Undocumented Immigration to the United States: A Cost-Benefit Analysis

Transcription

1 Undocumented Immigration to the United States: A Cost-Benefit Analysis Item Type Electronic Thesis; text Authors Wright, Jeffrey Lee Publisher The University of Arizona. Rights Copyright is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. Download date 06/07/ :26:56 Link to Item

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5 Abstract There is in the United States a widely held notion that undocumented immigrants are a drain on the economy. After conducting a cost-benefit analysis of the ways in which undocumented immigrants contribute to and drain from the economy, using the findings from leading experts on U.S. immigration, one can easily see that this notion is false. U.S. immigration policy leaves much to be desired; if policy-makers focus more on employment enforcement and increased options for legal immigration, the U.S. economy, as well as native and foreign-born U.S. citizens and immigrants, will largely benefit from immigration.

6 !"#$%&'' (' Undocumented Immigration has affected the lives of all Americans if not directly, then indirectly. The overall effect that undocumented immigrants (also referred to as unauthorized/illegal immigrants) have on the U.S. economy is complex; but understanding the costs, benefits, and politics of this complicated and increasingly contentious issue will help us guide policy to be more economically beneficial. In this paper, I will give a short background to undocumented immigration, typical characteristics of undocumented immigrants, and give the three main reasons for why they come here. Then, I will discuss the types of benefits and costs incurred by the U.S. economy on the national and the state/local level. Finally, I will discuss the political motives involved in this issue and give the two priorities that immigration reform should have in order to better address this problem. Background There were only about 300,000 undocumented immigrants, mostly agricultural workers, who were living in the U.S. in the 1960s. By 1980, that number rose to several million. Donato and Carter (1999) claim that this is primarily due to two things: (1) The end of the Bracero program in 1964, which allowed migrant workers from Mexico to perform seasonal labor on U.S. farms, and (2) a quota was imposed in 1977 limiting the number of legal immigrants that were admitted into the U.S. each year. 1 Basically, the number of foreigners who wanted to work in the U.S. was increasing, while the number of legal slots available for legal immigration was not keeping pace, and undocumented immigration became the next best alternative. There are two types of undocumented immigration. The first type, entry without inspection, is the most common, and occurs when an individual from another country

7 !"#$%&'' )' Figure 1: Origins of the 2005 Unauthorized Population in the U.S. Source: Gans crosses the border illegally. The other type, visa overstayer, occurs when an individual enters the U.S. legally, but stays in the U.S. beyond the time limit indicated on their visa. 3 Most of the entries without inspection are from Mexico and Central America, whereas visa overstayers are from a variety of different nations (see figure 1). 4 Figure 2: The U.S. Unauthorized Immigrant Population in 2008 Source: Passel

8 !"#$%&'' *' Most unauthorized immigrants are Figures 3, 4, 5: Age and Sex distributions of various populations Hispanic (76%), and are spread throughout the U.S., mainly in states along the U.S./Mexico border (see figure 2). Almost half (47%) of unauthorized immigrant households consist of a couple and children. Oftentimes these households are mixedstatus families where at least one member of the household has legal citizenship (child or adult). 6 The most common sex of an undocumented immigrant is male, and age distributions suggest that the undocumented population is much younger than the general population in the U.S. As of March 2010, 11.2 million unauthorized immigrants were living in the United States (see figure 6). This number was equivalent to about 3.7% of the nation s population and 5.2% of its labor force in Although the United States has been increasing their spending on border security Source: Passel

9 !"#$%&'' +' dramatically since 2003, the number of immigrants arriving has steadily been increasing (save for the beginning of the recession in Nov. 2007). This is because the economic incentives to enter the U.S. illegally are much stronger than the risks posed to individuals for attempting unauthorized entry. Coinciding with the economic downturn in 2007, the number of unauthorized immigrants in the U.S. labor force fell from 8.4 million in March 2007 down to 7.8 million in March In March 2010 that number went up slightly, to 8.0 million, suggesting that with the recovery of the economy, unauthorized workers are returning to the labor force. Figure 6: Undocumented Immigrant Population vs. Immigration Enforcement in U.S. Source: Hamilton Project 10 Reasons for Undocumented Immigration Although it is clear that most immigrants who come to the United States illegally do so because they are able to earn a considerably higher wage then their home country, there are even more basic reasons why this phenomenon is occurring. There are three main reasons, according to immigration expert Judith Gans: globalization (in the

10 !"#$%&'',' economic sense), inadequate provision for legal economic migration, and failure to sanction employers for hiring undocumented workers. 11 The first factor, globalization, entails an assortment of things. It is not simply the increased mobility of the global goods market (such as liberalized trade through treaties like NAFTA and World Trade Organization Conventions), but also the decrease of barriers to capital investment. The growing economies of India and China have greatly encouraged outside investment. These policy decisions are largely a positive thing, because they have created opportunities for nations to divide the labor and goods market amongst each other more efficiently. As Gans notes, developing countries are shifting from manufacturing-based to knowledge-based economies. This trend has incentivized many people to migrate to areas where their labor is most cost-effective, and the recent flow of immigrants to industrialized countries is reflective of the economic incentives that are linked to globalization (see figure 7). Figure 7: Net migration trends around the world Source: Graphic from Wikipedia, data from CIA Factbook 12

11 !"#$%&'' -' Aside from the large disparities in income and opportunity, demographic factors also create this incentive. Populations in less-developed nations are younger and expanding more rapidly than those of industrialized nations. Thus, there are regions of the world that are immigrant exporting and immigrant importing. These trends have developed rapidly, and governments worldwide are seeking to adapt to the significant shift in global competitive advantage and increased labor mobility. Labor has become international, and individuals are migrating (legally as well as illegally) to areas of the world where economic activity has significantly increased. In the United States, migration has been welcomed for decades, especially when compared to other countries (see figure 8). Gans attributes the steady increase of immigration to the United States to its robust economy, its long-term history of welcoming and integrating immigrants, and the relative flexibility of its labor laws. Figure 8: Net migration in select countries Data source: World Bank, World Bank Development Indicators 13

12 !"#$%&''.' Unauthorized migration has increased as well: the number of unauthorized migrants entering the U.S. has increased in recent decades. The Pew Hispanic Center estimates that in the 1980s approximately 180,000 unauthorized migrants per year entered the U.S., compared to as many as 850,000 per year since 2000 (see figure 9). This upward trend has much to do with the Gan s second main reason for unauthorized migration to the United States: inadequacy of channels for legal economic migration, especially low-skilled labor. Since legal options are scarce, and economic incentives are abundant, illegal entry has become a means for the migration of lowskilled labor. Figure 9: Arrivals of unauthorized immigrants by time period, Data Source: Gans

13 !"#$%&'' /' The priorities of the immigration system in the United States today, according to Gans, are focused primarily on three things: family reunification, protection of American workers from competition with foreign workers, and provision for scarce labor. With regards to this last priority, current immigration law is attempting to fix the hourglass shape of the U.S. workforce wide at the top and bottom but narrow in the middle by making it easier for low-skilled and high-skilled workers to obtain U.S. citizenship. 15 In other words, there are relatively few people in the U.S. who do not have a high-school diploma (low-skilled workers) and relatively few people who hold PhDs; one priority of the U.S. immigration system is to attempt to compensate for these shortages. More specifically, immigration law is designed to permit temporary immigration of seasonal low-skilled workers (e.g. agricultural), and permanent immigration for high-skilled workers (e.g. highly specialized scientists). In keeping with the second priority (protection of American workers), permanent legal immigration for low-skilled and middle-skilled workers is carefully limited. Because of these realities, illegal entry seems to be a means whereby migrants are able to respond to the lure of a job that pays considerably more in the United States than it does back home. The third main reason for illegal immigration concerns the ease with which illegal immigrants can get a job, due to the inefficiency of U.S. government sanctions for employers that hire illegal immigrants. There are three reasons why employer sanctions are ineffective, according to Gans. The first reason is that there does not seem to be a reliable method for verifying employment eligibility. Although there have been sanctions in place since the Immigration Reform and Control Act of 1986 for knowingly hiring an illegal alien, the

14 !"#$%&'' 0' law only requires that employers determine the eligibility of the worker on the basis of whether or not the documents presented to them appear to be authentic. The law does not require employers to verify whether the documents presented are actually authentic. Given the lax nature of the law on this matter, illegal immigrants have found it easy to obtain counterfeit documents and employers have found it easy to comply with the law simply by determining those documents to be authentic. Some states have required the use of E-Verify, an internet-based program that compares a potential employee s documents with U.S. government records. Unfortunately, the program is not sophisticated enough to detect whether or not the documents are a result of identity fraud, and might therefore be increasing the value of stolen identity data as a means for an unauthorized individual to gain employment. 16 The second reason why sanctions are inefficient is that the U.S. government has spent very little to increase funding interior investigations, especially when compared to the overall enforcement budget (see Figure 10). Worksite enforcement in specific, has decreased from 9% of the interior enforcement budget to 2% of the budget between 1992 and 2002 even though funding Figure 10: Enforcement spending by category, Data Source: Migration Policy Institute

15 !"#$%&''(1 for interior investigations increased between 1987 and 2002 by $349 million (see Figure 11). Although border enforcement is needed to control illegal immigration, decreasing the economic incentives to work illegally in the U.S. is a legitimate concern that has not really been addressed. The explanation for this lies in the third main reason for inefficiency of employer sanctions competing political pressures. Gans points out that there are two conflicting public pressures. There is concern over national sovereignty and violations of U.S. law, which prompts increased spending to stop illegal border crossing. There is also a desire to maintain strong economic performance, which causes concern over the disruption of economic activity made possible by illegal labor. In an effort to balance these interests, the U.S. government has focused enforcement at the border rather than at the worksite. Despite increased funding to secure the border between 1987 and 2002, however, the continual increase in illegal immigration suggests that the economic incentive to immigrate illegally is still very powerful. Figure 11: Types of interior investigation cases as a percent of interior enforcement budget, 1991 and 2003 Data Source: Migration Policy Institute

16 !"#$%&''(( Cost-Benefit Analysis: Introduction Now that we have a better understanding of who unauthorized immigrants are, and why they come here, let s talk about what kind of costs and benefits undocumented immigration imposes on the U.S. economy. Simply adding up all of the quantifiable benefits and all of the quantifiable costs of undocumented immigration in order to analyze the issue provides a shortsighted analysis at best, and erroneous conclusions at worst. The Center for Immigration Studies attempted to do this in their 2004 report, but several assumptions were questionable. Illegal aliens were identified by assigning probability values to all foreign-born respondents of the 2003 Current Population Survey (collected by the U.S. Census Bureau) based on the year of arrival in the United States, country of birth, educational attainment, sex, receipt of welfare programs, receipt of social security, veteran status, and marital status and the report assumed that any probability value of one or higher is an illegal immigrant. 19 Furthermore, the study characterizes U.S. born children of unauthorized immigrant households to be unauthorized immigrants, even though those children are legally U.S. citizens. This methodology is used in order to account for the cost of providing pubic education, school lunch programs, and Medicaid services used by those children. This assumption is valid, but it should be noted that many impoverished children, whose parents are legal citizens, are entitled to the same services. Furthermore, this economic analysis does not seem to account for the benefits to society (if not in the short-run, then certainly in the long-run) of educating children. As you will see, the forces that drive unauthorized immigration are strong. However insightful the following figures are in understanding the picture more generally, it is difficult to compare these numbers and conclude that unauthorized

17 !"#$%&''() immigration results in net-gains or net-losses. At this point, the aim of this cost-benefit analysis is to be more familiar with the different ways in which illegal immigration can affect the U.S. economy. Similarly, our policy decisions should not be based on roughly estimated aggregate benefits minus aggregate costs, but instead on an analysis of the costs and benefits of our current admission rate and enforcement policies regarding unauthorized immigration. The goal is to design policies that allow for undocumented immigrants to contribute positively to the U.S. economy. Benefits of Unauthorized Immigration Chiefly, illegal immigrants contribute to the U.S. economy through purchasing goods and services, contributing labor, and paying taxes such as social security. Figure 12: Proportion of Workers who are Unauthorized for Select Industries Data Source: Passel

18 !"#$%&''(* The first type of contribution is explained by the fact that unauthorized immigrants are living in this country, and must therefore consume (at the very least) basic necessities. They make purchases that increase the demand for clothes, food, and other goods and services in accordance with their income levels, which according to the Pew Hispanic Center, averaged about ~$12,000 per person in Given that there were an estimated 10.4 million unauthorized immigrants living in the United States in 2004, this accounts for $124.8 billion in income earned in the U.S. Since, on average, unauthorized immigrants in the United States send $30 billion back to their home country every year, it is safe to assume that undocumented immigrants are putting tens of billions of dollars back into the U.S. economy. 22 The second type of contribution that unauthorized immigrants make to the U.S. economy is through labor. This is a significant contribution for two reasons. The first is that certain industries depend on unauthorized workers for a sizeable percentage of their labor force. Even though unauthorized workers account for 4.9% of the total workforce, they constitute a much greater percentage of the workforce within several industries: farming, cleaning, construction, food preparation, production, and transport occupations (see figure 12). There are some occupations in which unauthorized workers make up more than one quarter of all the workers employed, such as: insulation workers (36%), miscellaneous agricultural workers (29%), roofers (29%), and drywall installers (28%). These occupations are popular amongst unauthorized workers because unauthorized immigrants typically do not have an educational background beyond what is required to obtain such employment (see figure 13). On the face of it, filling these occupations do not seem all that important or significant; but, the labor offered by unauthorized migrants is in fact complimentary to

19 !"#$%&''(+ the needs of the U.S. labor force, which is the second reason why the labor contributions of unauthorized migrants are significant. As mentioned before, one of the goals of U.S. immigration policy is to compensate for the hourglass shape of the U.S. work force, which is lacking in low-skilled labor and high-skilled labor. Immigrants (and in particular, unauthorized immigrants) have a tendency to compliment the skills of native-born citizens at the low end of the educational spectrum. This is beneficial to the employers of unauthorized migrants who are able to procure labor for lower wages. Consumers are also beneficiaries, as they see lower prices of goods and services produced from this labor. Overall, job creation is made more feasible for those individuals of the U.S. labor force whose skills are complimented by low-skilled workers. This also has an affect on wages (see page 22) Figure 13: Educational Attainment of Working Age Population in 2004 (age 25 to 64 yrs.) Data Source: Passel

20 !"#$%&''(, The third type of contribution that unauthorized migrants make to the U.S. economy is through the payment of taxes. Many unauthorized immigrants in the United States have taxes withheld from their paychecks, making unrequited contributions to Social Security, Medicare, and unemployment programs. Nationally recognized tax attorneys Paula Singer and Linda Dodd-Major found that hundreds of thousands of undocumented immigrants go out of their way to file tax returns more than 500,000 tax returns were filed by immigrants with U.S. addresses who were not authorized to work or even to be in the United States. 24 This could be due to the fact that proof of tax payments is required for naturalization. The American Immigration Council (formerly the American Immigration Law Foundation) cited an Urban Institute Report that found that undocumented immigrants contributed $2.7 billion to Social Security and $168 million to unemployment insurance taxes in The only avenue for unauthorized immigrants to get any of this money back is through the public services they access (discussed in the next section). Costs of Unauthorized Immigration While there are a multitude of benefits brought by unauthorized immigrants to the U.S. economy, there are a great number of costs as well. The bearer of the cost of unauthorized immigration is most often the state and local governments that are required by the federal government to provide a host of services to individuals regardless of their immigration status. 26 Unauthorized immigrants, to the extent that they utilize services at the state level, most noticeably make use of three services: emergency medical services, elementary and secondary education, and law enforcement.

21 !"#$%&''(- Health care is commonly accessed in the form of emergency treatment, because unauthorized immigrants are less likely than citizens to have health insurance the Pew Hispanic Center Research estimated that 59% of undocumented adults had no health insurance in 2007, which is more than double the uninsured portion among legal immigrants (see figure 14). Concerns have been raised about the cost of providing health care to unauthorized immigrants, which have been met with concerns about long-term health effects if immigrants do not obtain it. But the cost of providing health care to unauthorized immigrants who do not have health insurance can be sizable, especially in places where they are heavily concentrated. A study conducted by a group of health policy researchers set out to estimate the service use and costs of care for nonelderly adults within the largest community of unauthorized immigrants in the country Los Angeles County. In 2000, the study found that 12% of the population of Los Angeles County was undocumented, and 68% of that population did not have health insurance. 27 In 2000, only 58% of undocumented immigrants had visited a doctor and 11% had been hospitalized. Of the foreign-born immigrants that were not undocumented, 60-75% saw a doctor in the past year, and 10-14% were hospitalized. Compare these figures with the native-born population, of which 80% saw a doctor in 2000, and 13% were hospitalized. Figure 14: Portion of Adults Without Health Insurance by Status in 2007 Data Source: Passel

22 !"#$%&''(. The study was able to predict the cost of providing health care to undocumented immigrants by taking self-reported information on outpatient and inpatient use (collected by the Los Angeles Family and Neighborhood Survey a study conducted in 2000 of families in a stratified random sample of sixty-five neighborhood in LA county) and assigning an accurate price value found from the Medical Expenditure Panel Survey (a survey that collects data on health services use and costs). This cost model allowed prices of inpatient and outpatient care to vary by characteristics such as region and ethnicity. Because some health care spending is not tied to individual use such as general subsidies to public hospitals the authors of this study inflated the numbers by (a purportedly modest) 25 percent. The total medical spending on the undocumented population in LA County was $887 million, which is only 6% of all medical costs compared with this group s 12% population representation. From these data, we can speculate that undocumented immigrants, reportedly, use less health care resources than native-born and documented foreign-born populations in LA County. The Congressional Budget Office (CBO) has confirmed this speculation, after they reviewed a multitude of studies conducted in other jurisdictions and concluded that, in most of the estimates that were examined, unauthorized immigrants accounted for less than 5% of total state and local spending on those services. 29 According to CBO, education is the largest single expenditure in state and local budgets. Unlike health care, where usage rates among undocumented immigrants is relatively low, the cost of financing the education of the children of undocumented immigrants is a major component of the costs borne on the U.S. economy. In 1982, the Supreme Court ruled that the state could not exclude children from receiving public

23 !"#$%&''(/ education based on their immigration status. 30 Again, state and local governments absorb most of this cost: CBO reports that the federal government provides only 10% of the total amount spent by all levels of government on kindergarten through grade 12 each year. 31 Estimates indicate that in 2005 roughly 2 million school-age children between the ages of 5 and 17 in the United States were unauthorized immigrants, with an additional 3 million children who were citizens but born to unauthorized immigrants (for more recent data, see figure 15). At that time, there were 53.3 million school-age children in the United States. 32 Therefore, children who are unauthorized immigrants represent almost 4% of the overall school-age population. Studies conducted by the state of Minnesota s Department of Administration estimated that, during the school year, the state and local governments in Minnesota spent between $79 million and $118 million to educate an estimated 9,400 to 14,000 children who were unauthorized immigrants, out of the total $8 billion spent on elementary and secondary education. 33 A similar study was done by the New Mexico Fiscal Policy Project that estimated, for the school year, total spending in New Mexico on the state and local levels for 9,200 unauthorized immigrant schoolchildren was about $67 million, out of the total $3 billion spent on elementary and secondary education. 34 Thus, educational expenditures on unauthorized immigrant schoolchildren in those states amounted to 1.5% and 2.2% of total educational expenditures, respectively. Unauthorized immigrants impose a variety of costs to state and local governments whenever they make use of the same law enforcement services that are offered to ordinary citizens. When an unauthorized immigrant is accused or convicted of a crime (other than an immigration-related offense) they are not deported

24 !"#$%&''(0 immediately; instead, they are tried in the local criminal justice system, just like regular citizens. The federal government may begin the process of deportation only after state and local governments have incurred the costs involved with investigating, detaining, prosecuting, and incarcerating such immigrants through the local criminal justice system. The estimates that are currently available include only the costs related to prosecution and incarceration of unauthorized immigrants under state and local laws. 35 Figure 15: Concentration of students in the U.S. with Unauthorized Immigrant Parents Source: Passel

25 !"#$%&'')1 Researchers from Rutgers University found that, in general, immigrants are less likely than native-born citizens to be incarcerated. 37 It is still true, however, that in some counties such as those that share a border with Mexico the costs associated with incarcerating immigrants is higher than most. For instance, in 2001, the United States/Mexico Border Counties Coalition reported that law enforcement costs involving unauthorized immigrants in four states California, Arizona, New Mexico, and Texas cost a combined total of more than $108 million in San Diego County incurred the largest of these costs, spending over $50 million that year, or approximately 9% of their total spending for law enforcement activities that year. This report also determined several factors that accounted for increased law enforcement spending in each county: the number of ports of entry, the population of neighboring Mexican communities, border terrain, and federal programs for deterring illegal entry. 26 How the Federal Government Helps with Costs Federal programs have been established to help state and local governments with some of the cost of providing services to low-income and underserved populations. In terms of providing health care, the federal government provides some assistance for emergency health care, largely through the Medicaid program. Each state is able to set their requirements for the eligibility of Medicaid, and the federal government reimburses anywhere between 50-83% of all Medicaid costs (the average being 57%), depending on the per capita income of the state. 39 The passage of the Consolidated Omnibus Budget Reconciliation Act of 1986 amended Medicaid law to provide coverage to immigrants who would otherwise qualify for Medicaid, if it were not for their

26 !"#$%&'')( immigration status. This coverage applies to only those services that are necessary to stabilize the patient. The Department of Education stated that out of the approximately $1 trillion spent during the school year on all levels of education, about 90% of those funds will come from state, local, and private sources; with the federal government providing the (approx.) remaining 10%. Federal funds that are allocated to schools are typically at a per-student rate, irrespective of the student s immigration status. The federal government began offsetting the cost of providing law enforcement services to state and local governments. The Immigration Reform and Control Act of 1986 authorized the federal government to allocate funds to assist with the costs of incarcerating unauthorized immigrants who were convicted of committing nonimmigration-related crimes. In 1994, The Department of Justice started providing states with assistance through the State Criminal Alien Assistance Program (SCAAP). This program requires that state and local governments apply for funds annually by submitting detailed demographic data on individual unauthorized immigrants who have been incarcerated. The amount of funds allocated to each facility doesn t depend on these data, however. Funds are allocated depending solely upon on the amount of money each facility spends on the salaries of their correction officers. Between 2000 and 2006, the Department of Justice awarded almost $2.8 billion in SCAAP funds to more than 800 state and local governments covering all 50 states plus the District of Columbia. 40 Still, these funds only offset a portion of the amounts that state and local governments spend on incarcerating those criminals. In 2005, it was determined that the awards represented 33% of eligible requests.

27 !"#$%&'')) The Effect Unauthorized Immigration has on Wages It can be said pretty much across the board that the wage that an unauthorized immigrant earns in the United States is an improvement from the wage that he or she was earning or could earn in their home country; but the effect that unauthorized immigrants have on the wages of native-born workers varies. Low-skilled immigrants tend to lower the wages of low-skilled native-born workers, while raising the wages of high-skilled native-born workers. Whenever an immigrant s skill set overlaps (or competes directly) with the skills of native-born workers, wages in that industry decrease. However, this only affects a small subset of the population immigrants typically have different skills than native-born workers (see figure 16). Native-born high school dropouts will face the most competition from unauthorized immigrants, especially in jobs where knowing English is not important. Gans claims that this will lower wages for low-skilled workers in the short run, but in the long run as the increase in the availability of workers and decrease in wages attracts investment the negative impacts on wages are mitigated. 41 She cites an estimate that immigration since 1990 lowered the 2004 wages of native-born high school dropouts between 1.2 and 5.5 percent. In highly skilled industries, knowledge is more specialized and the supply of labor is relatively scarce, so the effects on wages are nominal. More noticeable is the effect that immigrants have on the wages of native-born workers whose skills are complementary to those of immigrants. Any industry requires a wide variety of labor to complete a range of tasks. When an industry sees an increase in the supply of lowskilled labor, it might increase their demand for labor that is complementary to it. For example, if the agricultural industry sees an increase in the supply of agricultural

28 !"#$%&'')* workers that are willing to work for low wages, then after hiring them, there might be a subsequent increase in the demand for complementary labor (agricultural land management). This tends to raise the wages of workers that compliment low-skilled workers. Gans found that immigration since 1990, including an influx of low-skilled workers, has raised the 2004 wages of college graduates from roughly 0.5 to 1.5 percent. 42 Figure 16: Distribution of native-born citizens and unauthorized immigrants in the workforce (2005) Source: Gans

29 !"#$%&'')+ The Basic Political Climate Surrounding Immigration Before outlining some suggestions for policy makers, it is important to have an understanding of the political climate surrounding immigration. From the perspective of a migrant coming to the United States for work, immigration provides unequivocal benefits. For instance, the wages of a Peruvian worker coming to work in the United States will make an estimated 2.6 times as much as he would make in Peru, and a typical Mexican worker would experience a 250% increase in their annual income by moving from Mexico to the United States. 44 As discussed earlier, the economic incentive to migrate to the United States is so strong for some workers that they are willing to leave their home country and risk death in order to improve their quality of life. These interests compete with the interests of native-born workers who, in a given industry, might experience a change in wages or competitive pressure if a more lenient immigration policy were to be enacted. The immigration policies that are actually enacted depend on the actions of politicians, who are ultimately motivated to please voters and interest groups. Those that oppose immigration most are low-skilled natives (whose wages are usually hurt by unauthorized immigration). 45 U.S. residents living in areas with large immigration populations are more exposed to the fiscal costs associated with immigration (e.g. providing immigrants with public benefits) and, perhaps for that reason, are in support of reducing immigration. Places with higher taxes (e.g. California) also experience a greater support for reduction in immigration. Interest groups in favor of immigration include the businesses that seek to hire illegal labor. Hanson, in his book Regulating Low-Skilled Immigration in the United States, provides several examples whereby agricultural interest groups have advocated

30 !"#$%&''), for less border enforcement whenever the demand for undocumented labor rises. And immigration officials have listened: When there is an increase in the relative price of goods for an immigrant-intensive industry, there is likely to be a decrease in border enforcement six to ten months in the future, controlling for macroeconomic conditions. 46 Temporary worker programs, which tend to maximize labor and tax contributions while minimizing the use of public services, receive some support from the U.S. government but not much. Temporary workers are denied welfare benefits, do not comprise a large portion of the immigrant population (3% in 2005), and they are mostly high skilled individuals. 47 If this kind of immigration is attractive to the U.S. economy, then why is there not more of it? Mostly because the U.S. has difficulties getting temporary workers to leave the country once their visa has expired. This is in part due to the fact that the U.S. has, for a long time, favored the individual s right to privacy. 48 Immigration authorities do not have many options for ensuring that temporary workers leave when the time limit on their visa is up, because of the stiff protection of civil liberties afforded to all people in the U.S. Furthermore, granting narrow rights to immigrants does not serve to fully integrate them into society, and it lessens their incentives to invest and contribute fully to U.S. society. 49 Another form of immigration that more or less provides steady contributions to the U.S. economy and a relatively small number of economic costs is illegal immigration. The way that illegal immigration to the U.S. is currently regulated ensures that entry prices and selection criteria serve a selective function that is similar to that of legal immigration. 50 How does this work? It starts when the U.S. government increases the intensity of border enforcement and penalties for individuals who smuggle

31 !"#$%&'')- non-citizens into the U.S. illegally. When this happens, the government can control the risks incurred by those smugglers (or, coyotes). When coyotes experience a greater level of risk, they will increase their smuggling fees. 51 This suggests that, at least indirectly, the U.S. government can regulate the entry costs of illegal immigration. Why does this matter? Entry fees serve as a device for selection, since a non-citizen must value their entrance into the U.S. enough to be willing to pay the market price of a smuggler. 52 This encourages the selection of more productive illegal immigrants, or at least it puts productive pressure on unauthorized migrants one they successfully enter the country. Interior screening is another method by which the government can regulate illegal immigration. 53 The U.S. government chooses to deport unauthorized immigrants who commit crimes, but does not, in many cases, closely monitor employers to see if they are hiring illegal immigrants. Going back to the U.S. government s commitment to individual liberty: If an unauthorized immigrant is able to obtain counterfeit documents, and presents them to an employer, the employer may only verify those documents (through a system like E-Verify) but they are not allowed to ask the applicant upfront if they are supplying counterfeit documents. 54 The idea that the government is, in some respects, employing mechanisms that encourage highly motivated individuals to enter the country illegally, while restricting their pull on the economy, is not so farfetched. Hanson has even found that, in practice, illegal immigration is more responsive to market forces and economic conditions than legal immigration. 55 However efficient illegal immigration has become, there are quite a few drawbacks. A large population of non-citizens who are living in the U.S. illegally will lack protections that are afforded to citizens, undermine U.S. law, and reduce the need for politicians to respond to the needs of their constituents. 56 The objectives of illegal immigration policy should not just be to

32 !"#$%&''). increase the economic efficiency of illegal immigrants, it should be to address the aforementioned drawbacks of having a large portion of foreign-born workers who are living in the U.S. illegally. Policy Options and Suggestions The U.S. government has traditionally regulated undocumented immigration by utilizing two strategies: strengthening enforcement strategies and increasing legal options for current and future immigrants. The strategies that are used will determine the impact on the U.S. government s coffers, labor productivity, and assimilation of immigrants. The first strategy, stronger enforcement strategies, usually consists of increased border enforcement and a focus on monitoring worksites. This strategy reduces both the total level of immigration, as well as the level of illegal immigration. Currently, with high levels of immigrants paying a smuggler to enter the U.S. illegally, this type of immigration is regulated by price. 57 As mentioned earlier, when there is a higher penalty for smuggling undocumented immigrants, the smugglers charge more for their services. This system of undocumented immigration attracts immigrants that believe that they can earn enough working in the U.S. to compensate for the amount paid to a smuggler. Compare the cost-based method of immigration regulation to a quantity-based method of regulation, where the U.S. government controls exactly how many people to legally admit each year. Take for example the H-2A and H-2B programs that permit temporary low-skilled immigration in this system, the government must find a way to make up for the attractive incentives that are lost when price is not a regulating

33 !"#$%&'')/ mechanism. One suggestion, offered by Freeman, is to charge a fee that is comparable for the going-fee for coyotes (which was about $2,000 in 2009). 58 This would be a fee that immigrants would gladly pay to avoid the risk and hassles of illegal entry. Furthermore, the U.S. government could collect this entry fee, instead of smugglers, making this option fiscally beneficial for the U.S. government as well as for immigrants. When the U.S. government employs quantity-based regulation, they have a choice between two things: flexibility and control. Having a high amount of control over the quantity of immigrants is appealing to the U.S. government, and has been a longestablished feature of U.S. immigration policy. With the passage of the Immigration Act of 1990, only 675,000 green cards are allotted each year, with a specific quota for family-sponsored (480,000), employment-based (140,000), and lottery-based immigration (55,000). High levels of control, although maintaining the status quo, do not permit economic efficiency. Ideally, the level of immigrants who are admitted each year would be able to fluctuate with the labor needs of the U.S. economy. When U.S. GDP growth is high, the demand for goods and services increases, subsequently increasing the demand for labor. Similarly, when GDP growth is small, the demand for labor decreases. The U.S. government should recognize this, and favor an immigration policy that is sensitive to economic factors. Presently, illegal immigration is the only type of immigration that responds to market signals 59 The second strategy offering legal avenues for current unauthorized immigrants and future immigrants reduces illegal immigration, but has the effect of keeping the level of immigration high. As stated earlier, legalization of illegal immigrants has its pros and cons. Since illegal immigrants do not legally have access to the same public services that citizens do (such as welfare programs and housing subsidies), legalizing

34 !"#$%&'')0 these individuals would increase their draw on public services. However, legalization would also be beneficial in many ways. Hanson speculates that after an immigrant attains legal permanent residence, he has more of an incentive to invest in U.S. society, such as seeking an education for skills that are relevant to his occupation, buying a home, and volunteering in the community. Stronger incentives for immigrants to invest in the U.S. economy equates to immigrants having a higher earning potential, higher productivity, and a greater ability to contribute to society. 60 Summary In light of the economic and political costs and benefits of unauthorized immigration, there seem to be two major priorities that a sensible, effective immigration policy should have. The first is a higher priority on interior enforcement. Employers must be held accountable for hiring undocumented immigrants if they are aware that those immigrants are legally unauthorized to work for them. Before employers are held increasingly accountable, they should have better tools and expanded legal rights in order to determine the citizenship status of a job applicant. This will greatly reduce the incentive to immigrate illegally to the U.S. Secondly, after the population of illegal immigrants has effectively been reduced, the economic demand for low-skilled labor should be assessed and policies should be sensitive towards the yearly labor needs of the U.S. economy, not the desires of the most powerful interest groups. This way, the immigrants that are coming to work in the U.S. in order to improve their quality of life can be afforded the same public services, the same protection under the law, and the same incentives to contribute socially and financially to the country they are legally a citizen of.

35 !"#$%&''*1 Works Cited '''''''''''''''''''''''''''''''''''''''''''''''''''''''' 1 Donato, Katharine M., and Rebecca S. Carter, Mexico and U.S. Policy on Illegal Immigration: A Fifty-Year Retrospective. Illegal Immigration in America, ed. David W. Hainesand Karen E. Rosenblum, Westport, CT: Greenwood Press, pp Figure 1: Gans, Judith. A Primer on U.s. Immigration in a Global Economy. Tucson, AZ: Udall Center for Studies in Public Policy, University of Arizona, p Immigration and Naturalization Service Estimates of the Unauthorized Immigrant Population Residing in the United States: 1990 to Washington, D.C.: Immigration and Naturalization Service. 4 Gans (2006) p Figure 2: Jeffrey S. Passel and D Vera Cohn. A Portrait of Unauthorized Immigrants in the United States. Washington, DC: Pew Hispanic Center, April Passel (2009) p. i 7 Jeffrey S. Passel and D Vera Cohn. Unauthorized Immigrant Population: National and State Trends, Washington, DC: Pew Hispanic Center (February 1, 2011). 8 Figures 3, 4, and 5: Passel 2009 pp Kochhar, Rakesh, C. Soledad Espinoza and Rebecca Hinze-Pifer. After the Great Recession: Foreign Born Gain Jobs; Native Born Lose Jobs, Pew Hispanic Center, Washington, D.C. (October 29, 2010) p Figure 6: Greenstone, Michael, and Adam Looney. Ten Economic Facts About Immigration. Washington, D.C: The Hamilton Project, The Brookings Institution, p Gans (2006) p Figure 7: Obtained from Wikipedia, which obtained data from: The World Factbook Washington, DC: Central Intelligence Agency, Figure 8: World Development Indicators: Washington: World Bank Publications, Internet resource. 14 Figure 9: obtained from Gans (2006), who obtained from Passel, Jeffrey, The Size and Characteristics of the Unauthorized Migrant Population in the U.S.: Estimates Based on the March 2005 Current Population Survey, March 7, Washington, DC: Pew Hispanic Center. p Capps, Randy, Michael Fix, and Serena Y.-Y. Lin. Still an Hourglass?: Immigrant Workers in Middle-Skilled Jobs. Washington, DC: Migration Policy Institute, Internet resource. 16 Rosenblum, Marc R E- Verify: Strengths, Weaknesses, and Proposals for Reform. Washington, DC: Migration Policy Institute. 17 Figure 10: Meyers, Deborah Waller, U.S. Border Enforcement: From Horseback to High-Tech, Migration Policy Institute Insight: Independent Task Force on Immigration and America s Future, No. 7. Washington, DC: Migration Policy Institute. p Figure 11: Jacoby, Tamar, An Idea Whose Time Has Finely Come? The Case for Employment Verification, Migration Policy Institute Policy Brief: Independent Task Force on Immigration and America s Future, No. 9. Washington, DC: Migration Policy Institute.

36 !"#$%&''*( '''''''''''''''''''''''''''''''''''''''''''''''''''''''' 19 Camarota, Steven. "The High Cost of Cheap Labor Illegal Immigration and the Federal Budget." Center for Immigration Studies. N.p., n.d. Web. 4 April Figure 12: Passel, Jeffrey, The Size and Characteristics of the Unauthorized Migrant Population in the U.S.: Estimates Based on the March 2005 Current Population p Passel, Jeffrey, Unauthorized Migrants: Numbers and Characteristics June 14, Washington, DC: Pew Hispanic Center. p D'Agostino, Joseph A. "Immigrants Drain $30 Billion in Cash Annually." Conservative News, Views & Books - HUMAN EVENTS. Web. 2 Apr Figure 13: Passel (2005) p Singer, Paula N. and Dodd-Major, Linda, Identification Numbers and U.S. Government Compliance Initiatives. Tax Notes, Vol. 104, No. 13, September 20, Available at SSRN: 25 AILF, The Value of Undocumented Workers. The American Immigration Law. Foundation: available in 26 Merrell, Melissa. The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments. Washington, DC: Congress of the United States, Congressional Budget Office, Internet resource. Pp Dana P. Goldman, James P. Smith and Neeraj Sood Immigrants And The Cost Of Medical Care Health Affairs, 25, no.6 (2006) pp Figure 14: Jeffrey S. Passel and D Vera Cohn. A Portrait of Unauthorized Immigrants in the United States. Washington, DC: Pew Hispanic Center, April CBO p Plyler v. Doe, 457 U.S. 202 (1982). 31 CBO p Bureau of the Census, Annual Estimates of the Population by Selected Age Groups and Sex for the United States: April 1, 2000, to July 1, 2006, Series NC-EST (last updated May 17, 2007), available at NC- EST2006-sa.html. (This estimate includes children 5 to 17 years of age.) 33 Minnesota Department of Administration, Office of Strategic Planning and Results Management, The Impact of Illegal Immigration on Minnesota: Costs and Population Trends (December 8, 2005), available at asp. 34 New Mexico Fiscal Policy Project, Undocumented Immigrants in New Mexico: State Tax Contributions and Fiscal Concerns (Albuquerque: New Mexico Voices for Children, May 2006), available at 35 CBO page 9 *- '2#$3"4'(,5'678849':)110;' 37 Kristin F. Butcher and Anne Morrison Piehl, Why Are Immigrants Incarceration Rates So Low? Evidence on Selective Immigration, Deterrence, and Deportation, Working Paper No (Chicago: Federal Reserve Bank of Chicago, November 2005), available at wp2005_19.pdf. 38 Tanis J. Salant and others, Illegal Immigrants in U.S./Mexico Border Counties: The Costs for Law Enforcement, Criminal Justice, and Emergency Medical Services (report prepared for the United States/Mexico Border Counties Coalition, February 2001). That report included costs incurred by the offices of the sheriff, the marshal, the district