On Guest Workers

A couple of days ago, I pointed out that, in my view, the biggest problem with the Bush-McCain-Kennedy bill was its amnesty provision without any credible mechanism for making sure that we do not have to revisit the amnesty issue again in a few years. I now want to turn to the next biggest problem with the bill: the guest worker program. Dani Rodrik and I had an exchange at his blog. Let me now rephrase and expand some of the points I made in that exchange.

The key problem with practically all proposed guest worker program is that they have no credible mechanism for ensuring that guest workers return home after their visa expires. Before anyone retorts by citing the case of Malaysia or Singapore and arguing that those countries provide examples of successful policies that we can follow (as compared to, say, Germany), let me point out the obvious: The United States is not Malaysia or Singapore and most Americans would like to keep it that way. According to news reports, a (guest worker) maid in Singapore who gets pregnant gets deported within a week. I don't think that's the way that the situation would be or should be handled in the U.S.

Let me ask a few simple questions that proponents of guest workers programs should answer in the context of U.S. laws and norms:

1. What guarantee is there that the guest workers will in fact be temporary workers? How can such a guarantee be enforced in the United States?

2. What will happen when the judicial system puts its fingerprint on the program? All it takes is for one activist judge to invent some right out of thin air, and--presto--it will be hard to repatriate many more guest workers.

3. Doesn't a guest worker at the end of the visa term have incentives to become an illegal immigrant? How are we going to prevent that? How are we going to catch them? (See the numerical exercise below for an example of how financial incentives can motivate many guest workers to become illegal immigrants at the end of their work period).

4. Why would one want to start a program that essentially creates a huge class of disenfranchised workers in the labor market? Isn't there a real danger that the exploitation of poor foreign workers--the new crop of second-class citizens--becomes a trademark of that segment of the labor market?

5. Surely a guest worker program of the magnitude contemplated by Bush-Kennedy-McCain must have some impact on the relative wage of competing workers. I realize that more than a few economists are willing to forget the law of demand they teach in Econ 1 when it comes to immigration. But think of it another way: why would employers spend so much lobbying for guest workers if the program didn't benefit them?

Finally, it's sort of ironic but I think that the people who actively support the guest worker program are thinking---gasp!---too much like economists. The wisest remark I have ever heard about guest workers was made by Swiss writer Max Frisch. Referring to the German experience, he said: "We wanted workers and we got people instead." Like everyone else, guest workers get sick, get married, procreate, etc. Many of these life events open up entitlements in the U.S. system, and some of these entitlements can be very expensive. Imagine the public reaction when a guest worker, after 6 years in the United States, finally faces the day of reckoning. His brood of U.S.-born children (all U.S. citizens unless the proponents of the program want to do something about the 14th Amendment) are all crying as a camera crew graphically captures the cruelty of the system and the "deportation" of American citizens. Show me a few of these separations and I will show you how temporary visas quickly become permanent.

I think there's something fundamentally misleading about the way that the proponents of a guest worker program are trying to sell their program. We are really arguing over a large increase in permanent immigration. I am more than willing to have a good discussion over whether such an increase is desirable--in fact, having such a debate would be extremely healthy. It would air out a number of issues that deserve airing. And I can certainly see a good argument for an increase in some types of immigration. But it's crucial to have a transparent and above-board debate.

(An arithmetic exercise: I have heard some proponents of guest worker programs argue that we can encourage the guest workers to return by withholding some of their U.S. pay, putting it into a bank account, and giving them the lump sum as they get on the plane back home. This may not create enough financial incentives in the real world. Consider a guest worker who earns $20,000 a year in the U.S. for six years. And, let's be extreme, let's withhold all of his pay. At the end of six years, that bank account will be worth about $140,000 if the interest rate is 5 percent. Now consider his incentives just before he gets on the plane back home. If he goes back, he gets the $140,000 booty and earns, say, half of his U.S. pay for the rest of his life. Discounting future earnings at 5 percent and assuming he has a very long life ahead of him, this option is worth approximately $340,000. Alternatively, he can say goodbye to the $105,000 bank account, stay in the U.S. illegally, and earn $20,000 for the rest of his life. This option is worth $400,000. All other things equal, it seems, this guest worker would rather live in the shadows. Obviously, the details of this exercise can be changed: maybe the pay back home is higher than half of U.S. pay and we obviously can't withhold all of his pay. But the lesson is worth remembering: Financial incentives alone may not encourage many guest workers to return).

Comments

[Thorsten]

Being German I would really agree with you that the German experience provides a good example of how not do migration policies. However, I would like to object somehow. I am not very familiar with the US-American debate but I think the sensible policy would be to make a mixture between your point and that of Dani Rodrik - introduce a point-based system for permanent immigrants, including an allotment for unskilled workers - for humanitarian reasons or just to exert competitive pressure on the labour market to keep (make) the US unit labour cost competitive.

However, at the same time you should offer the people incentives to move back home again thereby promoting development in their home countries - maybe you could subsidize to move "back" (perhaps with their entire new family...). At the same time take the commitment to promote development seriously so it is really worth to return. But from a development perspective, you should also try to send the high-skilled migrants back (instead of keeping them e.g. at Harvard...). I once heard there were African countries with more doctors working in France than in their country of origin.

Last, I think that from my outsider point of view the new rather restrictive stance of US-American immigration policy seems to have a negative effect on the public attitude towards at least some groups of migrants thereby making it perhaps more difficult to attract also high-skilled migrants from, say, Latin America.

[mk]

The scenario of 'nest egg' released upon return would perfectly suit many of our current 'guest workers.' Many of them live frugally here so they can send the bulk of their earnings home. Those earnings are banked with the hope of beginning their own businesses when they return home. Some of our guest workers are really entrepreneurs facing credit constraints, or sufficiently distrustful of credit that they're trying to find a way to bankroll their own start-ups.

[Hans]

"And, let's be extreme, let's withhold all of his pay." What's extreme about this ? Let him p a y for working in the US.

[bill]

There are many suggestions for a points system, similar to that implemented in Canada. Why is this superior to a system in which we simply sell the right to enter, or one in which we allow anyone to enter, but charge a surtax on immigrants for the first, say, 10 years of their stay?

[alex]

Thorsten: you should offer the people incentives to move back home again thereby promoting development in their home countries - maybe you could subsidize to move "back"

In America, that wouldn't work. It suggests that we don't want these people. Worse, it echoes the Liberian experiment, which was a 19th century attempt to solve the African-American "problem" by sending people back to Africa.

But from a development perspective, you should also try to send the high-skilled migrants back

Or we could take Dean Baker's approach and encourage highly skilled workers (eg doctors) to come here. Countries that "exported" these people could be compensated for the brain drain by imposing, say, a 10% tax surcharge on their income, which would be sent to their country of origin to train more doctors.

Given that medical education is highly labor intensive, countries such as India have a comparative advantage over the US. Hence it makes sense for us to import a product like medical education.

Perhaps Prof. Borjas can go across campus to the Harvard Medical School to discuss this idea with some students and faculty.

[alex]

Oops, this blog system doesn't take italic markup. The 1st and 3rd paragraphs of my above post were quoting Thorsten.

Note to self: use preview button.

[Jorge Romero-Habeych]

Secure the Mexican border and more than half of the problem is taken care of. Without first stopping the influx of immigrants crossing that border, any other approach is worthless. Whatever happened to learning from history, 1986 amnesty? The way our government is currently operating makes me want to pull out my hair. It is very frustrating. What really drives me mad are all these marches by illegals, they demand so much while forgetting the simple fact that they are "illegal". What's really disturbing is that if the amnesty does go through we will not be adding 12 million Americans but 12 million foreigners who mostly have no intention of becoming part of American society. An example of this was the sea of waiving Mexican flags that we all saw at the May rallies a year ago. We all need to stop being politically correct and start getting real!

[Richard A.]

The justification for guest workers is usually to solve labor shortages. But the cause of labor shortages are a pay scale set below the market clearing wage. The market solution is for the employer to up their pay. Granting employers the special right to import indentured labor to solve a labor shortage is government intervention in the economy of an ugly kind.

[jimbino]

I was an Amerikan guest worker in Germany for almost 5 years, but got the hell out just in time to get back half the German Social Security contributions that the socialist state had stolen from me. That was a nice nest egg and a welcome surprise, considering that I would have gladly abandoned Germany without it.

I have a better idea, however: offer me, now an Amerikan citizen of 62, the opportunity to abandon both the USSA and my citizenship, along with the offer to buy me out of my right to a share of our nanny state's SS and Medicare by a nestegg bribe. I'd take it in a heartbeat, at the same time opening up my slot for a younger and more productive Hispanic. Then I would relax in a paradise like Brazil and be able to finance my medical care, since Medicare benefits parts A, B and D, though I have paid premiums lifelong to help finance them, are unavailable there.

[Cal Lanier]

The 14th Amendment issue (birthright to guest worker's children) is so overwhelming that I'm always astonished people can discuss anything else downstream of that.

Yet the bill doesn't even mention guestworker children born in the US during his or her employment (that I've seen). The bill *does* mention something else extraordinary--the guest worker can bring his or her spouse and children for one term, but not both, provided "the annual wage of the principal Y nonimmigrant paid by the principal nonimmigrant's U.S. employer, combined with the annual wage of the principal Y nonimmigrant's spouse ...is equal to or greater than 150 percent of the U.S. poverty level and "that the alien's cost of medical care is covered by medical insurance, valid in the United States".

Insurance for your average unskilled labor job? On what planet?

So the bill considers the possibility of the guest worker wanting to bring his own wife and children, but completely ignores the possibility that the guest worker might find one and create the other in the US?

It's obvious why the bill doesn't address these issues. Any attempt to address them would instantly make it clear that restricting the behavior is too draconian (e.g., guest workers can't marry, female guest workers must voluntarily undergo birth control for the duration of the visa). Any definition of additional rights accruing to guest workers that have children or marry creates even more incentives than they already have.

Nonetheless, this bill *must* address these issues, because the Senate cannot reasonably claim that these issues can't be anticipated.

[Paul A'Barge]

It would be helpful if you could join those of us running agricultural operations in border states who need to hire guest workers before you go off on your rants, writing academic mini-dissertations that are mostly composed of questions and very, very short on answers.

Unless you can be, you know actually helpful, I don't see reading what you have to say.

[Brobdingnagian]

Aside from the negative aspects inherent to these programs, to call them 'temporary' or 'guest' is, at the very least, constructive fraud. Aside from the Asian countries cited (which are not comparable to the U.S.), the 'nothing more permanent than a temporary worker' phenomenon is plain to see.

'The 14th Amendment issue (birthright to guest worker's children) is so overwhelming that I'm always astonished people can discuss anything else downstream of that.'

Which is why that topic is never mentioned by pro-guest worker politicians.

[jason]

This article is a few months old but some questions should still be asked.

1) What has changed about immigration in the last 10 yrs, 20 yrs, or 30 yrs?

2) Why is immigration such a big deal now?

3) How tight is this election going to be?

4) What minority group has the largest population in the US?

5) Which candidate is benefiting from their newly found minority votes?

6) Which candidate has studied social change and would know how to implement that knowledge to capture votes?

7) Fact: Immigration remains relatively unchanged. Question: Why is it a big issue right now? Answer: Look to the polls to see who has gained the most ground as a result of immigration's infatuation and then we can determine who the man, or woman, behind the curtain is.

--Our country is facing issues that are far more pressing than immigration. Immigration is being used as a red herring to throw the election.

[Divorces]

This is a good blogs I have enjoyed very much