[Economic Report of the President (2007)]
[Administration of George W. Bush]
[Online through the Government Printing Office, www.gpo.gov]

 
CHAPTER 9

Immigration



Immigrants play a vital role in the dynamic U.S. economy.
Understanding the forces that drive immigration can help us design
more effective immigration policies. This chapter discusses the
economics of immigration; the incentive effects of immigration
policies on migrants, native workers, and employers; and the
benefits of comprehensive immigration policy reform.

The United States is a nation of immigrants and a nation of laws,
and we value both historical legacies. Although immigrants continue
to make positive contributions to our nation and our economy, our
current immigration laws have proven difficult to enforce and are
not fully serving the needs of the American economy. It is
unofficially estimated that between 11 and 12 million foreign-born
persons reside in the United States illegally, almost one-third of
the total foreign-born population and about four percent of the total
U.S. population.

Effective immigration policy can curtail illegal immigration and
at the same time promote America's national and economic interests.
Comprehensive immigration policy reform, which combines more
effective enforcement capabilities and a temporary worker program,
is the most promising route to an immigration system that is legally
functional, security conscious, economically beneficial, and
humane. In this comprehensive approach, the various elements of
policy reform reinforce and enhance one another. In contrast, any
given partial reform, standing alone and without the reinforcing
measures that characterize the comprehensive approach, cannot fully
address the problems and engage the opportunities that accompany
immigration.
The key points of this chapter are:
International differences in economic opportunities and
standards of living create strong incentives for labor migration.
Once established, migration flows from a certain region tend to
be self-perpetuating because past migrants facilitate the movement
of new migrants, employers become familiar with the migrant group,
and U.S. immigration policy favors family reunification. A large
supply of potential migrants will exist for decades to come.
Foreign-born workers make significant contributions to the
American economy, but not all Americans gain economically from
immigration. Understanding the labor-market effects of immigration
requires consideration of the migrants' skill mix and the
capital-accumulation response to labor force growth. Foreign-born
workers tend to be concentrated at the low end and the high end
of the educational spectrum relative to native-born workers.
Immigration policy plays a key role in determining the
volume and composition of the foreign-born workforce. Comprehensive
immigration reform can help ensure an orderly, lawful flow of
foreign-born workers whose presence benefits the American economy.


The Economics of Immigration

International migration patterns are strongly influenced by the
interaction of economic forces and public policy. In this sense
migration is similar to other aspects of international economic
integration and exchange, such as trade in goods and services and
investment flows. The fundamental motivation for such movement-
whether of goods, capital, or workers-is that people perceive more
profitable economic opportunities abroad. The ultimate results are
that the world's economy functions more efficiently,
entrepreneurship is rewarded, and many Americans reap economic
gains.

Compared to barriers to the movement of goods, policy restrictions
on the international movement of labor are tight. Immigration
policy determines the volume and composition of both permanent
immigrants and temporary workers legally admitted to the United
States. But many more people would like to come to the United States
than are legally permitted to do so, and millions manage to reside
and work here illegally. There is broad agreement among U.S. citizens
that immigration policy needs to be reformed. To this end, the reform
of U.S. immigration policy should be based on an understanding of
the forces that drive migration, relevant lessons from American
immigration history, and the ways in which immigration affects
the economy. This chapter highlights some facts and principles that
can help guide the design of a better immigration policy.

The Migration Decision and the Volume of International Migration

Economic analyses of migration typically start by imagining an
individual who has many choices about where to live and work at
various times in his life. If this person perceives that job
opportunities and living conditions are approximately the same
everywhere, then he will not have an economic motive to choose one
place over another. More realistically, because migration costs time
and money and often requires leaving behind one's friends and family
and adjusting to a new culture and language, our imaginary individual
will be strongly inclined to live and work near his original home.
On the other

hand, if the same person perceives that incomes and living
conditions differ significantly across places for workers with
similar skills, then he might find it worthwhile to incur the
costs of migration to secure a higher standard of living. In this
sense, migration is like an investment decision-a cost is borne
today in return for an increased flow of income and well-being in
the future. Essentially, the potential migrant must decide whether
the expected benefits from migration outweigh the expected costs.

From the perspective of workers in many countries today, the
potential income gains from migration are large. One study measured
average wages for Mexican-born men who had recently moved to the
United States and compared them to the wages of similar men who were
still working in Mexico. The real wage ratios (that is, wages
adjusted for international differences in prices) ranged from about
6-to-1 to 2-to-1 in favor of the U.S.-based workers, depending on
the age and education group. For example, in 2000 those who were
18 to 22 years old with 5 to 8 years of education earned $7.60 per
hour in the United States compared to the equivalent of $1.56 per
hour in Mexico. Another study compared the earnings of fast-food
restaurant workers who performed nearly identical jobs but in
different countries. Again, the real wages in the United States
were much higher than in several less advanced economies.

Facing such large international wage differences, a worker might
hope to move abroad permanently or with the expectation of returning
home after accumulating a nest egg. Indeed, migrants often work
intensively at relatively high wages (compared to home) and save or
send back home a portion of their earnings. In this scenario the
opportunity to work abroad temporarily can help finance large
purchases or investments (like a house, car, or new business) in
home countries where credit markets are underdeveloped and where
wealth accumulation is difficult due to low wages. Migration might
also allow households to expand and diversify their income sources,
thereby serving as a lifeline to a higher and more stable income
level for family members who remain based in a less-developed
economy. The large volume of international remittances of migrants'
earnings testifies to the strength of the links that migrants
maintain with their home country. A recent study estimated that
U.S.-based workers from Latin America sent home $45 billion in
remittances in 2006, about 10 percent of their total earnings.
Nearly three quarters of the migrants in the survey remitted some
portion of their earnings.

The decision framework described thus far emphasizes a potential
migrant's expectations regarding the future stream of income at home
compared to that available abroad, after accounting for broadly
defined migration costs (including transportation costs, time spent
out of work, difficulties adjusting to a new culture and labor
market, and perhaps fees paid to "coyotes" or other smugglers who
facilitate illegal migration). But these are not the only

determinants of the migration decision. A potential migrant might
consider the risk of unemployment, uncertainties associated with
illegal status, and other sources of income variability in
different locations. The migrant might also consider factors that
are not narrowly economic but that certainly would count as
``benefits from migration,'' such as family reunification or
safety from religious or political persecution.

Even if the incentives to migrate are strong, however, the economic
costs of migration might be impossible for poor workers to meet by
saving or borrowing. Moreover, immigration policies often make it
difficult for workers to relocate to high-wage countries, especially
if they are not highly skilled or closely related to someone in the
high-wage country who can sponsor their application for admission.
In this sense, immigration policy acts as a filter that selectively
allows some workers to migrate but also deters many potential
migrants.

This simplified model of an individual's migration decision is a
useful starting point for understanding the economic pressures for
labor to move internationally. To make sense of the overall volume
and composition of immigration, we must expand our scope to consider
the sum of many individuals' migration decisions and the role of
immigration policy. Within any given country, some inhabitants might
perceive promising economic opportunities abroad whereas others do
not; some might have sufficient means to finance the move whereas
others do not; and some might have family connections or skills that
make it easy for them to relocate legally whereas others do not.
Against this backdrop, events (such as economic or political crises)
that widen international gaps in expected well-being or that lower
the costs of international movement will tend to amplify the volume
of international migration because a higher proportion of any given
population will find it optimal or feasible to relocate. Working
in the other direction, events that narrow gaps in expected
well-being and policies that make it more difficult for people to
relocate will tend to dampen the volume of international mobility.

The immigration pressures felt by virtually all high-income
countries today reflect the ongoing tension between declining
costs of migration and persistent international differences in
material standards of living, on one hand, and policy responses
that seek to manage the inflow of foreign-born persons, on the
other.  In this context, the flow of legal migration is determined
by selective immigration policies. In the United States, these
policies facilitate permanent immigration for family reunification
and, to a lesser degree, for those with high levels of skill. For
other workers, legal channels for migration are narrow while the
economic incentives, underpinned by labor demand from U.S. employers
and consumers, remain strong. Consequently, many seek employment
through illegal channels.

Lessons from American Immigration History

The surge of immigration in recent decades is not unprecedented,
and we can better understand the economics of immigration by
examining the current situation in light of historical experience.
In the decades after the Revolutionary War, migration to the United
States was hindered by the high costs of international transport,
the relative immobility and poverty of agrarian populations in
potential emigrating regions, and political disruptions to
international economic integration. By the 1840s, however,
economic, technological, and political conditions had combined to
launch the first era of voluntary mass migration. The first big
waves of U.S.-bound migration originated in northwest Europe, but
by the end of the nineteenth century migrants from eastern and
southern Europe dominated the immigration flow. The foreign-born
proportion of the U.S. population increased from 9.7 percent in 1850
(the earliest census to record place of birth) to 14.4 percent in
1870, and it hovered around 14 percent until 1910 when it began to
decline steadily. In recent decades it has risen again, and in 2005
the foreign-born proportion of the population reached approximately
12.4 percent.

The mass migration of labor between 1840 and 1914, along with
extensive trade in goods and capital mobility, contributed to a high
degree of global economic integration that in many ways was a
precursor to our more recent and familiar era of globalization.
World War I abruptly curtailed the earlier era of globalization,
and the political and economic turbulence of subsequent decades
further disintegrated the international economy. Since World War
II, policymakers have worked toward re-integrating the global flow
of goods, services, and capital. However, in comparison with the
pre-1914 era, significant policy restrictions on the international
movement of labor remain in place.

Four historical lessons are especially relevant for contemporary
thinking about American immigration and the policies that manage the
inflow of foreign-born workers. First, migration to the United States
has always reflected the relatively high level of labor productivity
here. In the previous section, we cited the wage gap between the
United States and Mexico. Similarly, estimates of real wage gaps
in the late nineteenth century suggest that U.S. wages were often
1.5 to 4 times higher than those available in Europe. Thus,
immigration is a sign of our economy's ongoing success and the
relatively high rewards that it has long offered its workers. While
immigration policy reform is surely necessary, we should be glad
that after more than 200 years the United States is still a magnet
for ambitious foreign workers.

Second, immigration flows are often self-propagating. From the
perspective of a potential migrant, the cost of migration drops
sharply when one has a number of friends and family abroad who can
help locate employment and housing opportunities and who can provide
a sense of community. One

consequence of this self-propagating mechanism is that macroeconomic
and political shocks can have long-lasting ramifications for
American immigration patterns. The Irish famine in the late 1840s
is a salient example of how a dire economic situation abroad
accelerated a process of mass migration that continued long after
famine conditions had passed. Macroeconomic shocks in Mexico in
recent decades, though far less severe than the Irish famine, may
have had a similar effect. Durable networks of family, friends,
and employers have always facilitated migration, especially given
current policy preferences for family reunification.

The third historical lesson is that regions of emigration that are
in the process of economic modernization and development often send
out an increasing number of workers. Migration has always been a
costly enterprise that the very poor cannot easily finance. As the
process of modern economic development unfolds, a larger number of
workers surpass the necessary threshold of wealth and education for
long-distance migration; employment declines in the agricultural
sector and young workers seek employment in urban areas at home and
abroad; and stronger migrant networks and financial systems develop
to facilitate long-distance movement. Along these lines, it has been
argued that the spread of economic modernization in Mexico has
promoted emigration even as it has raised gross domestic product
(GDP) per worker. The ongoing process of economic development in
many parts of the world may lead to a growing pool of potential
international migrants for decades to come.

Eventually, at advanced stages of economic development when domestic
wages rise to levels that are comparable to those that are available
elsewhere, the rate of emigration from a particular place tends to
decline. The long-run experience of parts of Europe that were
massive exporters of labor in the late nineteenth and early
twentieth centuries exemplifies this pattern of rising and then
falling emigration rates. Thus, a secondary point is that the pool
of potential migrants may change substantially as some countries
enter into the process of economic modernization and as others
reach comparatively high levels of economic development.

Fourth, the demographic structure of regions of emigration is
relevant to the volume of international migration. Migrants
to the United States have generally been drawn from the pool
of relatively young workers. In 2005, for example, foreign-born
persons who reported being in the United States for only one year
(recent migrants) had a median age of 25, whereas the median age of
native-born persons was 35. The young have the most to gain from
migration, and they also have fewer ties binding them to a specific
location in the home country. Relatively large groups of workers
came of age in Mexico in the 1980s and 1990s, and emigration surged
when the Mexican macroeconomy stumbled. Reinforcing the point made
above, the sheer number of young people in less advanced economie
s ensures that many foreign workers will be interested in migration opportunities in the future.

In sum, past experience and current economic and demographic
realities suggest that the forces that attract migrants to the
United States will continue to be strong in the twenty-first
century. Managing the inflow of migrants is an important and
complex challenge for policymakers. It demands a comprehensive
immigration strategy that views the process for what it is and
has always been for the United States-a significant contributor
to labor force growth and vitality.


Foreign-Born Workers in the U.S. Labor Force

Foreign-born workers (the sum of both legal and illegal migrants)
make up 15 percent of the total U.S. labor force, and since 1996
they have accounted for about half of the total growth in the labor
force, thereby fueling macroeconomic growth. In 2005, foreign-born
men had higher labor force participation rates than natives (81
percent compared to 72 percent), whereas foreign-born women worked
somewhat less than their American counterparts (54 percent compared
to 60 percent). Among those in the labor force, foreign-born men
had lower unemployment rates than natives (4.1 percent compared to
5.3 percent), whereas foreign-born women had slightly higher
unemployment rates than native women (5.4 percent compared to 5.0
percent).

At the high end of the skill spectrum, foreign-born workers were
more likely than natives to work in computer, mathematics,
architecture, engineering, and science occupations (6.5 percent
of foreign born compared to 5.0 percent of natives). Lower in
the skill spectrum, the foreign born were two to four times as
likely as the native born to work in building and grounds cleaning
and maintenance; farming, fishing and forestry; and construction
and extraction occupations.

Tables 9-1 and 9-2 report more detailed occupational information
for the foreign born. Table 9-1 lists the ten occupations that the
foreign born are most likely to fill. For comparison, it also
reports the proportion of native-born workers in the same set of
occupations. Construction laborers, maids and housekeepers,
janitors, and cooks are at the top of the foreign-born occupation
list. Together these four occupational categories account for 11
percent of all foreign-born workers compared to about 4 percent of
native-born workers. Table 9-2 lists the occupations that have the
highest proportion of workers who are foreign born. Tailors and
dressmakers, graders and sorters of agricultural products,
miscellaneous personal appearance workers (such as manicurists),
and plasterers and stucco masons are the occupations with the
highest proportions of foreign-born workers, all with over 50
percent. The foreign born are also strongly represented among medical
scientists (46 percent).

In recent decades, a handful of states have absorbed the majority
of foreign-born persons. In 2005, California, New York, Texas, and
Florida together accounted for 57 percent of all the foreign born
in the United States. The same states accounted for only 29 percent
of the native-born U.S. population. These states still attract a
large share of the foreign born, as one would expect given the
importance of family and information networks in facilitating
migration, but there is also evidence of significant gains in many
other parts of the country. Georgia, for instance, gained more than
200,000 foreign-born persons between 2000 and 2005, raising its
total foreign-born population by 38 percent. Several other states
had comparable percentage increases, though smaller gains in
absolute numbers. The largest percentage changes were in New
Hampshire (51 percent) and South Carolina (50 percent). These
geographic shifts reflect foreign-born workers' responsiveness
to changes in labor demand across regions within the United States.

The Foreign-Born Skill Mix and the Labor Market Impact

The inflow of foreign-born labor has complex effects on the
productivity and earnings of American factors of production-capital,
land, and labor. To understand how immigration affects the labor
market, it helps to consider the determinants of the skill mix among
the foreign born and the nature of substitutability among different
factors of production.

American immigration policy acts as a filter that strongly favors
potential migrants with family connections to U.S. citizens and
lawful permanent residents. In 2004, 946,142 persons were granted
lawful permanent resident status. Forty-three percent were admitted
as immediate relatives of U.S. citizens and an additional 23 percent
were admitted under other family-based sponsorship. Only 16 percent
were admitted under the employment-based preference category.

To some extent, this policy structure helps explain observed
differences in the economic performance of immigrants from different
countries. Most permanently admitted Mexican immigrants, for example,
were selected on the basis of family connections rather than skills.
Therefore, it is not surprising that as a group they do not fare as
well economically as groups of migrants who were selected largely
on the basis of their skills, such as those from India.

Out of the employment-based permanent admissions category, only
10,000 lawful permanent resident slots are reserved for less-skilled
workers. For less-skilled seasonal workers, H-2A visas (for
agriculture) and H-2B visas (for other sectors) admit workers for
short durations and specific jobs. These visas help alleviate peak
seasonal demands, but there is still demand for less-skilled workers
to work for longer durations. In an environment in which
unauthorized migrants can find employers without great difficulty,
the mismatch between labor market forces and immigration policy has
resulted in a large number of unauthorized migrant workers.

Standard surveys, such as the Current Population Survey, do not
specifically identify the legal status of the foreign born.
Therefore, it is difficult to measure and characterize the
unauthorized population with precision. With this caveat in mind,
Box 9-1 discusses current estimates of the illegal population's
size and economic characteristics.

H-1B visas permit temporary employment for skilled professionals
who are sponsored by a U.S. employer, typically in occupations in
science, computers, or engineering. The worker can remain in H-1B
status for up to six years. Current law permits only 65,000 new
H-1B issuances per year, with some exceptions for those with advanced
degrees from U.S. universities and those going to work for
institutions of higher education or government research
organizations. For fiscal year 2007, the H-1B application cap was
reached in May 2006.

____________________________________________________________________
Box 9-1:The Number and Characteristics of Unauthorized Migrants

Due to the clandestine nature of illegal migration, the unauthorized
foreign-born population cannot be precisely enumerated. Nonetheless,
reasonable estimates have been made using data from the Census
Bureau's Current Population Survey (CPS). The CPS data do not
explicitly identify unauthorized individuals, but they do record
a great deal of relevant information. Using an estimate of the number
of legal foreign-born residents that is based on official U.S.
immigration data, the total number of illegal migrants can then
be estimated as the difference between the total foreign-born
population and the number of foreign-born estimated to be present
legally. In 2006, a study estimated that there were between 11 and
12 million unauthorized migrants residing in the United States,
accounting for approximately 30 percent of the total foreign-born
population. A related study estimated that between one third and
one half of the unauthorized migrants entered the country legally
but then overstayed their visas.

To provide more detailed characterizations, the study used
statistical techniques to select a certain number of potentially
unauthorized foreign-born residents from the March 2005 CPS. Keep
in mind that the following conclusions are unofficial estimates.
They are subject to error, but are also the best current
characterization of the illegal population.

It appears that the labor force participation and occupational
choices of unauthorized migrants differ substantially from that
of the general U.S. population. Unauthorized adult males (ages
18 to 64) were more likely to participate in the labor force than
their native counterparts (94 percent participation rate compared
to 83 percent for natives). Unauthorized adult females were less
likely than natives to participate in the labor force (54 percent
participation rate compared to 72 percent for natives). In this
case, the difference partly reflects the migrant women's higher
likelihood of having young children in the household.

In general, unauthorized migrants were concentrated in jobs that
require comparatively little formal education. Thus, they are
under-repre-sented relative to natives in "white collar" jobs in
management, business, and professional occupations, and in sales
and administrative support occupations. Relative to native-born
workers, unauthorized migrants were highly concentrated in other
service jobs (31 percent compared to 16); construction and extraction
(19 percent compared to 6); production, installation, and repair
(15 percent compared to 10); and farming (4 percent compared to 0.5).
Although unauthorized migrants represented just 4.9 percent of the
total U.S. labor force in 2005, they represented large proportions
of the workforce in several specific occupations: 24 percent in
farming occupations, 17 percent in cleaning occupations,
14 percent in construction, and 12 percent in food preparation.

Approximately 40 percent of the unauthorized migrants had been in
the country for five years or less. The vast majority of unauthorized
migrants had come from Mexico (56 percent, or 6.2 million) and
elsewhere in Latin America (22 percent, or 2.5 million).

Nearly half (5.4 million) of the unauthorized migrants were adult
males, with a little less than half (2.4 million) of the adult males
residing without a spouse or children. Adult females accounted for
35 percent (3.9 million) of the unauthorized migrants, and less than
one-fifth of the women were residing without a spouse or children.
Approximately 1.8 million children accounted for the remainder of the
unauthorized population. In addition, approximately 3.1 million
U.S.-born citizen children were living in households where the head
or the head's spouse was an unauthorized migrant.
____________________________________________________________________

The interaction of migrant supply, labor demand, and policy structure
results in a foreign-born skill mix that is described in Chart 9-1
(for all foreign born, age 25 and above). Educational attainment
is only one component of productive capability and it does not fully
capture ambition, reliability, or knowledge of a specific trade or
language. Nonetheless, many jobs have strict educational
requirements, and economists frequently study the labor market in
terms of educational categories. The height of each bar in Chart
9-1 represents the number of foreign born from each region (age 25
and above). Clearly, Latin America supplies more migrants than any
other region, and many from Latin America have less than a high
school degree.

Foreign-born workers are found disproportionately at the extremes of
the educational spectrum. The educational mix of foreign-born workers
relative to native-born workers is shown in Chart 9-2. It differs
from Chart 9-1 in that it pertains to all employed workers over age
15, it groups all foreign-born workers together, and it has more
detailed information about the top end of the educational scale.
The first bar indicates that 15 percent of all workers in the United
States in 2005 were foreign born. The foreign born were heavily
over-represented in the group of workers with less than a high
school degree; they were slightly under-represented among workers
with only a high school degree, those with some college, and those
with only BA degrees; and they were over-represented among workers
with advanced degrees, especially among those with Ph.D. degrees
who worked in scientific and technological fields. All together,
and remarkably, over 40 percent of Ph.D. workers in computer,
mathematical, architectural, engineering, and science occupations
were born outside the United States.



Highly skilled migrants make many economic contributions to the
United States, and a strong case can be made that policy should
accommodate more of them. Skilled migrants, whether permanent or
temporary, enrich our scientific and academic communities, boost
the technical capabilities of U.S. firms (and the native-born
workers employed there), augment the supply of healthcare providers,
and pay far more in taxes than they absorb in government services.
Many of these workers were educated at American universities, and
nearly all adjust easily to life in the United States in terms of
language skills and employment. They make major innovative
contributions in science, medicine, and engineering, and help keep
the United States at the forefront of technological capability.
For example, between 1901 and 2005 approximately one third of
U.S. Nobel Prize winners in medicine and physiology were born abroad.

Because the foreign born, as a group, do not have the same mix of
skills as U.S. natives, they alter the relative supply of different
types of labor in the economy. The extent to which this alteration
of labor supply influences natives' wages depends in large part on
whether the foreign born are complements or substitutes for natives
in the labor market. When two inputs closely resemble one another,
they are likely to be substitutes, and an increase in the supply of
one will lower the earnings of the other. In some cases, however,
inputs are likely to be complements, and an increase in the supply
of one will raise the productivity and, therefore, the earnings of
the other. For example, construction laborers may be complements to
skilled craftsmen because additional laborers may raise craftsmen's
productivity. Conversely, new construction laborers may be close
substitutes for other construction laborers and for similar
less-skilled workers, and so additional construction laborers would
tend to make the services of less-skilled laborers less valuable
on the labor market.

The impact of immigration on the labor market also depends on how
other factors of production, such as capital, respond to the change
in labor supply associated with immigration. In particular, in the
short run an increase in the supply of labor puts downward pressure
on wages, allows more hiring, and raises the productivity of capital.
This increase in capital productivity, in turn, induces firms to
invest in more physical capital which ultimately makes labor more
productive. Thus, over time the capital accumulation response to
immigration tends to offset the downward pressure on wages caused
by an increase in the labor supply. The key point is that in trying
to understand the effect of immigration on labor markets it does not
make sense to suppose that all the other factors that influence
labor markets remain the same over a long period of time; rather,
these other factors adjust to immigration in important ways.

Economists have produced many data-intensive analyses of the response
of native-born workers' wages to immigration, and the debate is
still ongoing. To some extent the estimates depend on the methodological approach that is used to isolate the effects of immigration.
One recent study concluded that immigration between 1990 and 2004 slightly raised the wages of most native-born workers but slightly lowered
the wages of those without high school degrees (who represent about
10 percent ofthe native-born labor force). If this finding is correct,
then excluding foreign-born workers might give a small boost to the
earnings of American high-school dropouts. But such a policy would be
costly and counterproductive from the perspective of American
consumers, businesses, and most native-born workers. Moreover,
such a policy would not be a well-targeted or effective way to assist
low-income Americans. The economic challenges facing low-income
Americans are a serious concern, but sharp restrictions on
immigration are not the remedy. A better policy is to ensure that
all Americans have opportunities to acquire skills that will improve
their labor market outcomes.


Comprehensive Immigration Policy Reform

Border security is a fundamental responsibility of a sovereign
nation and an urgent requirement for our national security. Since
2001, funding for border security has more than doubled, from $4.6
billion in fiscal year 2001 to $10.4 billion in fiscal year 2007. We
will have increased the number of Border Patrol agents by 63
percent, from 9,000 at the beginning of this Administration to
nearly 15,000 at the end of fiscal year 2007, and we have deployed
about 6,000 National Guard troops to assist our border security
efforts at the southern border. We have also added 6,700 new
detention beds, for a total of 27,500, and have been able to
effectively end the practice of ``catch and release'' of illegal
aliens apprehended at the border. The heightened efforts to control
entry into the United States are one part of a larger strategy to
improve the immigration system while bolstering national security.

The President believes that the best way to fix immigration policy
is to adopt a comprehensive program that combines stronger border
security, more effective worksite enforcement of employment
eligibility laws, and expanded legal channels for the employment
of foreign-born workers, including those who are not highly
skilled. The comprehensive program would reduce the number of
illegal workers and preserve the economic benefits associated with
a flexible supply of hardworking foreign-born workers. The key
features of comprehensive immigration policy reform would work
together and reinforce one another to strengthen the incentives
for both workers and employers to comply with immigration and
employment laws.

A Legal Bridge between Employer Demand and Migrant Supply

By improving the technology that firms use to verify new workers'
employment eligibility and expanding the channels for legal,
temporary migration by less-skilled workers, comprehensive
immigration policy reform can dramatically reduce incentives for
illegal work. Effectively narrowing employment opportunities for
illegal workers must be the keystone of immigration policy
reform. Unfortunately, at present, it is often difficult for
employers to verify the employment eligibility of migrant workers,
some of whom have fraudulent documents or engage in identity theft.
And as long as some firms employ illegal workers, other firms might
do the same to compete on the basis of cost. The current situation
with millions of illegal workers and many non-compliant employers
is both unacceptable and unnecessary.

Comprehensive immigration reform should aim to establish an
environment in which all employers can easily determine the legal
status of newly hired workers, in which foreign-born workers can
easily prove their identity and legal status, and in which firms
can legally hire a foreign worker when no American worker is
available to fill a given job. This reform requires an electronic
employment eligibility verification system that is accurate,
fast, and inexpensive. The Department of Homeland Security continues
to refine and expand an internet-based system called the Basic Pilot
Program that allows participating employers to verify the employment
eligibility of their new hires by checking against Social Security
Administration and immigration records. In addition, to curtail
the use of fraudulent identity documents, the Department of
Homeland Security now issues tamper-resistant, biometrically
enhanced (with photograph and finger print) identity documents
to most lawfully present foreign-born workers.

Employers also must be held accountable if they hire illegal
workers. A rigorous system of verification checks in combination
with strong enforcement and enhanced penalties can effectively
promote compliance. In this regard, the new policy would remedy
the comparatively lax enforcement of immigration law that followed
the Immigration Reform and Control Act of 1986.

Electronic verification of new hires' eligibility, tamper-resistant
and biometric identification cards for foreign-born workers, and
stronger interior enforcement measures should be complemented by
the establishment of a temporary worker program, initially proposed
by the President on January 7, 2004. A temporary worker program
would provide a legal channel for a foreign-born worker to enter
the United States for a specific period of time, provided that
the worker maintains a consistent work record, does not break the
law, and follows the rules of the program. In addition, under
certain conditions, some currently undocumented workers would be
eligible to work here legally if they pay a substantial penalty
for having violated the law. As long as the costs for program
participation are kept low, enforcement is robust, and the number
of workers allowed to participate is sufficient, migrants and
employers will choose this legal channel for finding matches
rather than resorting to illegal means.

A temporary worker program should also endeavor to preserve the
flexible role that foreign-born workers play in the American economy.
Foreign-born workers are responsive to new economic opportunities and
to variation in opportunities over time and space. This
responsiveness tends to improve labor market efficiency and overall
economic productivity. Administrative requirements that are
burdensome for firms, migrants, or government agencies will raise
the program's economic costs and, depending on the program's
structure, result in either non-compliance with the new policy or
a significant drain on government resources.

Finally, comprehensive immigration reform must ensure that
highly-skilled immigrants are welcome to make contributions to
the U.S. economy. For example, many of the world's best students
come to American universities for advanced training in science and
technology, and a large share of these students would like to stay
and work in the United States after finishing their education. As
discussed earlier in the chapter, their work helps keep the United
States at the frontier of research and development, and their
post-schooling employment depends upon their ability to acquire a
temporary work visa or permanent resident status.


The Pitfalls of Partial Policy Reforms

Less-skilled workers are infrequently admitted to the United States
unless they have a close relative who is already an American citizen
or lawful permanent resident, or they are coming for a short-term,
seasonal job. At the same time, America has a strong demand for the
products and services that less-skilled workers provide and a
declining number of less-skilled domestic-born workers to provide
them. This combination acts as a powerful magnet for less-skilled
foreign workers. While there is no excuse for breaking immigration
and employment laws, the underlying economic forces that draw
immigrants to the United States are powerful and deeply rooted.
Comprehensive immigration reform can put the United States on a
firm legal and economic footing to manage twenty-first century
immigration, whereas partial reforms are likely to entail
significant costs without yielding satisfactory results.

A policy that relies on more extensive border fencing or more
intensive border patrols will make it more difficult for migrants to
cross the border illegally. This is an important step in improving
control over our borders. By itself, however, this approach will
not undercut the existing demand from U.S. employers and consumers
for the labor services of foreign-born workers. Therefore, it seems
likely that in response to this partial reform the flow of migrants
would change its path rather than dry up completely. Building
fences, for example, does not address the problem of lawful
entrants over-staying their visas and working without
permission, and according to a recent study, between one third and
one half of all unauthorized migrants in the U.S. entered the
country legally. Thus, even with substantial increases in border
patrol resources and increases in the cost of "coyote" services
(guides who lead illegal migrants across the southern border),
the best efforts of our Border Patrol have not fully stemmed the
tide of illegal immigration. Pursuing intensive fencing and
patrolling approaches to extremes would be inordinately costly
in terms of material and manpower, and still it would not achieve
the goal of greatly reducing the employment of illegal workers.

A partial policy reform that targets current employers of illegal
migrants might lower the demand for illegal workers, make it more
difficult for illegal migrants to find work, and therefore lessen
the illegal inflow. But if the supply of authorized foreign-born
workers is not simultaneously augmented through a temporary worker
program, this approach would hurt many American companies and
consumers and, as discussed above, would hurt complementary
American workers. It would also slow the growth of the labor force
and the overall economy.

Alternatively, a partial policy reform that focuses primarily on
detecting, apprehending, and removing illegal workers who are
already present in the United States might reduce migrants' desire
to live and work here, but would be very costly to carry out.
Moreover, fundamental economic forces would still drive many foreign
workers to try their luck in America, illegally if necessary.
The likely outcome of such partial reform is that there would
still be many illegal workers and, more than ever, they would
be unwilling to communicate with local law enforcement officials,
prone to work in the underground economy, and subject to
exploitation by criminals, smugglers, and unscrupulous employers.

Unlike partial reforms, the President's comprehensive approach can
succeed because it combines a number of elements that reinforce one
another. This comprehensive approach gives employers access to a
source of legal foreign-born workers when they cannot find Americans
to fill jobs, gives them better tools to verify the employment
eligibility of persons they hire, and strongly punishes
non-compliance with enhanced civil and criminal penalties. This
approach also provides potential temporary migrants a more expansive
legal route to employment in the United States that does not depend
so heavily on having high levels of education and skills or on
having relatives in the United States to sponsor them. It also
makes illegal border crossing more difficult to accomplish and
makes unauthorized employment more difficult to find. By
simultaneously narrowing illegal channels for migration and
employment and widening legal channels, the comprehensive approach
to immigration policy reform can significantly improve upon the
current system.


Conclusion


Immigrants make important contributions to the American economy.
They help the economy grow by adding to the labor force; they fill
in jobs at the lower end of the skill distribution where relatively
few native-born Americans are available to work; they also fill in
jobs at the highest end of the skill distribution and help keep
the United States at the forefront of technological and medical
innovation; they respond quickly and flexibly to shifts in labor
demand; and they work hard to make better lives for themselves and
their children. Immigration is both a reflection of and a
contributor to our economy's prosperity.

The foreign-born proportion of the population has steadily increased
in recent decades, and now stands at about 12 percent of the total
U.S. population. Over the same period, the U.S. economy has
performed well in comparison with other advanced economies. Still
the large number of unauthorized workers has made it clear that our
current immigration policy is inadequate. At the same time, the
economic forces that drive international migration are as strong
as ever and will remain so for the foreseeable future.

Comprehensive immigration policy reform can improve border security,
significantly reduce the number of illegal workers, and yield
economic benefits for employers, workers, and consumers in the
United States. Achieving these policy goals requires better interior
enforcement which, in turn, requires better tools for employers to
verify worker eligibility. It also requires the creation of better
legal channels for the migration of hard-working foreign-born
workers who are eager to fill jobs that contribute to the American
economy. Such workers tend to enhance the productivity of American
factors of production, but they currently have few avenues, aside
from family reunification, to gain legal entry and employment
for a sustained period of time. By mutually reinforcing one another,
the various components of comprehensive immigration policy reform
can support a legally and economically viable immigration system.