Wednesday, December 26, 2012

A Comprehensive Immigration Reform Plan (3 easy steps)


The state of the world at the close of 2012 has not helped prioritize immigration reform as a short-term goal of the US government.  The self-imposed fiscal crisis, gun violence, Syrian civil war, political chaos in Egypt and the continuing economic problems in Europe are all issues that crowd legislators’ agendas.  However, the wheels of reform may have been set in motion by the demographic political imperatives looming in the next election.  Put simply, the Republicans feel out of touch with growing Latino and Asian populations and there are murmurs that immigration reform could be a key issue.  The political impetus for this push is clearly to win the hearts and minds of these growing segments of voters.  However, the economic impetus for immigration reform may be far more compelling. 

A recent Economist article examining the oncoming “demographic squeeze” bears ill news for the US.  While US population growth is still faster than every developed country and trails only India and China in percent growth, decreases in fertility, immigration and population aging are all taking their toll on the US economy.  Consumers of US news can see this manifest in the ongoing Social Security and MediCare crises and the diminishing ability of today’s workers to supports today’s pensioners.  The US is not alone in facing the Malthusian risk associated with economic and social development. With fewer young people and larger elderly populations living longer than ever, the ability of the state and the economy to support the current structure is cast in serious doubt.  Dire demographic forecasts have been made about China. The European Union may turn to promoting immigration in order to escape the trap of an ageing population and ballooning public debt.  The US hardly needs to promote immigration.  What policy makers need to do is facilitate immigration.

The work of economist Giovanni Perri would be a great first stop for legislators worried either about Malthus or reelection. In his recent policy paper Dr. Perri proposes a market-based regime for employment visas.  This would replace the first-come, first-served and lottery systems now being used.  By allowing employers to bid on employment visas, market efficiencies would distribute these scarce resources to most interested employers.  This is only the first step in what Dr. Perri sets out as a three phase plan for comprehensive immigration reform.

Phase one includes an auction for temporary employment visas, like the H-1B and H-2.  This visa auction places employers at the center of the decision-making process while reducing transaction costs such as legal fees.  A minimum price could be set by the government to cover the costs of the auction and the tracking database, which Dr. Perri estimates could easily be set at $7,000 for the three-year H-1B.  Immigrants coming to the US on these visas would not be tied to any particular employer and could circulate freely in the labor market as employers barter for immigrants and their visas on a secondary market.  By treating these employees as normal members of the labor pool, employment visas would no longer need to be encumbered by the byzantine labor verification system.  This process requires employers to prove that a position filled by an immigrant employee cannot be filled by a native worker and is a long, drawn-out bureaucratic exercise.
Phase two calls for the simplification of visa categories.  The current system for employment visas involves a wide array of visas (H, I, L, Q, R and TN) that are valid for differing periods of time.  

The second phase of this comprehensive reform plan calls for collapsing all of these categories into three simple classes: C, NC and S.  These new groups would be aimed at college educated work, non-college educated work and seasonal work respectively.  The first two new visas would be valid for five years while the last would be valid for twelve months.  This visa revamp would also abolish the distinction between “temporary” and “permanent” visas.  All visas would be considered provisional with the option of applying for permanence at their expiration.  Dr. Perri argues that this incentivizes rational self-selection among immigrants to decide if they wish to save and return to their countries of origin or if they wish to remain in the US.  The ability to seamlessly incorporate immigrant workers with five years or more of experience into the labor market as legal permanent residents would be a boon for employers, workers and the economy as a whole.

The third phase proposes expanding the provisions of the first two phases to the wider immigration regime.  Thus a new balance should be struck between family- and employment-based visas.  Adult children and siblings of US citizens should be diverted into the employment visa system.  National quotas should be eliminated and provisional visas should be granted to graduates of four-year universities in the US.  Along with these expansions, the current undocumented population should be folded into the system through a regimented process towards residence.

Dr. Perri offers convincing arguments and sufficient detail for a well-balanced debate over the merits of his proposals.  As an economist, his affinity for hard numbers and modeling lends itself to a tone of reasonableness that has long been absent in the immigration reform debate.  The political pitfalls of pushing through this type of reform may still be daunting, but the demographic and economic impetus for the changes outlined in this plan will only drive the need for its serious consideration.  Anyone looking for some content to insert into their comprehensive immigration reform package should certainly consult with Dr. Perri.

No comments:

Post a Comment