[Economic Report of the President (2005)]
[Administration of George W. Bush]
[Online through the Government Printing Office, www.gpo.gov]



 
CHAPTER 4

Immigration

In recent decades, the United States has experienced a surge in
immigration not seen in over a century. Immigration has touched
every facet of the U.S. economy and, as the President has said,
America is a stronger and better Nation for it. Immigrants today
come from countries around the world and work in diverse occupations
ranging from construction workers and cooks to computer programmers
and medical doctors.
Immigrants have settled in all parts of our Nation and have
generally succeeded in finding jobs quickly, helped in large
measure by the flexibility of the U.S. labor market. One indicator
of this success is that foreign-born workers in the United States
have a higher labor force participation rate and lower unemployment
rate than foreign workers in most major immigrant-receiving countries.
While flexible institutions may speed the economic integration
of the foreign-born, the distribution of the gains from immigration
can be uneven. Less-skilled U.S. workers who compete most closely
with low-skilled immigrants have experienced downward pressure
on their earnings as a result of immigration, although most
research suggests these effects are modest. Also, communities
contending with a large influx of low-skilled immigrants may
experience an increased tax burden as immigrant families utilize
publicly provided goods such as education and health care.
U.S. immigration policy faces a complicated set of challenges,
perhaps more so now than ever before. Policy should preserve
America's traditional hospitality to lawful immigrants and promote
their economic contributions. Yet these goals must be balanced
with the Nation's many needs, including the imperative for orderly
and secure borders. These challenges have only grown in a post-9/11
world. The persistence of undocumented immigration and problems
with employment-based immigration suggest that the United States
needs to better enforce immigration laws and do more to address
the demand for immigrant workers and the need for national security.
The President's proposed Temporary Worker Program and increased
funding for internal enforcement recognize these problems and would
implement necessary reforms.
The key points in this chapter are:
	The flexibility of the U.S. labor market helps
immigrants succeed.
	A comprehensive accounting of the benefits and
costs of immigration shows that the benefits of
immigration exceed the costs.
	Much immigration occurs outside the realm of
immigration law; a temporary worker program and
better enforcement of current laws would be expected
to result in many improvements, including a
reduction in the number of undocumented immigrants.
Immigration and Economic Growth
Immigrants have contributed enormously to U.S. population and
employment growth. The foreign-born have grown among all occupations
and regions of the country and have spread beyond traditional
immigrant centers and into areas where previously few immigrants had
lived. Following common practice, this chapter uses the terms
immigrant and foreign-born interchangeably and adopts the Census
Bureau's definition of foreign-born to mean any person who is in
the United States legally or illegally who was not a U.S. citizen
at birth (not born in the United States or of U.S. parents). This
usage differs from that of the U.S. Citizenship and Immigration
Services, which uses the term immigrant to refer to a subset of
the foreign-born population, namely lawful permanent residents
(see below for an explanation of the different immigrant
categories).
Immigrants and Employment Growth
The foreign-born are associated with much of the employment
growth in recent years. Between 1996 and 2003, when total employment
grew by 11 million, 58 percent of the net increase was among
foreign-born workers. That immigrants contributed so much to net
employment growth is not surprising: immigrants contributed almost
as much to growth in the working-age population (51 percent) as they
did to growth in employment. Almost all employment growth among
immigrants was among those who arrived in the United States between
1995 and 2003. (Employment growth in this chapter is based on the
Current Population Survey or ``household'' survey because it provides
information on place of birth and citizenship status -- see Box 1-2
in Chapter 1 of the 2004 Economic Report of the President for a
discussion of the payroll versus household surveys.)
While employment of the foreign-born grew among all occupations,
immigrant contributions to job growth were especially large in
the service occupations and precision production, craft, and repair
(a category that includes mechanics, repairers, and construction
workers) (Table 4-1). In some occupations, natives were leaving
even as the foreign-born were entering. For instance, employment
of natives as operators, fabricators, and laborers fell by 1.4
million between 1996 and 2002, while employment in such occupations
grew by 930,000 among the foreign-born. This should not be taken as
evidence that the foreign-born displace native workers; rather, it
reflects the fact that immigrants have made up all of the growth in
the low-skilled workforce. As education levels rise among younger
U.S. workers and older U.S. workers retire, the number of
low-skilled natives is declining.


Immigrants and Regional Growth
Immigrants are not spread evenly across the United States but
instead are concentrated within certain states and cities. In
2000, 59 percent of the foreign-born lived in just four states:
California, New York, Texas, and Florida, compared with only 29
percent of natives. Fully 21 percent of the immigrant population
lived in the metropolitan areas of New York and Los Angeles alone,
compared with 5 percent of the native-born. The foreign-born are
concentrated in certain areas, not only because of the economic
opportunities in these regions, but also because new immigrants
often prefer settling in cities in which their fellow countrymen
already reside. This enables new immigrants to live among people
who share their language and culture, as well as to use ethnic
networks to find jobs and learn about life in the United States.
While recent immigrants continue to settle disproportionately
in cities and states with large immigrant populations, both
recent and earlier waves of immigrants have increasingly pursued
economic opportunities in areas where few immigrants had lived
previously. From 1996 to 2003, some of the fastest job growth among
the foreign-born took place in regions of the country where few
immigrants had worked at the beginning of the period (Chart 4-1).
In the East North Central region (Indiana, Illinois, Michigan, Ohio,
and Wisconsin), for example, immigrants accounted for 84 percent of
employment growth between 1996 and 2003, even though the
foreign-born were only 5 percent of workers in this region in 1996,
compared to 11 percent nationwide. Even in the East South Central
states (Alabama, Kentucky, Mississippi, and Tennessee), immigrants
were only 2 percent of workers in 1996 but accounted for
47 percent of job growth during this period.


How Many Immigrants?
The foreign-born have contributed to population growth almost as
much as they have contributed to employment growth. Population
growth is the combination of natural growth (births minus deaths)
and net immigration (immigrants minus emigrants). Since 1970,
immigrants have constituted an increasing share of the rise in
population. The U.S. population grew by 21.6 million between 1996
and 2003, with 41 percent of that increase from immigration.
By 2003, 33.5 million residents of the United States had been
born in other countries, and the foreign-born share of the
population had risen from 5 percent in 1970 to 12 percent in 2003
(Chart 4-2). Nonetheless, as a share of the population, the
foreign-born are still less prevalent than at their peak in 1890,
when they accounted for 15 percent of U.S. residents.
Legal and Illegal Immigrants
The 33.5 million immigrants living in the United States can be
divided into four groups: naturalized American citizens, immigrants
who have become citizens by passing a citizenship test and
fulfilling other requirements; permanent residents, immigrants who
have ``green cards'' and the legal right to reside permanently in the
United States but have not become naturalized citizens; temporary
residents, people admitted to the United States temporarily for
a specific purpose, including visitors, students, and temporary
workers (referred to as nonimmigrants by immigration authorities);
and undocumented


immigrants (also called illegal or unauthorized
immigrants), people residing in the United States illegally.
The number of foreign-born in the United States is measured
primarily through the decennial Census and, since 2000, updated
annually using the American Community Survey. The Census is believed
to undercount the number of foreign-born, especially among
undocumented immigrants. Taking into consideration the undercount
in the undocumented immigrant population and other factors, a 2004
study estimates that the foreign-born population was 34.9 million,
or 1.4 million higher than the official 2003 estimate. Chart 4-3
illustrates this study's estimated breakdown of immigrants by
their immigration status. Legal non-citizens are about 38 percent
of immigrants, with 12.0 million permanent residents and 1.2 million
temporary residents. An additional 34 percent are naturalized
citizens, and the remaining 28 percent are undocumented immigrants.
From Which Tempest-Tossed Shores?
When Emma Lazarus wrote The New Colossus in 1883, immigrants were
overwhelmingly from Europe. Only a handful of immigrants were from
Asia or Latin America. The situation is reversed today. Over half
of the foreign-born population was born in Latin America
(Chart 4-4). Of those from Latin America, over two-thirds are from
Mexico or Central America. The next


largest group of immigrants was born in Asia, with China, the
Philippines, and India the most prevalent Asian countries of birth.
An additional 14 percent of the foreign-born come from Europe, and
the remaining 8 percent were born in other areas of the world
(mainly Africa, Oceania, and Canada).

Immigrant Education and Earnings
The foreign-born are disproportionately represented among those
with little schooling. Over one-fifth of immigrants have less than
nine years of education, compared with only 4 percent of the
U.S.-born population (Chart 4-5). The foreign-born are also slightly
overrepresented among people with an advanced degree (a master's,
professional, or doctoral degree): 10 percent of the foreign-born,
but only 9 percent of U.S. natives, hold an advanced degree. This
difference in advanced degrees is greater for men. Although native-
and foreign-born women are equally likely to hold an advanced degree,
12 percent of foreign-born men but only 10 percent of native men have
an advanced degree.
Schooling levels are correlated with region of origin. Immigrants
from certain world regions tend to be highly educated while those
from other world regions tend to have little schooling. For example,
25 percent of Asian-born men in the United States hold advanced
degrees, whereas only 10 percent


failed to graduate from high school. In contrast, only 2 percent of
male immigrants from Mexico or Central America have a master's
degree or higher, while 42 percent completed less than nine years
of schooling and an additional 22 percent attended high school but
did not graduate.
Partly as a result of lower average education levels, the typical
immigrant earns less than the typical native. In 2003, median
immigrant earnings were $511 per week, or 74 percent of the median
earnings of natives (Table 4-2). Within education groups,
immigrants earn 82 to 94 percent of natives' wages, with the
smallest earnings gap among college graduates. This earnings gap
narrows over time as most immigrant cohorts experience faster
earnings growth than natives with similar education.


As a result of lower education levels and earnings and larger
families, immigrants are more likely than natives to be poor. In
2003, 16.6 percent of immigrants were poor compared to 11.5 percent
of U.S. natives. Despite higher poverty rates, immigrants are more
likely to participate in the workforce than natives, with 78 percent
of male immigrants with less than a high school education
participating in the labor force compared to 47 percent of their
native counterparts. Among undocumented male immigrants, 96 percent
are estimated to participate in the labor force.
The Role of Labor Market Institutions
U.S. immigrants are much more likely to work than immigrants in
most other industrialized nations, a distinction which may in part
be due to labor market institutions. Labor market institutions refer
to the constraints that govern the employer-employee relationship,
including the policies that influence the firm's decision to hire
and the worker's decision to work. The demand for workers is
influenced by the regulations that determine employment costs,
including wage floors set by unions or the government, non-wage
costs such as payroll taxes, and laws that limit turnover such as
rules against firing workers. The supply of workers is likely
affected by the institutions that provide welfare and unemployment
benefits, with more generous programs associated with fewer
incentives to work and hence a lower labor supply or more
unemployment.
The United States is regarded as having relatively flexible labor
markets, which allow individual employers and workers greater
discretion in setting working conditions. This contrasts with
highly-regulated labor markets in which wage-setting and benefits
determinations are often centralized. This section compares the United
States with some other Organization for Economic Cooperation and
Development (OECD) countries to see whether there is a correlation
between the extent of labor market regulations and the unemployment
rate of immigrants relative to natives.
Institutions and Immigrant Unemployment
Labor market regulations influence the level and flexibility of
wages and affect new workers' chances of finding employment. In
standard economic analysis, unemployment results when total worker
compensation -- the sum of wages and benefits -- exceeds the market rate.
This happens either when compensation is fixed and cannot fall in
response to increased labor supply, or when wage floors and mandated
benefits set worker compensation at a level above the market rate.
In both cases, immigrants may be more likely than natives to be
unemployed as a result.
If immigrants are less productive than natives, then regulations
that increase compensation for entry-level workers would be expected
to affect foreign workers more than natives. Immigrants may be less
productive on their initial arrival because they may lack the
language skills, educational background, or institutional knowledge
that natives can draw upon to enhance their job performance. A lower
entry-level wage could compensate for these shortcomings and would
be expected to be followed by faster wage growth as the immigrant
learns new skills and gains experience. Several studies have found
that lower initial earnings among immigrants are
in fact correlated with higher rates of earnings growth.
Rules against firing workers are common in more-regulated markets
and can reduce new hiring, especially of immigrant workers.
Immigrants might initially be perceived as more risky hires because
employers may not know how to evaluate immigrants' educational
backgrounds, for example, or may not be able to gauge their language
proficiency. As a result, immigrants may have to search longer for
a job than would otherwise similar native workers.
Immigrants may overcome communication, cultural, and other
barriers (including discrimination) by starting their own businesses.
Entrepreneurship, however, may be out-of-reach for some immigrants
in highly-regulated markets, which are often characterized by high
business start-up costs and less access to capital. At the same
time, generous unemployment insurance in more-regulated economies
and welfare programs for refugees and asylum seekers may discourage
immigrants from looking for jobs in the first place.
The composition of employment growth is another important
difference between the United States and some Western European
countries that may influence immigrant unemployment rates. In the
United States, the fast-growing U.S. service sector provides greater
opportunities to new workers than does the service sector in many
other countries. In Germany, where immigrants are disproportionately
employed in the service sector, the sector's relatively slow growth
may have limited immigrant job opportunities. The lack of growth in
low-skill service jobs could simply be another consequence of
high-cost and high-tax markets, although some researchers point to
cultural or lifestyle differences as limiting the demand for things
like fast food.
Immigrants in countries with highly-regulated labor markets tend
to have higher unemployment rates relative to natives than immigrants
in countries with flexible labor markets, such as the United States.
Chart 4-6 shows the average unemployment rates of native versus
foreign males in major immigrant-receiving OECD nations during
2000-2001. The countries are ranked according to the competitiveness
of their labor markets, with less-regulated countries at the top of
the chart and more-regulated countries at the bottom. Immigrant
unemployment rates are generally lower and more similar to native
unemployment rates in less-regulated labor markets, such as in the
United States, than in highly-regulated labor markets such as those
in Spain, Sweden, Germany, and France. Male immigrants in France,
for example, had a 17 percent unemployment rate in 2000-2001, 10
percentage points higher than natives. Male immigrants in the United
States, meanwhile, had a 4.4 percent unemployment rate, 0.5
percentage points lower than U.S. natives.
Unemployment Rates Among Immigrant Youth
Labor market inexperience may exacerbate the negative
consequences of rigid labor market institutions, perhaps more so for
immigrants than natives. Chart 4-7 compares unemployment rates among
foreign and native youth (aged 15 to 24) for a subset of the
countries above. Relative unemployment rates among immigrant youth
(both men and women) are higher in heavily regulated labor markets.
In Sweden, immigrant youth have more than twice the unemployment
rate of native youth. In France, foreigners aged 15-24 have a 30
percent unemployment rate, compared to 18 percent for similarly aged
natives.


Caveats to Consider
Many other factors that vary across countries affect these
statistics. While in the United States, ``foreign'' implies that the
person was born abroad, that is not the case in Europe or Japan
where ``foreigner'' refers only to those who are not citizens. Either
group can be bigger depending on how much countries restrict access
to citizenship; in some countries even second- and third-generation
immigrants are not citizens. In Germany and Japan, for example,
relatively few immigrants become citizens while much larger shares
of immigrants naturalize in the Netherlands and Sweden. As a result
of these differences and holding all else equal, foreigners in
Germany would be more comparable to natives in Germany, shrinking
the difference in the unemployment rates as compared with foreigners
in the Netherlands and Sweden who would tend to be made up of
relatively new immigrants.
Differences in immigration policies across countries also
affect the comparison of immigrants' labor market outcomes.
Australia, for example, admits the majority of its immigrants based
on employment skills; its immigrants would be expected to be better
prepared for the job market than would immigrants in countries which
prioritize foreigners who are refugees or asylum seekers, or family
members of natives and prior immigrants, as in the United States.
Indeed, Australian immigrants have similar unemployment rates as
Australian natives (Chart 4-6). U.S. immigrants also have low
unemployment rates, however, even though U.S. immigration policy
is principally based on family ties. The last section of this
chapter describes U.S. immigration policy in more detail.
Benefits and Costs of Immigration
The gains from immigration are analogous to the gains from trade
(see Chapter 8, Modern International Trade, for a discussion
explaining how countries gain from trade). In classical trade
theory, countries benefit from trading when they differ in some
way. Similarly, the more different immigrants are from natives,
regardless of whether they have fewer or more skills, the bigger
are the economic gains from immigration. The skill composition of
immigrants comes into play in other ways, however. First, it
determines which native workers gain by immigration and which
lose. Second, it determines whether immigration positively or
negatively affects government revenues and expenditures.
Labor Market Impact of Immigration
Standard economic theory suggests that an increase in the supply of
labor, such as an influx of immigrant workers, would be associated
with lower wages, other things being the same. Empirical estimates
of how much native wages fall in response to immigration, however,
are typically small. The magnitude of the wage impact is mitigated
by two factors: how substitutable immigrant workers are for natives
and the response of existing factors of production such as capital
and labor to the influx of immigrants.
If foreign workers are not substitutable for natives, then
immigration would be expected to have little impact on the wages of
natives. For example, an immigrant with unique skills, such as a
highly specialized scientist, or an immigrant who speaks little or
no English, is unlikely to compete directly with most U.S. workers.
Instead, recent immigrants may be the most adversely affected by the
inflow of more immigrants. A new immigrant with limited English
skills, for example, will likely compete closely with other recent
immigrants with poor English ability and in jobs that do not require
institutional, technical, or advanced language skills, such as
janitorial services or child care. If immigrants become concentrated
in certain states or cities, natives might also respond by moving
to locations with relatively less competition from immigrants.
Although research findings suggest so-called native flight may
have occurred in the 1980s, the experience of the 1990s suggests the
opposite -- that immigrants and natives were drawn together by economic
growth.
The supply of capital might also change with immigration. An
increase in the supply of labor means that each unit of capital
becomes more productive and thus more valuable. As a result, capital
may flow into areas where there has been immigration even while
output in those areas shifts toward production of goods and services
that are relatively more labor intensive. This increased investment
and production shift may in turn raise the demand for labor and push
wages partially back up.
Several economic studies have attempted to measure the wage
impact of immigration on natives and previous immigrants -- a
challenging task because it is necessary to take into account all
other factors that might plausibly affect wages, such as the
responses by capital and labor outlined above. Such studies also
have to take into account that immigration itself is driven by
favorable economic conditions such as high or rising wages. With
those caveats in mind, a typical finding is that, on average,
immigration has little effect on native wages. Box 4-1 reviews
one of these studies in more detail. Generally, estimates suggest
that a 10 percent increase in the share of foreign-born workers
reduces native wages by less than one percent. Recent studies that
look at wage effects by skill levels typically find larger negative
effects on less-skilled than medium- or high-skilled native workers.
Adverse wage effects on previous immigrants have been found to be
on the order of 2 to 4 percent. It should be noted that these
studies typically identify the effect of immigration on natives
by comparing labor market outcomes of natives in response to
differences in immigration across regions and over time. Analysis
done at the national level relies primarily on variation in
immigration over time and finds larger adverse effects.
______________________________________________________________________

Box 4-1: Wage Impacts of Immigration

The labor market effects of immigration can be identified by using
real-world events in which immigration occurs suddenly and is not
driven by economic factors. One such study measures native wages
in Miami before and after the Mariel Boatlift in which approximately
125,000 Cubans arrived between May and September of 1980. This
influx added 45,000 workers, or 7 percent, to Miami's labor force
in just a few months.  Despite the fact that a relatively high
fraction of the new immigrants were low-skilled, these immigrants
had virtually no effect on the wages or unemployment rates of
less-skilled workers in Miami.
This result could have been driven by labor and capital responses.
For example, natives and other immigrants who would otherwise have
moved to Miami to fill low-skill jobs may have decided not to do so
because of the rapid influx of Cuban immigrants over this period. In
addition, textile and apparel firms, industries that are well-suited
to utilize low-skilled labor, expanded in Miami, thereby cushioning
the adverse wage impact on Miami workers.
______________________________________________________________________


Fiscal Impact of Immigration
Immigrants -- like all natives -- affect the public finances, the
revenues and expenditures of local, state, and Federal governments.
Immigrants contribute money to public coffers by paying sales and
property taxes (the latter are implicit in apartment rents).
Immigrants working ``on the books'' further contribute through income
and payroll taxes. Immigrants consume publicly provided goods and
services such as roads, police and fire protection, and public
schools. If they are eligible, some legal immigrants, such as
naturalized citizens and lawful permanent residents who have lived
in the United States for five years or more, may also receive
assistance from programs such as food stamps, Temporary Assistance
to Needy Families (TANF), and Medicaid. Supplemental Security
Income (SSI) is generally restricted to citizens and to lawful
permanent residents who have worked in the United States for at
least 10 years. The fiscal impact of immigration is the difference
between how much immigrants pay in to the government and the value
of the public services they consume.
Some studies have calculated the fiscal impact of immigrants on
an annual basis and looked at whether the cost of providing public
goods and services to immigrant households increases the tax burden
on native households in a given year. Such studies have found that,
while immigrants do not impose a net higher tax burden at the
Federal level, natives in states with a heavy concentration of
immigrants from Latin America do realize an increased overall tax
burden. Another approach in estimating the fiscal impact of
immigration is to compute the expected lifetime fiscal impact of
immigrants who come to stay permanently and their children,
grandchildren, and future descendants. A 1997 study found that the
net present value of immigrants' estimated future tax payments
exceeded the cost of services they were expected to use by $80,000
for the average immigrant and his or her descendants. Accounting
for the 1996 welfare reform, which restricted eligibility and
imposed time limits, this figure increased to $88,000. The value of
services slightly exceeded taxes paid by the original immigrant, but
the contributions of the immigrant's descendants more than made up
the difference.
The average impact masks two facts. First, immigrants typically do
not impose a net cost at the Federal level where most of the
proceeds from payroll taxes accrue, but rather at the state and
local level through their use of public schools and health care.
Second, the average fiscal impact also masks the fact that the
fiscal effect of immigrants (like that of natives) varies by
education level. How much immigrants pay in and how many services
they utilize depend largely on whether they are families headed by
skilled or unskilled workers. Immigrants with a high school degree
or better and their descendants contribute more in taxes than they
use in public services, which produces the overall positive impact
mentioned above. But the average net present value of the fiscal
impact of an immigrant with less than a high school education is
negative $13,000. The impact of the original immigrant with no high
school diploma is negative $89,000, which is largely offset by the
positive $76,000 in contributions by the immigrant's descendants.
Fiscal contributions and receipts are also a function of an
immigrant's legal status and the same net present value would not
apply to an undocumented immigrant or someone residing in the United
States temporarily. More than half of undocumented immigrants are
believed to be working ``on the books,'' so they contribute to the
tax rolls but are ineligible for almost all Federal public
assistance programs and most major joint Federal-state programs.
Over time, however, if low-income immigrants attain legal status,
they may become eligible for more welfare programs. The U.S.-born
children of an immigrant, legal or illegal, are automatically
citizens and eligible for government programs.
Immigrants and Public Assistance
Immigrant households, despite the restrictions on their
eligibility, are more likely than native households to participate
in public assistance programs. In 2003, 16.7 percent of native
households used a major welfare program, compared with 25.5 percent
of households with a foreign-born household head. Major welfare
programs in this case include TANF, SSI, food stamps, public
housing, and Medicaid. Immigrant families, which includes families
with U.S.-born children, are more likely to use welfare as a result
of their higher poverty rates and lower rates of health insurance
coverage. Medicaid alone accounts for almost all the difference in
the rates of public assistance for these two groups. This is partly
due to the fact that immigrants are more likely to work in jobs
without health insurance. Only 45 percent of immigrants have
employment-based coverage, compared to 62 percent of natives.
Immigrants and Social Security
While the number of immigrants with relatively low education
levels tends to put a strain on government budgets, several other
immigrant characteristics have the opposite effect. First, compared
to native workers, immigrants are relatively young when they arrive.
Green card recipients are overrepresented in the age groups between
10 and 39. Immigrants also have higher fertility rates than natives.
The influx of younger people and higher birth rates expand the
labor force and slow the ongoing decline in the ratio of workers
per retirees. This, in turn, contributes to the financing of
pay-as-you-go entitlement programs, such as Social Security and
Medicare.
Many of these workers who have contributed to the Social Security
system return to their home countries and never file for benefits.
In the case of Mexico, millions of Mexicans have worked in the
United States and returned home, but only 37,000 non-U.S. citizens
residing in Mexico received Social Security benefits in 2004.
Undocumented immigrants without a valid Social Security number
cannot receive Social Security benefits, but as long as the employer
reports their earnings to the Social Security Administration (SSA),
their earnings are subject to withholding of Social Security taxes.
The SSA cannot identify undocumented workers, but keeps track of
the earnings of all workers who have mismatched or invalid Social
Security numbers in the so-called Earnings Suspense File (ESF).
The ESF was valued at $463 billion in 2002.
Totalization agreements are another way that foreign workers can
affect Social Security. Totalization agreements are binational
treaties where U.S. workers' earnings abroad count toward their
Social Security contributions and similarly for foreign workers
employed in the United States. Totalization agreements exist with 20
countries.
Additional Benefits to Immigration
Calculations of the net benefits of immigration are typically
made from the natives' point of view, hence the focus on fiscal and
labor market impacts. But immigration also benefits the immigrant
and his or her family, who enjoy increased income and improvements
in their quality of life. Some of the increased income may be sent
home in the form of remittances, benefiting family members who
remain behind in the immigrant's country of origin. In addition, as
migrants leave the country-of-origin, economic opportunities may
arise for others who stay put. If there is enough emigration, as in
the case of Mexico, the decrease in the supply of labor could even
be enough to raise wages.
Migrant remittances can have important economic benefits in the
origin country. In 2003, remittances from the United States to Latin
America exceeded $30 billion. Remittances raise income, reduce
poverty, and lower income volatility in the recipient country, an
important consideration in countries where economic crises are more
common. Studies of Mexican migrants have found that remittances
are used for both day-to-day consumption, such as food and housing,
as well as for investments in human and physical capital, such as
starting a business, buying land, or building a home. The United
States has led efforts to facilitate remittances. At the G-8 Sea
Island summit in Georgia in June 2004, the President secured support
for a plan to help developing countries by improving data on
remittance flows and by reducing the costs of international money
transfers.
In the long run, international migration can also lead to
institutional change in the origin country. The fact that people are
mobile means that countries facing high emigration may try to retain
or lure their citizens back. For example, according to news reports,
Mexico launched a crackdown on corrupt customs agents who preyed on
migrants as they returned home. As part of the crackdown, Mexico
appointed a border czar in 2001 and strengthened the Paisano
Program, which helps Mexicans return home for the holidays without
being harassed or extorted. The U.S. and Mexican governments also
established Partnership for Prosperity, a large-scale binational
public-private economic development initiative. Meanwhile, Federal
and state government officials in Mexico launched programs such as
Dos por Uno and Tres por Uno to match remittance money going to
infrastructure projects, such as paving roads in migrant communities.
Immigration Policy
In a typical year, about two-thirds of new lawful permanent
residents are admitted into the United States or adjust immigration
status based on their family relationship with a U.S. citizen or
permanent resident. (Adjustment of status refers to foreigners
inside the United States who apply for green cards so they can stay
here permanently.) While family-based immigration is prioritized in
U.S. immigration policy, employment-based immigration has grown in
importance in recent years largely through an increase in the number
of skilled temporary workers. Nonetheless, existing employment-based
programs suffer from many problems, including outdated processes for
labor certification and inflexible numerical caps. Immigration
systems are also strained by the need for security measures, such
as more extensive background checks on applicants. At the same time,
immigration continues to occur outside official channels in the form
of undocumented immigration.
According to the most recent estimates, there are about 10 million
undocumented immigrants in the United States, the majority of whom
are low-wage workers. More than one-half of undocumented immigrants
are from Mexico. One of the most pervasive features of undocumented
immigration is that it is overwhelmingly driven by supply and demand:
immigrants want to work in the United States, and many American
employers want to hire them. Such a simple fact, however, has
complex economic, humanitarian, and security-related implications.
Many undocumented immigrants endure a perilous journey to make it
to the United States. To obtain work, some undocumented immigrants
resort to using false documents, such as fake Social Security cards
or green cards. They live in fear of deportation and may hesitate to
contact law enforcement if they become victims of crime or abuse.
Once workers are here, additional undocumented immigration may take
place as family members and friends join the workers. As families
grow, the children born in the United States to undocumented
immigrants are U.S. citizens. Network-based migration and the
natural rate of population increase have created hundreds of
thousands of ``mixed status'' families, in which children, siblings,
and parents have a different immigration status.
Current U.S. Immigration Policy
Throughout the nineteenth and into the early twentieth century,
the United States had a generally ``open door'' policy toward
immigration. Most newcomers were admitted with the exception of
those barred by the Chinese Exclusion Act of 1882, prohibitions
against prostitutes and felons, and a few other exclusions. World
War I, however, ushered in an era of restricted immigration -- a
policy that has persisted to the present day. The National Origins
Act of 1924 allowed immigration under country quotas that heavily
favored northern Europeans. The Immigration Act of 1965, which
provides the framework for current policy, abolished national-origins
quotas and based immigration policy largely on ``family
reunification.'' While the Immigration Act of 1990 increased the cap
on employment-based green cards, such green cards make up fewer than
15 percent of the total number of green cards issued in a typical
year.
Current immigration law provides for five major bases for
obtaining permanent residency in the United States -- immediate
relatives of citizens, other family members, employment immigrants,
``diversity'' immigrants, and refugees and persons granted political
asylum. Immediate relatives include the parents, spouses, and minor
children of citizens; other family members include siblings and
adult children of citizens, as well as spouses and children of
permanent residents; employment immigrants are workers brought in
to work for U.S. employers; diversity immigrants come into the
United States or adjust status through the ``green card'' lottery
where priority is given to persons from certain underrepresented
countries, such as many African nations; and refugees and persons
granted asylum (also called asylees) qualify for permanent residence
because they face persecution in their home countries. Refugees and
asylees differ only in their location: refugees apply for admission
to the United States from abroad, while asylees apply for asylum
from within the United States.
All major permanent residence categories except immediate
relatives of citizens are subject to numerical limits: approximately
226,000 for other family members, 140,000 employment immigrants,
55,000 diversity immigrants, and 10,000 asylees. Uncapped immediate
relatives of citizens averaged 402,000 per year in 2000-2003. While
there is no explicit limit on the number of green cards allotted for
refugees, the number of refugees who can adjust status is limited by
caps on refugee admissions that are set each year by the President
in consultation with Congress. The cap on refugee admissions is
70,000 in fiscal year 2005.
Despite the overwhelming demand for permanent residence in all
these categories, thousands of allotted green cards are not being
issued. Processing backlogs are keeping green card issuances below
their numerical caps and contributed to a 34 percent decline in the
number of new lawful permanent residents in 2003. At the end of
fiscal year 2003, there were 1.2 million adjustment of status cases
pending a decision.
As a result of numerical limits and backlogs, green card
applicants filing as ``other family members'' can expect to wait from
4 years (for unmarried adult children of citizens) to over 12 years
(for siblings of citizens). Waits are longer for family-sponsored
immigrants from certain overrepresented countries, such as India,
Mexico, and the Philippines, because family-sponsored green card
issuances to any single country cannot comprise more than 7 percent
of the total. In February 2005, Filipinos who immigrated as siblings
of U.S. citizens had waited 22 years for their green cards.
Employment-Based Immigration
Foreign workers come to the United States through employment-based
green cards, as described above, or with temporary worker visas. For
these purposes, there are at least 140,000 employment-based slots
for permanent residency available each year (the actual cap varies
with the number of green cards issued in the family program) and a
variable number of temporary worker visas. Employment-based green
cards typically require the worker to have at least a college degree
or special skills; only 10,000 green cards are reserved for
less-skilled workers. The allotment for employment-based green cards
includes the principal worker and any family members. Nevertheless,
for many years, the number of green cards issued fell far short of
the 140,000 cap. During the height of the economic boom in the late
1990s, average annual employment-based green cards numbered only
about 80,000, consisting of about 36,000 workers and 45,000 spouses
and minor children.
The current situation is similar in that employment-based green
card issuances are below their caps again, although this time not
for a lack of demand. As of January 2005, there were 271,000
employment-based applications for adjustment of status pending, with
about 191,000 of these backlogged by the Department of Homeland
Security (DHS).
A multitude of factors contribute to difficulties within the
employment-based green card program. Background checks and the sheer
volume of pending applications limit processing speed, as do
cumbersome requirements regarding the labor certification process.
Labor certification for permanent employment requires a firm to
undergo an extensive, government-supervised search for U.S. workers
before the petition to hire a foreign-born worker can be approved.
Once the Department of Labor (DOL) certifies that no qualified U.S.
worker is available for the position and the wages and working
conditions of existing workers will not be harmed by bringing in
an additional foreign worker, then DHS and the Department of State
can proceed with processing the green card application. In addition
to the DHS backlogs mentioned above, there is a backlog of over
300,000 applications for labor certification at DOL. The labor
certification process typically takes several years to complete
and has been criticized as being time-consuming, costly, and
complicated.
The problems with labor certification have resulted in calls for
reforms and action by the Administration. In 2002, the
Administration proposed to move to a streamlined application process
under which the employer would recruit domestic workers before
petitioning to hire a foreign worker. The final rule regarding the
new labor certification system was published in the Federal Register
on December 27, 2004. Under the new system, firms attest to
appropriate recruitment procedures and DOL has the authority to
audit all applications. DOL can order supervised recruitment for
employers found to have abused the program. DOL expects that this
simplification of the recruitment process and other changes, such
as electronic filing and automated processing, will greatly reduce
the time needed to process labor certification applications.
The waits and costs associated with traditional processing for
employment-based permanent residency have likely prompted employers
to make greater use of temporary worker visas. The number of visas
issued to temporary workers has more than doubled in the last
decade, rising from 251,000 in 1992 to 593,000 in 2003. In contrast,
the number of employment-based green cards issued in 2003 was
actually below the number issued in 1992, despite the tremendous
growth in the labor force during this time. Temporary worker
programs include the H-1B program for skilled workers, H-2A for
agricultural workers, and H-2B for other less-skilled workers.
Skilled temporary workers can also be admitted as intra-company
transferees (L-1 visas) and, from Canada and Mexico, as North
American Free Trade Agreement (or NAFTA) workers (TN visas).
There are many reasons for all parties -- employer, employee, and
the government -- to prefer temporary worker visas. Temporary work
visas are issued for a limited period of time and are typically
restricted to one employer, so both employee and employer make a
short-term commitment. The application process is simpler and thus
generally less costly and timelier. In contrast to permanent
residents, who can apply to be naturalized after five years'
residence in the United States, temporary work visa holders are
not eligible to apply for citizenship. They are also ineligible
for most forms of public assistance. Temporary workers can apply
for a green card, however, if they qualify and their employer
agrees to support their application.
The unprecedented number of pending applications for
employment-based green cards is believed to stem from the high
number of temporary workers that came in under the H-1B program
for skilled personnel in the late 1990s. In fiscal year 2004, the
cap on H-1B workers in the private sector reverted from a temporary
cap of 195,000 to the permanent cap of 65,000 workers per year.
This quantity has proven insufficient to meet demand. In 2004, the
government ran out of H-1B visas in February, seven months before
the end of the fiscal year. In fiscal year 2005, the cap of 65,000
H-1Bs was reached in one day. In light of the shortage of H-1B
visas, legislation was passed as part of the November 2004 Omnibus
spending bill to provide an additional 20,000 H-1B visas per year
to foreign students graduating from U.S. universities.
Undocumented Immigration
The influx of low-wage workers, many of whom come illegally, is
partly a result of an immigration policy which, while having several
employment-based immigration programs to address the need for
skilled workers, has relatively few slots for low-skilled workers.
The supply of green cards and temporary worker visas typically
allows fewer than 100,000 low-skilled workers to come in each year.
The sum is made up of 10,000 green cards and 66,000 H-2B visas for
other low-skilled workers. In addition, about 14,000 agricultural
workers were admitted with H-2A visas in 2003. In contrast,
according to the Current Population Survey, the number of
low-skilled foreign workers -- workers who lack a high school
degree -- increased by about 225,000 per year between 1996 and 2003.
Moreover, while H-2B visas for less-skilled workers have run out
in both fiscal years 2004 and 2005, no increase or exemptions to
the H-2B cap have been passed.
The demand for foreign labor is not new. When the railroads were
being built in the nineteenth century, Mexican workers were
recruited to expand the workforce in the Southwest and Chinese
workers immigrated to work in the West. During World War II, labor
shortages arose as U.S. men left their jobs to join the armed
forces. In 1942, the U.S. and Mexican governments initiated the
Bracero Program, which allowed Mexican workers to come in and fill
seasonal jobs in agriculture. The need for workers did not end with
the war, however, and the Bracero Program was kept in place until
1964, bringing in an average of about 200,000 workers per year.
European countries, such as France and Germany, faced similar
increases in labor demand following the war and instituted
guest-worker programs around that time.
The end of the Bracero Program in 1964 and the imposition of
quotas on legal immigration from the Western Hemisphere in 1977
eliminated many of the legal avenues by which to enter the United
States from Latin America. The ensuing flow of undocumented
immigration continues to this day. The Immigration Reform and
Control Act (IRCA) of 1986 was an attempt to deal with this problem
by providing for legalization of undocumented immigrants, increasing
funding for the Border Patrol, and making it illegal to hire
undocumented workers. To allow for additional worker inflows, IRCA
also established the H-2A visa program for temporary agricultural
workers. However, H-2A visas require employers to undergo a
burdensome labor certification process and follow extensive rules
and, as a result, the program is little used.
The passage of IRCA failed to stop illegal immigration.
Undocumented immigration surged with U.S. growth in the early to
mid-1990s. Contributing factors were likely the forces of network
migration, which may have intensified following IRCA, and the
1994-1995 Mexican economic crisis. In response to the resurgence
of undocumented immigrant inflows, border enforcement along the
U.S.-Mexico border was dramatically increased starting in 1993.
The President's proposed Temporary Worker Program (TWP),
announced on January 7, 2004, seeks to address the economic and
security issues surrounding the flow of undocumented workers into
the United States, as well as the associated humanitarian concerns.
The TWP would give temporary visas to foreign workers who fill jobs
for which employers can show they are unable to hire Americans.
This would create an additional legal avenue to match workers,
including low-skilled workers, with U.S. employers. The visas would
last three years and, as long as the worker is employed, could be
renewed at least once. The program would also offer incentives for
workers to return home by setting up tax-preferred savings accounts
where money could be withdrawn for use in the home country. The
U.S. government would also work toward developing agreements with
foreign nations to ensure TWP workers' U.S. earnings would be
recognized by the public retirement programs in their respective
countries.
The TWP would allow new foreign workers to come in each year in
accordance with labor market demand. In addition, TWP eligibility
would be extended to undocumented workers who were present and
working in the United States on January 7, 2004, when the President
made his announcement. The President also stated that there would
continue to be increases in border security and, under TWP, tough
penalties would be imposed on employers who continued to hire
undocumented workers.
The President has proposed to more than double the funding
dedicated to worksite investigations. In this multi-pronged
approach, TWP has many advantages. It recognizes that an orderly and
legal flow of workers will likely increase national security and
brings employers and undocumented workers into compliance with the
law. Employers will be able to legally hire the workers they need
once they demonstrate that no willing and able American worker is
available. Workers will be less likely to lie about their
immigration status, rely on false documentation, or work under
assumed names. Workers who abide by the rules of the program will
not have to fear deportation. They will be able to return home for
visits to their families and have their U.S. earnings count toward
their future retirement benefits.
The challenges for a program such as this are twofold: to ensure
that undocumented immigration does not continue -- either in its
current form or as temporary workers overstay -- once the temporary
worker program is implemented, and to minimize administrative burdens
on employers who participate. If the goals of the program are
achieved, there should be reduced demand for undocumented workers,
leading to less illegal immigration.
Conclusion
Immigrant workers range from the seasonal agricultural laborer to
the Nobel prize-winning scientist. They are the doctors and nurses
who serve inner cities and rural areas, the professors who teach in
our universities, and the taxi drivers and hotel workers that
travelers rely upon. Immigrants also fill jobs that simply allow
Americans to go to work every day, such as housekeeping and child care.
From an economic standpoint, one important lesson to take away from
how the Nation has dealt with the unprecedented surge in immigration
over the last decade is the role of U.S. labor market institutions.
Flexible labor markets are important in generating job opportunities
for workers, and immigrants are no exception. The work ethic of U.S.
immigrants bolsters their economic contributions. Summing up the
economic benefits and costs of immigration shows that over time,
the benefits of immigration exceed the costs. Adjustment of the
economy and native workers to immigration takes time, however,
and the adjustment period can present challenges.
The lessons learned from recent decades can guide immigration
reform and make laws more consistent with economic realities and
American values. Under the President's proposed Temporary Worker
Program, employers who show they cannot find an American worker
to fill a job opening will be able to legally hire a foreign
worker. This simple guiding principle, combined with better
enforcement of immigration laws, has the potential to reduce
undocumented immigration, bolster national security, and improve
on the myriad employment-based immigration programs in effect.