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Temporary Workers on the Auction Block? And the Complicated Economics of Immigration

March 15th, 2011 | Kari Lydersen

kari-lydersenImmigration reform experts propose tying system to labor market, and creating govt.-run auction for temp workers…While also touting economic benefit of immigrants.

DALLAS, TEXAS—Do immigrant workers—specifically, undocumented workers—contribute value to the economy through their labor, taxes and Social Security contributions? Or are they a net drain on government services and a big depresser of wages?

As states consider anti-immigrant bills modeled on Arizona’s SB 1070, this question has been debated hotly by activists on both sides of the immigration reform debate and by economists and other academics. The need for federal immigration reform remains impossible to ignore.

At the Institute for Journalism and Justice’s “Immigration in the Heartland” conference in Dallas Thursday and Friday, experts tried to get beyond rhetoric and politics in ascertaining the concrete economic and fiscal impacts of immigrant workers on the U.S. economy. Among other things, they argued for a reformed immigration system that is strictly tailored to the current labor market, and a temporary worker system based on a government-run auction. They also stressed the importance of understanding the separate fiscal and economic impacts of immigration. The fiscal impact is the direct cost of services, while the economic impact includes the wide-ranging ripple effects of their roles as consumers and entrepreneurs.

Washington Post Writers Group pundit Ed Schumaker-Matos, a Cuban immigrant, cited World Bank, Social Security Administration and other figures while positing that immigrant workers mirror native-born workers in the fact that highly skilled and educated people contribute a net gain to the economy, while low-skilled immigrant workers cost more than they contribute on the fiscal level considering their use of social services, education and healthcare.

But he said the cost of low-skilled workers in using social services and in competing with native-born low-skilled workers must be considered in light of the fact that immigrants of all skill levels do much to grow the economy as a whole.

A migrant worker's teeth are inspected at a tobacco leaf farm on August 11, 2010, in Windsor, Conn. The University of Connecticut Migrant Farm Worker Clinics visit area farms to offer health screenings to migrant farm workers and their families. There are an estimated 3.5 million migrant and seasonal farm workers in the United States, and many of these workers lack access to health professionals due to language barriers and fears of deportation.   (Photo by Spencer Platt/Getty Images)

A migrant worker's teeth are inspected at a tobacco leaf farm on August 11, 2010, in Windsor, Conn. The University of Connecticut Migrant Farm Worker Clinics visit area farms to offer health screenings to migrant farm workers and their families. There are an estimated 3.5 million migrant and seasonal farm workers in the United States, and many of these workers lack access to health professionals due to language barriers and fears of deportation. (Photo by Spencer Platt/Getty Images)

And he said that as opposed to decades past where many native-born U.S. citizens were high school dropouts, today only a small fraction of the U.S. population qualifies as “unskilled” and hence in competition with unskilled immigrants for jobs. He noted that studies show immigrants are much more likely than native-born U.S. citizens to start businesses, and that their role as customers and the income they inject into the economy expands the economy and U.S. productivity as a whole.

And he noted that while low-skilled immigrant workers may be a financial drain on local or to a lesser extent state social services, as anti-immigrant critics often charge, their children are likely to obtain levels of education and skill that help compensate for their parents’ effect on the economy by contributing more in taxes than they cost the system.

He said:

Is it an investment in the future or a burden? You don’t say to the local white kids that they’re a burden – they are in fact – they cost more than they put in. But you think of it as an investment in the future.

He pointed out a similar double standard regarding the “stealing jobs” argument.

Just like with natural population growth, the more people you have the more the economy grows. But people don’t stop having children because they’re afraid they’ll steal jobs from their parents.

A recent report by the Dallas Federal Reserve, “From Brawn to Brains: How Immigration Works for America,” noted that only 11 percent of second generation immigrants lack a high school diploma, compared to 30 percent of first generation immigrants. The report says:

One silver lining is that these costs dissipate in the very long run as their descendants assimilate and “pay back” the costs imposed by their predecessors. Economic or educational assimilation is, therefore, a very important piece of the immigration calculation.

Shumaker-Matos added that a less-publicized part of the immigration debate involves (usually legal) high-skilled immigrants, especially in the sciences, who compete with highly educated citizens for those high-end jobs. He said that while high-skilled immigrants may drive down wages slightly in these jobs, the innovation and overall economic and technological growth they contribute expands overall economic efficiency and productivity.

Pia Orrenius—a senior economist with the Dallas Federal Reserve, co-author of the aforementioned report and former advisor on labor, health and immigration to the Bush administration—said that high-skilled immigrants are a boon to the U.S. economy while low-skilled immigrants are a drain, at least in the immediate sense.

In her recent book, Orrenius proposes an “employment-driven” immigration system that awards temporary work visas without a wait based on the immediate needs of the labor market; rather than the current legal immigration system that according to government figures awards 85 percent of green cards to family members and only 7 percent based on employment.

Orrenius said that the U.S. lags behind other developed countries including South Korea, her native Switzerland, Spain and Italy, which base their legal immigration system primarily on the needs of the labor market rather than family relationships and humanitarian concerns.

The Dallas Federal Reserve report said that:

Estimates from 1996—the most recent comprehensive estimates available—indicate that immigrants with less than a high school diploma cost $89,000 more than they contribute in taxes over their lifetimes, while immigrants with more than a high school education contribute $105,000 more in taxes than they use in public services.

In other words, low-skilled immigrants are a net fiscal drain, but overall, immigration need not be. High-skilled immigrants can offset the fiscal cost of low-skilled immigrants.

Orrenius, whose book was published by the pro-business, free market American Enterprise Institute, would like to see a system wherein the government would auction off permits for high-skilled, low-skilled and seasonal temporary workers, and employers willing to pay the most for the permits would legally hire workers. The permits would only be good for a year, with the number of visas constantly adjusted based on the labor market and economy.

She said that under her proposal, workers would be allowed to quit their jobs if they suffered exploitation or abuse of the type common under the U.S.’s current guest worker program. In that case workers would have to find a new employer who had also bought permits, Orrenius said, which she suggested would likely not be a problem in urban areas but could present problems in rural areas with fewer employers. She said immigrants could theoretically petition for green cards – with the numbers awarded also determined by the current labor market – after five or 10 years in the temporary worker program.

Though in theory this might protect immigrants from exploitation by employers, in reality such a system would likely be ripe for abuse, as many immigrants likely would be afraid of leaving their jobs for fear of endangering their visa. And employers unwilling or unable to pay for the permits would likely continue to employ undocumented workers.

Orrenius’ proposed system would allow reunification of spouses and minor children with no wait, but it would greatly reduce the number of other relatives of citizens or permanent residents – a move sure to be blasted by immigrants rights groups. She said:

With an employment-based system, legal immigration would act more like unauthorized immigration. It is demand-based, so it benefits native workers – you don’t want a lot of immigrants coming in when the labor market is doing poorly.

About the Author: Kari Lydersen, an In These Times contributing editor, is a Chicago-based journalist whose works has appeared in The New York Times, the Washington Post, the Chicago Reader and The Progressive, among other publications. Her most recent book is Revolt on Goose Island. In 2011, she was awarded a Studs Terkel Community Media Award for her work. She can be reached at [email protected]

This blog originally appeared in In These Times on March 11, 2011. Reprinted with Permission.

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2 Responses to “Temporary Workers on the Auction Block? And the Complicated Economics of Immigration”

  1. Marc Brenman Says:

    Various studies have shown that undocumented people make a net contribution to the US economy. They cost more than some other groups in public education and incarceration, but contribute more in taxes, and in lack of use of social welfare benefits, because they are not eligible. Income taxes are withheld from their paychecks, and they pay the same regressive taxes everyone else pays for gas, sales, etc.

  2. Charles J Read Says:

    All well and good but the first thing we need to do is get rid of the 12 million illegal immigrants here now. They so distort all the statistics as to cost and economic gain as to make them worthless. Anydody who uses 15 year old data to make conclusions in this day and age is stupid. Ask Richard Fisher he is the president of the Dallas Federal Reserve Bank. How would you like to have to forecast the end of the current recession using data from befor the previous recession.

    All and all the posting is terribly biased in favor ofimmigation.

    Charles

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