.
    Chairman Specter. The President of the Dominican Republic 
was very interested in the money coming back to the Dominican 
Republic. The estimates are the immigrants in the United States 
send home about $39 billion a year in remittances. So on one 
hand, there is a concern about what that does to our economy. 
That purchasing power is not being used in the United States.
    The other aspect is that our foreign relations are very 
complicated. We heard a great deal about the difficulties with 
Venezuela and President Chavez. A vote of the Andean countries 
on protecting property rights was three-to-two, with the United 
States winning. We have trade there to try to strengthen our 
foreign relations. We heard a lot of talk about their 
recognizing the leaders of the foreign governments, recognizing 
our rights to control our borders, but also looking for a 
humanitarian approach that we have.
    How big an impact is it, Professor Siciliano, if $39 
billion is remitted from the United States to the home 
countries?
    Mr. Siciliano. Well, as a component of the overall economy, 
I actually think it is a fairly small number, but it obviously 
has tremendous impact for the countries who receive the 
remittances.
    Two points. One, the transmission of that money actually 
generates substantial revenue and profits for U.S.-based 
business, primarily financial institutions who serve as the 
intermediaries to make that happen. I don't think we want to 
forget that.
    The second issue is that the money lands in the hands of 
individuals who are nationals of obviously that country and 
some of it recycles as demand for our goods and services, hence 
jump-starting, we hope, the ongoing trade relations which may 
mitigate some of the foreign national risks you have 
identified. So I think it is a small piece in a big global 
economy and one that shouldn't dominate the thinking about how 
we decide to move forward on the immigration debate.
    Chairman Specter. Professor Freeman, you have suggested a 
policy of considering auctioning immigrant visas and to use 
those excess funds to redistribute the gains. Do you think that 
is really a good idea to engage in an auction for people who 
want to come to this country and the highest bidder wins?
    Mr. Freeman. Let me give the place where it would make the 
most sense, which is the H-1B visas. Where companies are saying 
there is a shortage of people and they want to bring more 
people, we charge them some amount of money.
    Chairman Specter. So you are going to have Bill Gates pay 
for the auction price?
    Mr. Freeman. Exactly right.
    Senator Sessions. They pay now.
    Mr. Freeman. They pay something now. That is right.
    Senator Sessions. I don't know what it is, but--
    Mr. Freeman. They pay $1,000--or $2,000, he says.
    Chairman Specter. Well, that puts it in a different light 
if Bill Gates is going to pay, as contrasted with the 
immigrant.
    Mr. Freeman. Yes. There, the notion of an auction just was 
the $2,000 got established for some unknown reason and this 
would establish a market mechanism that would say if we are 
going to give out 100,000 H-1B visas, the employers who want 
them the most would bid money for them, the same way we auction 
off the rights to pollution and things like that. I wouldn't be 
putting this as a major cornerstone of our immigration 
policies.
    Chairman Specter. Professor Chiswick, you have made a 
suggestion in your writing about prioritizing immigrants based 
on the economic benefits they are likely to confer on the 
United States. That is an interesting concept. Would you do 
that at the expense of family unification? Would you exclude 
family unification and maintain that priority before taking up 
the issue of analyzing the economic benefit so that we look to 
specific immigrants who can add to our productivity?
    Mr. Chiswick. I wouldn't totally exclude family 
unification. I think in terms of the spouses and minor children 
and aged parents of U.S. citizens, I would permit that to exist 
as it does under current law. But I would recommend removing 
all of the other family categories and I would recommend three 
changes in allocating visas.
    One would be to move away from the current targeted 
employment policy and move toward a Canadian-Australian style 
point system for valuating skills. I would also move in the 
direction of the auctioning or large visa fee system that we 
have just spoken about, and this would be a way for family 
members, friends, to express their preference to bring over a 
particular individual.
    Chairman Specter. You would auction family reunification 
visas?
    Mr. Chiswick. No. I would auction visas and people who want 
to bring their relatives here would have an incentive to 
contribute to the price of the visa that is auctioned off. So 
it doesn't have to be Bill Gates who is paying for the visa. It 
could be the person's brothers, sisters, cousins, aunts, 
uncles, nieces and nephews.
    Chairman Specter. It sounds like a pretty tough way to 
raise public funds to me.
    You are lucky, gentlemen, that we are about to vote. 
Otherwise, we would keep you here well into the afternoon.
    Mr. Chiswick. We are enjoying this.
    Mr. Siciliano. Absolutely.
    Chairman Specter. Senator Sessions, anything further?
    Senator Sessions. Well, it is a most fascinating subject. I 
asked that we do some hearings like this because we are just 
moving pieces of legislation through and we have hardly had any 
real discussion of the incredible size and scope of what we are 
doing and the impact it may have on us.
    I was just with the president of the University of Alabama-
Huntsville. Kit Bond spoke and referred to his amendment that 
would allow a college graduate from a foreign country to stay 
in the country. Now, they have to leave the country.
    Professor Freeman, do you have any thoughts about--to my 
knowledge, there is nothing in this bill that fixes that, but 
do you think that is a good policy to change that rule?
    Mr. Freeman. Yes, and I think it is one of the silly things 
that we do is if you are a foreign student and you want to come 
to the U.S. to study, you have to tell the State Department 
person that you are not remotely thinking about working in the 
U.S.
    I talked to the State Department people and I said that do 
you know that for the Chinese 90 percent of them will stay 
here? So you realize, of course, they are lying to you when 
they say no. And the State Department person said we don't pay 
attention to statistics; we just trust people.
    But making entry to the country of these kinds of people 
sort of a bit of a white lie at the beginning when everyone 
understands we want them and they want to come to work here--we 
should just be forthright about that the way the Australians 
and the Canadians are.
    Senator Sessions. Well, I was in Russia in the early 1990's 
and we had a guide who spoke perfect English. She was a very 
attractive young lady and she wanted to have a visa to come to 
the United States, and they said, no, she would never get it. 
We said why? Well, she will probably get married, you know, and 
she probably won't return.
    What kind of rule is that when we have people who say we 
have got to have somebody to put a piece of chocolate on your 
bed every night, and this lady could have contributed in any 
number of ways to the good of the United States?
    Let me just raise an issue. I just want to raise this 
because I know it is anecdotal, but I think it is worth talking 
about. Jared Bernstein of the liberal Economic Policy Institute 
said, ``Of course, there are jobs that few Americans will take 
because wages and working conditions have been degraded by 
employers. But there is nothing about landscaping, food 
processing, meat-cutting or construction that would preclude 
someone from doing these jobs on the basis of their nativity. 
Nothing would keep anyone, immigrant or native-born, from doing 
them if they were paid better or had better conditions.''
    In my hometown of Mobile, there was a recent need after 
Hurricane Katrina, which is the classic thing I think you would 
need a temporary worker for. I mean, you have got roofs all 
over town that need to be replaced--a classic need for a 
temporary worker. So we had a lot of Hispanic workers.
    There was a recent article in the Washington Times entitled 
``Arrival of Aliens Ousts U.S. Workers,'' and the article 
describes how 70 laborers and construction workers were working 
for $10 an hour in the aftermath of Hurricane Katrina, but were 
told they were no longer needed when the Hispanic workers 
showed up.
    This is a quote from the article: ``Linda Swope, who 
operates Complete Employment Services in Mobile, told the 
Washington Times last week that the workers, whom she described 
as U.S. citizens, residents of Alabama and predominantly black, 
had been urgently requested by contractors hired to rebuild and 
clear devastated areas of the State, but were told to leave 
three job sites when foreign workers showed up.''
    ``After Katrina, our company had 70 workers on the job the 
first day, but the companies decided they didn't need them 
anymore because the Mexicans had arrived, Ms. Swope said. I 
assure that it is not true that Americans don't want to work. 
We had been told that 270 jobs might be available and we could 
have filled every one of them with men from this area, most of 
whom lost jobs because of the hurricane. When we told the guys 
they would not be needed, they actually cried and we cried with 
them. This is a shame.''
    Does anyone want to comment on that?
    Mr. Chiswick. I agree with that statement that there is a 
competition in the labor market and the large increase in low-
skilled immigration that we have seen over the last 20 years 
has had a substantial negative effect on the employment and 
earning opportunities of low-skilled Americans.
    On the other end of the skill distribution, the high-
skilled immigrants, we are in intense international competition 
not just with Canada and Australia, but now also with Western 
European countries that are all developing immigration policies 
to attract high-skilled immigrants. And we are essentially 
subsidizing Canada and Australia by our immigration policies 
which make it that much more difficult for high-skilled 
immigrants to come to the United States permanently.
    Chairman Specter. The vote has just started, so you may 
comment, Professor Holzer, but if you would make it brief, 
Professor Siciliano wants to comment and I wouldn't be 
surprised if Professor Freeman wants the last word. Just be 
brief.
    Mr. Holzer. Senator, I don't share the view that has been 
expressed that low-skilled immigrants have really dramatically 
depressed or reduced opportunities for native-born workers. I 
did say earlier that I thought construction was a sector where 
a lot of native-born workers would be interested.
    I think in this particular case of Katrina, this is an 
example where we could be doing more not necessarily to drive 
the immigrants out of America, but to level the playing field 
and increase the opportunities for native-born workers to 
improve the networks and the skills that they get.
    I think, for instance, if public funds are being expended 
on the rebuilding of Katrina, it would be fairly easy to 
generate some requirements that contractors look first and make 
some efforts to bring in native-born workers. I would favor 
those kinds of attempts to level the playing field and 
increasing the opportunities for the native-born workers. And 
in the case of Katrina, I think there is a strong case to be 
made.
    Chairman Specter. Professor Siciliano, do you have a brief 
comment?
    Mr. Siciliano. Yes, two key points. I think anecdote in the 
hands of the economist is a dangerous weapon, so let me just 
give two kind of actual points of data. First, in the 1960's we 
know that roughly half of the U.S. work force lacked a high 
school diploma, and now about 12 percent of the native-born 
work force lacks a high school diploma.
    This skill set difference is driving the comment that I 
think is true, which is it is not the case that immigrant labor 
is displacing by and large U.S. labor or depressing wages, and 
there are two key points to highlight that. Nevada and 
Kentucky, arguably similar in cost of living in many ways--7.5 
percent of the population of Nevada right now is estimated to 
be undocumented. The average high school drop-out wage is $10 
per hour. In Kentucky, less than 1 percent of the population is 
estimated to be undocumented, and yet the high school drop-out 
wage is $8.73 per hour.
    It can't be simplified into simply saying immigrant labor 
shows up and it hurts U.S.-born labor. It is much more complex 
than that. I think, net, it clearly benefits U.S. labor.
    Chairman Specter. Professor Freeman, do you have a brief 
concluding comment?
    Mr. Freeman. I want to give a speech, but I guess I am not 
allowed to. The fact is that in no single occupation in this 
country, including the worst occupations that we can think of 
in terms of wages, are immigrants the majority. I think 30 to 
40 percent is about the most we get in any occupation.
    So there are parts of the country where the jobs that we 
might think of now as for low-level immigrant workers--they are 
being filled in parts of the country where there aren't 
immigrants by Americans. That means that Americans are willing 
to work at these jobs. They may not be willing to compete with 
an immigrant at very low wages, particularly when the immigrant 
may be getting paid illegally off the books, and so on.
    Chairman Specter. Gentlemen, thank you all very much for 
coming. If you would respond to my inquiry within 2 weeks, it 
would be greatly appreciated because we expect the immigration 
bill back on the floor shortly; that is, to give us your 
projection as to how you would structure a guest worker 
program, considering the economic factors of not taking or 
minimizing the taking of jobs, and not lowering or minimizing 
the lowering of wages. But recog-

nizing that, as Professor Holzer says, these are very difficult 
issues and nobody knows the answers with precision, your projections 
would be enormously helpful to the Committee and to the Senate.
    Thank you all very much and that concludes our hearing.
    [Whereupon, at 11:17 a.m., the Committee was adjourned.]
    [Submissions for the record follow.]
    [Additional material is being retained in the Committee 
files.]


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