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

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.

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.