Immigration is a key policy issue heading toward the 2016 elections. so it is interesting to see how well the candidates apply economic analysis.
Donald Trump’s campaign has published a policy statement.
The policy statement identifies “three core principles.” Quoting verbatim:
- A nation without borders is not a nation. There must be a wall across the southern border.
- A nation without laws is not a nation. Laws passed in accordance with our Constitutional system of government must be enforced.
- A nation that does not serve its own citizens is not a nation. Any immigration plan must improve jobs, wages and security for all Americans.
The economics of each principle, and the policies Trump proposes to achieve it, is discussed briefly below.
Conceptually motivating the policy paper is the elementary economic principle that additions to market supply (including labor) reduce the market equilibrium price (including wages). This applies irrespective of immigrants’ skill sets. Unskilled immigrants reduce the market wage for unskilled labor; skilled immigrants reduce the market wage for skilled labor.
Even if the social benefits of immigration exceed the social costs, benefits and costs will be distributed unequally. Benefits will be captured by immigrants themselves and customers of firms that hire immigrants at lower market wages. It is possible that wages will be equal to or higher in the long run because immigrants add to market demand. However, this outcome cannot be assumed to occur because there is no economic principle through it would happen automatically. The cost of transition to the new equilibrium is likely to be substantial and cannot be ignored. Finally, there cannot be a stable new equilibrium market wage unless the number of immigrants added to the supply stops growing.
“Make Mexico Pay For The Wall”
The policy paper claims that Mexican leaders “have been taking advantage of the United States by using illegal immigration to export the crime and poverty in their own country (as well as in other Latin American countries).” No supporting evidence is provided, and it is contrary to the prevailing economic theories of emigration (see, e.g., Borjas 2014) and the chaotic character of unlawful immigration from Mexico and nations further south.
DOES MEXICO EXPORT POVERTY?
The policy paper says Mexico has “published pamphlets on how to illegally immigrate to the United States,” citing an article by James C. McKinley, Jr. published in the New York Times on January 6, 2005. According to McKinley, Mexican officials did not deny authorship but disputed its intent:
The Mexican government drew fire from American advocates of tighter borders on Wednesday for publishing a pamphlet that instructs migrants how to safely enter the United States illegally and live there without being detected.
Officials here say the small booklet, illustrated in comic-book style, is not intended to encourage illegal immigration, but to reduce the loss of life. Last year, more than 300 migrants died while crossing rivers and deserts to reach the United States.
The guidebook provoked anger because it appeared to challenge US sovereignty over its own territory:
It also counsels migrants to keep a low profile once in the United States, telling them, for instance, to stay away from loud parties or discos that might be raided by the police and to stay out of domestic disputes, which might lead to an arrest. Finally, it lists what rights migrants have if caught, among them safe transport home, medical care, food and water.
“This is not the action of a friendly neighbor,” said Representative Tom Tancredo, the Colorado Republican who chairs the Congressional Immigration Reform Caucus. “What would the Mexican government say if we encouraged our citizens to violate Mexican law?”
Gerónimo Gutiérrez, Mexico’s under secretary for North American affairs, is quoted by McKinley saying that Tancredo’s interpretation was reasonable but inaccurate:
“It is a natural and fair response to consider this as an attempt to promote undocumented immigration, but that is absolutely not the intent of the Mexican government.”
But groups seeking stricter immigration laws argued that Mexican officials were being disingenuous in asserting that the pamphlet does not encourage illegal migration. They say that Mexico wants to continue exporting unemployed people and reaping the benefits of money sent home to their families.
“If the Mexican government were really very concerned about their citizens dying in the desert, why doesn’t it use its army and police to prevent people from crossing in those areas?” said Steven Camarota, director of research at the Center for Immigration Studies, which favors tighter borders.
The policy paper mistakes cause and effect. Mexican officials did not create the benefits of unlawful US presence; those benefits were created by American officials and American courts. Thus, massive unlawful emigration from Mexico (and elsewhere), even if expressly intended by these nations’ leaders, is the effect of US policy. If the US had denied unlawful aliens access to employment, free education and health care, and other benefits of US residence, the incentive to unlawfully emigrate would have been much weaker. It’s economically more accurate to say that for decades it has been US policy to import poverty from Mexico (and elsewhere). If Mexican officials encouraged their poor to emigrate, that was a rational response to US policy.
DOES MEXICO EXPORT CRIME?
The policy paper includes several anecdotes about crimes recently committed by unlawful aliens. That some immigrants commit crimes is not surprising, nor is it a credible economic basis for the exclusion of immigrants generally. What the policy paper implies is the proposition that immigrants are responsible for a disproportionate share of crime. The paper offers no supporting evidence for this proposition, paraphrasing incorrectly and out of context statistics from a Government Accountability Office report. (The GAO report concerns criminal aliens, which according to GAO’s definition make up only 20% of criminal aliens convicted under a non-terrorism statute (Table 4).)
Except for immigration law violations, the GAO report indicates that the most common offense for which a criminal alien was arrested was a drug crime (48%, Figure 8). Twenty percent of federal primary convictions were for drug crimes. Other offenses, including homicide, kidnapping, sex offenses, assault, arson, burglary and auto theft, comprised just 2% of primary convictions (Figure 11). In Arizona, California and Texas, respectively, 30%, 27% and 20% of criminal aliens incarcerated were convicted of drug crimes (Figures 12, 13, and 16). Convictions for “beatings, rapes and murders” — the crimes highlighted in the Trump policy paper — were much less common. (The exception is New York State, where 27% of primary convictions of criminal aliens were for homicide and 23% were for drugs. The GAO report does not include sufficient information to explain why New York is different.)
Nonetheless, drug crimes (and the homicides committed incidental to the drug trade) are different from other crimes because they typically have an explicit economic motive. They involve for-profit (albeit illegal) trafficking and distribution to supply the demands of US customers, and the violent protection of exclusive territories in these markets. It is US demand for Mexican drugs that drives this segment of unlawful immigration. It’s economically more accurate to say that the US has imported drug crime and its accompanying violence by unlawful aliens.
The policy paper proposes to complete construction of a secure border and compel Mexico to pay for it. How Trump proposes to achieve this is described as follows:
Mexico must pay for the wall and, until they do, the United States will, among other things: impound all remittance payments derived from illegal wages; increase fees on all temporary visas issued to Mexican CEOs and diplomats (and if necessary cancel them); increase fees on all border crossing cards – of which we issue about 1 million to Mexican nationals each year (a major source of visa overstays); increase fees on all NAFTA worker visas from Mexico (another major source of overstays); and increase fees at ports of entry to the United States from Mexico [Tariffs and foreign aid cuts are also options]. We will not be taken advantage of anymore.
The policy paper does not explain how these actions would be implemented or how they would work.
“Defend The Laws And Constitution Of The United States”
The policy paper lists eight proposals in this section.
- “Triple the number of ICE officers.”
The policy paper cites congressional testimony that “[o]nly approximately 5,000 officers and agents within ICE perform the lion’s share of ICE’s immigration mission.” Budget documents show that ICE currently employs 19,791 people, of whom 5,800 work for Enforcement and Removal Operations (pp. 46-47). Presumably, Trump proposes to increase the size of ERO to 15,000. The effect on immigration enforcement of such an increase is not obvious, but it seems reasonable that the Trump campaign expects a proportional increase in production. That is, he would expect ERO to treble the number of annual removals from 315k to 945k. This would significantly reduce the non-detained docket, which is reported by the Department of Homeland Security to total 1.9 million in FY 2014, 54% of which is persons with final orders of removal.
E-Verify is DHS’ electronic system that employers may use to comply with federal legal requirements to ensure that employees and applicants for employment are legally entitled to work in the US. Budget documents say DHS “[m]anaged more than 28 million queries through the E-verify program, up from nearly 25 million in FY 2013” (p. 95) and that “more than 70,000 additional employers [were added] to the E-Verify program, growing to 553,628 employer participants at the end of FY 2014, with an average of more than 1,300 new employers joining each week” (p. 97).
There are limits to voluntary adoption of E-Verify, however. Employers most inclined to hire unlawful aliens are least likely to voluntarily use E-Verify. Thus, a requirement to use it is probably the only way to secure a high level of compliance among employers in industries where unlawful aliens are disproportionately employed. What is not clear is whether the policy paper proposes to mandate use of E-Verify; it does not say.
Forcing the least-willing employers into E-Verify would significantly reduce the benefit of unlawful immigration by denying access to wage employment. However, such a mandate also would lead some employers to convert unlawful alien employees to independent contractors (or what is essentially the same thing, contract out to a labor supply firm that, in turn, would hire unlawful aliens as independent contractors). The Internal Revenue Service has rules governing what qualifies as self-employment, and there is considerable evidence that these rules are widely violated. The Economic Policy Institute, for example, asserts that 10-20% of employers misclassify employees as independent contractors (but does not show how it derived the estimate). Motives are many, including avoidance of the employer’s share of Social Security taxes and exemption from most labor laws. What’s relevant here is that independent contractors also do not have to prove work eligibility, so if E-Verify were mandated the incentive to misclassify would grow stronger.
A useful follow-up question for the Trump campaign is whether the candidate also proposes to modify E-Verify so that independent contractors could be required to use it (e.g., require independent contractors to obtain a DHS certification of employment eligibility).
- “Mandatory return of all criminal aliens.”
The policy paper criticizes the Obama administration for releasing rather than deporting criminal aliens. The number of such releases cited is 76,000 since 2013, but no source is provided. (Contrary to the way the term is conventionally used, it is assumed that the Trump campaign interprets criminal alien to include only those who are unlawfully present.)
Presumably, mandatory return means no exceptions. The costs of zero-tolerance policies rises exponentially as compliance approaches 100%. The benefits of such policies decline with risk, however. All (unlawfully present) criminal aliens are not equal, of course, because the crimes they have committed vary in severity. Thus, a zero-tolerance policy is assured of requiring the government to expend substantially more in resources to return some criminal aliens than the social costs they impose.
- “Detention—not catch-and-release.”
Detention and removal practices are governed by DHS policy discretion subject to the constraints of congressional appropriations and due process rights that the courts have extended to unlawful aliens. Reducing due process rights to the constitutional minimum would increase the effectiveness of detention and removal, though by how much we do not know. Eliminating constitutional due process rights for unlawful aliens obviously is more problematic.
The authors of the policy paper appear to mean either (1) changing DHS enforcement priorities or (2) enacting legislation that would restrict DHS’s discretion. Both policy changes entail opportunity costs. If appropriations are fixed, for example, increasing detention and removal at the border requires DHS to make some other activities lower priority. Until the Trump campaign identifies these other activities, the opportunity costs of expanded detention and removal cannot be described qualitatively, much less estimated.
- “Defund sanctuary cities.”
A sanctuary city is one that by ordinance or policy refuses to cooperate with federal agencies in the detention of unlawful aliens. DHS appears to have no published policy regarding sanctuary cities. San Francisco’s ordinance, enacted in 1989, is characteristic.
The economics of sanctuary cities are fairly straightforward. First, whatever federal penalties may attach elsewhere to unlawful presence under federal law, they are substantially attenuated in sanctuary cities. These jurisdictions attract unlawful aliens, especially those whose actual or perceived risk of deportation is greatest. Second, to the extent that unlawful aliens who take advantage of sanctuary city ordinances pose disproportionate economic burdens or public safety risks, they are borne largely by their own residents. Third, enactment of a sanctuary city ordinance shifts these costs from jurisdictions that are not sanctuary cities, and especially those jurisdictions that actively cooperate with federal immigration authorities.
A reasonable reading of the proposal is it would deny sanctuary cities access to federal programs and grants, but the paper is silent concerning which programs and which grants or whether these actions require legislation to implement.
- “Enhanced penalties for overstaying a visa.”
Overstaying a visa appears to be a common way to enter the US legally with the intention of becoming an unlawful alien. A commonly cited fraction is 40%, but accurate estimation is technically impossible because both the numerator and the denominator are highly uncertain. Budget documents (pp. 40-41) indicate that DHS is seeking additional funding to create a working Electronic Visa Information Update System (EVIUS) that non-immigrant visa holders would use to provide updated biographic and travel-related information. That’s fine for non-immigrant visa holders who want to comply with US law, but it seems unlikely to have any beneficial effect on those who don’t.
The most interesting aspect of this item in the policy paper is its mere presence. Almost all public debate on immigration focuses on unlawful entry via the Mexican border.
- “Cooperate with local gang task forces.”
The paper alleges that the Obama administration allows criminal aliens to claim “dreamer” status to avoid deportation. This proposal would change DHS enforcement discretion to deny unlawfully present criminal aliens “dreamer” status. As with any other such change, the interesting question is what activities DHS would give less priority, and what would be the opportunity costs of changing priorities.
- “End birthright citizenship.”
The origin of birthright citizenship for unlawful aliens is widely misreported as having been established by the Fourteenth Amendment to the US Constitution. For example, the Wall Street Journal’s Aaron Zitner calls this “the 147-year-old principle that anyone born on U.S. soil is a U.S. citizen, even if his or her parents entered the country illegally.” This is untrue. With respect to aliens, birthright citizenship was established by the 1898 Supreme Court ruling that Wong Kim Ark was a US citizen by virtue of having been born in San Francisco to Chinese nationals who were “domiciled residents of the United States” — that is, they were not unlawful aliens.
Economically, birthright citizenship creates an incentive to be present when giving birth. There are four main categories of unlawful aliens affected by this incentive, and the implications differ. The promise of birthright citizenship is a fairly clear incentive among women who are pregnant at entry, whether they enter unlawfully or lawfully.
Unlawful entry (the “anchor baby” scenario) appears to be motivated by the reduced risk of adult detention and removal that results. Birthright citizenship may be desired for its own sake, or it could be purely instrumental in the pursuit of adult objectives.
Lawful entry (“birth tourism”) appears to be motivated as a hedge against future political or economic risks in the mother’s home country. Birthright US citizenship provides some protection from these risks if they materialize. It also provides a retirement hedge for the parent(s). When the child reaches the age of majority, he can sponsor his parents for lawful entry. (For a true hedge to be present, the child must be able to retain home country citizenship.)
In cases where the immigrant is not pregnant at US entry, evidence that the promise of birthright citizenship is a key behavior motivator is less clear. Securing birthright citizenship could be part of a long-run plan on the part of the unlawful alien, or it could be the consequence of wholly unrelated factors. Also, lawful status may change for women who are not pregnant at entry.
“Put American Workers First”
The policy paper identifies unemployment, particularly among unskilled blacks and Hispanics, as evidence of the damage done to the US middle class by international trade agreements and immigration policies:
The influx of foreign workers holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans – including immigrants themselves and their children – to earn a middle class wage. Nearly half of all immigrants and their US-born children currently live in or near poverty, including more than 60 percent of Hispanic immigrants. Every year, we voluntarily admit another 2 million new immigrants, guest workers, refugees, and dependents, growing our existing all-time historic record population of 42 million immigrants.
Limiting unlawful immigration is the proposed primary remedy, but others also are listed:
“Increase prevailing wage for H-1Bs.”
The H-1B program provides a limited number of visas “to employers seeking to hire nonimmigrant aliens as workers in specialty occupations or as fashion models of distinguished merit and ability.” The term “speciality occupation” is defined by the Department of Labor in ways that make it appear highly selective, but the eligibility requirement is actually quite broad:
A specialty occupation is one that requires the application of a body of highly specialized knowledge and the attainment of at least a bachelor’s degree or its equivalent. The intent of the H-1B provisions is to help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce by authorizing the temporary employment of qualified individuals who are not otherwise authorized to work in the United States.
The law establishes certain standards in order to protect similarly employed U.S. workers from being adversely affected by the employment of the nonimmigrant workers, as well as to protect the H-1B nonimmigrant workers. Employers must attest to the Department of Labor that they will pay wages to the H-1B nonimmigrant workers that are at least equal to the actual wage paid by the employer to other workers with similar experience and qualifications for the job in question, or the prevailing wage for the occupation in the area of intended employment – whichever is greater.”
The Trump policy paper alleges that employers are gaming the H-1B system to hire foreign workers in lieu of US citizens because foreign workers can be paid less:
More than half of H-1B visas are issued for the program’s lowest allowable wage level, and more than eighty percent for its bottom two. Raising the prevailing wage paid to H-1Bs will force companies to give these coveted entry- level jobs to the existing domestic pool of unemployed native and immigrant workers in the U.S., instead of flying in cheaper workers from overseas.
The policy paper also claims that one of the effects of the H-1B program as currently implemented is to disadvantage “black, Hispanic and female workers in Silicon Valley who have been passed over in favor of the H-1B program.”
Trump’s arguments pick up on a spate of recent stories alleging the outsourcing of jobs held by US citizens to new H-1B visa holders. In February 2015, the Los Angeles Times editorialized:
Information technology workers at Southern California Edison have found themselves in the unhappy position of training their own replacements, thanks to a plan by the utility to outsource their jobs to two India-based staffing companies.
Adding insult to injury, some of the new workers are in the United States under what are known as H-1B visas — a category of visa that was designed to help American businesses fill specialized positions, not to displace American workers. And worse yet, Southern California Edison’s action appears not to be unusual: It is part of a years-long trend among companies of misusing H-1B visas to undercut wages and offshore high-paying American jobs.
Allegations of H-1B program abuse resonate at least in part because the premise of the program is economically illogical. A bona fide shortage of labor in any field, whether technical or unskilled, can be alleviated by offering higher wages.For unskilled labor, rising wages immediately attract more native workers to the labor market. For skilled labor, rising wages motivate additional native workers to obtain the necessary credentials and subsequently add to the supply of qualified candidates. That increase in supply stops the upward trend in wages.
The purpose of the H-1B program is thus economically dubious. It allows employers that win the Department of Labor’s H-1B lottery to hire foreign workers at wages below the equilibrium wage for native US workers, thereby displacing some native workers.
- “Requirement to hire American workers first.”
This item in the policy paper is an extension of its predecessor.How it would be implemented is not clear. For example, the paper does not say whether employers could hire aliens only at the then-current market wage for native workers, or if they would have to fill all slots with native workers at whatever wage rate was required to clear the market.
- “End welfare abuse.”
The policy paper proposes that immigrants “be required to certify that they can pay for their own housing, healthcare and other needs before” being admitted. Presumably, this is intended to prevent immigrants from imposing financial burdens on taxpayers. How these certifications would be validated is not clear.
- “Jobs program for inner city youth.”
The policy paper proposes to terminate the J-1 visa program and replace it with a “resume bank” for inner city youth who, it is assumed, are qualified to perform the jobs J-1 visa holders currently perform.
J-1 visas are for educational exchanges. From the Department of State:
The J-1 Visa provides countless opportunities for international candidates looking to travel and gain experience in the United States. The multifaceted programs enable foreign nationals to come to the U.S. to teach, study, conduct research, demonstrate special skills or receive on the job training for periods ranging from a few weeks to several years.
Listed educational programs include a number of non-educational activities, however, including Au Pair, Camp Counselor, Intern, Physician, Specialist and Summer Work Program. In all cases a key beneficiary is the sponsor, who obtains labor services at a price likely to be below the market clearing wage for native workers. Except in cases of programmatic abuse, J-1 exchange programs also benefit the visa holder. The policy paper references a National Public Radio story by Yuki Noguchi about such complaints. How common these experiences might be is not known. The State Department clearly is aware of sponsor abuse, at least of exchange visitors in the Au Pair program,
Excluding 1.3 million B1/B2 Border Crossing Cards issued to Mexican nationals, the State Department issued more than 8.7 million nonimmigrant visas in FY 2014 — approximately a 65% increase since 2010 — at a time when immigrant visas were experiencing no change. About 375,000 of them were J visas. So the opportunity for significant effects on US labor markets cannot be ruled out.
- “Refugee program for American children.”
The policy paper proposes to reallocate funds currently spent on settling refugees and asylum-seekers to “help place American children without parents in safer homes and communities, and to improve community safety in high crime neighborhoods in the United States.”
The stated justifications for the proposal are that existing refugee and asylum programs are being abused and too many refugees obtain public assistance. The proposal does not target abuse of the refugee and asylum programs, nor does it say what the rate of public assistance ought to be. It would terminate these programs, not reform them.
The opportunity cost of terminating these programs is the harm done to bona fide refugees and asylum-seekers and foreign affairs interests of the US. One substantial program that would be affected (it is not listed as exempt from termination) would be the resettlement of Iraqis and Afghans who provided interpretative services to the US military during Operation Iraqi Freedom and Operation Enduring Freedom, respectively, who were promised resettlement in return for bearing these grave personal risks.
- “Immigration moderation.”
The policy paper proposes to enact a moratorium on the issuance of green cards to foreign workers abroad. Employers would be required to “hire from the domestic pool of unemployed immigrant and native workers.”
The paper claims that this would reverse the decline in female labor force participation that has occurred since 2009. Why the decline in female labor force participation deserves special attention, and if so, how this proposal would arrest it, is not explained.