Silicon Valley billionaires and near-billionaires are attempting to influence public opinion on the immigration issue, with a $50 million Political Action Committee. Their employees should consider whether their interests would be served by organizing in a truly aggressive isolationist union, like the 1950s United Auto Workers. After all, if the world market for computer scientists is equalized in price by massive immigration, their living standards will gravitate towards those of Bangalore, their largest single source of supply.
Let’s start with a few first principles. The job of a government in a Westphalian nation state like the United States is to look after the interests of its citizens, including their families who for age or other reasons don’t vote. Those interests may be furthered by helping other countries through foreign aid, by joining the United Nations, the World Bank or other international bodies or by providing benefits to foreigners of one kind or another, but those activities and benefits are secondary; they must meet the tests of furthering the interests of the people to whom the government is responsible.
It is this standard that any immigration reform must pass. Whether legal or illegal, low- or high-skill, the principal effects of high and indiscriminate immigration to a rich country are to lower the living standards and raise the taxes of those already living there. With less than 5% of the world’s population and 21% of Gross World Product, the United States cannot escape this effect; the only question is the immigration level at which it kicks in. This should not be disputable; with nineteen times as many people outside the U.S. as in it, there is the potential for a flood that will overwhelm the capacity of the U.S. economy to provide jobs and of the U.S. welfare system to provide benefits. Unlimited immigration is not therefore an option for a properly constituted U.S. government.
There are three categories of immigrants that should be considered separately: high-skill legal immigrants, low-skill legal immigrants, and illegal immigrants, the vast majority of whom will be low-skill, although some high-skill types may try to circumvent the immigration bureaucracy if it is possible to do so without joining the shadow economy.
Even for high-skill immigrants, the economic law of diminishing marginal returns applies. If the entire 500,000 annual output of India’s computer science colleges were admitted to the U.S., wage levels in that profession would decline to market-clearing levels and very high unemployment would result, not least among the 500,000 annual admissions.
Equally, there’s no question that a modest admission of high-skill immigrants for which there is demand in the workforce is beneficial. While there is some depressing effect on local wage levels from greater competition, there is also a substantial wealth-enhancing effect from the contributions of the high-skill immigrants themselves. At some point, the two effects balance out; the marginal additional immigrant reduces per capita wage levels in the industry by just enough to balance the additional benefit to industry growth of his or her own contribution.
In an ideal world, we would design an auction system for high-skill immigration, which would set the number of H1-B visas issued annually at exactly the point which optimized the welfare of the domestic electorate and its families. In practice, there doesn’t seem any way to do this. The benefits of each new visa accrue mostly to the immigrant (whose wage is presumably increased above the level available elsewhere) and to his employer, while the costs are diffused among the entire community of his workforce competitors. That doesn’t make for a good auction.
However, the alternative, of a quota set by bureaucrats, is subject to vicious lobbying by the pro-immigration crowd, such as the Silicon Valley billionaires referred to above. When you add to the power of lobbyists the power of businesses seeking low-wage drones for their most labor-intensive operations, the scale in Washington is preposterously tilted before the negotiation starts, even without the offensive propaganda from the media and groups purporting to represent the various ethnic minorities.
Probably the ideal solution for immigration legislation relating to high-skill immigration would be to sell “green card” visas to high-skill immigrants, with the cost set at say five years’ worth of the income currently required to sign an “Affidavit of Support” for a new entrant (five years being the normal time between immigration and citizenship.) Since the Affidavit of Support required income is currently 125% of the official poverty level, that calculation would today give a cost per visa of $86,175. That cost could be paid by the applicant, by his employer or by some combination of both; financing schemes to amortize the cost against the applicant’s earnings would presumably be available.
With that cost universally applied, and visas for high-skill employees otherwise unrestricted, we would have some assurance that economic skill shortages would quickly be filled and that domestic workforce competitors would be substantially protected by the cost of bringing in competition. Foreign graduates of STEM courses in the U.S. would equally be able to apply for these visas — $86,175 will after all be a mere fleabite compared with the rest of their college debt!
The same principle, of visas available for an $86,175 fee, could also be applied to low-skill applicants who had an offer of employment – if there was a crazed construction boom in say Atlanta that required extra bricklayers, or a bumper harvest in California requiring extra apple-pickers, the local construction companies or growers would be welcome to pay the fee and get new labor. Of course, in practice it would almost always be cheaper for these low-skill employers to obtain extra labor from the local pool of unemployed, even if they had to pay higher wages to attract the labor they needed.
The question of admitting relatives is a different one. While technically an immigrant should have to gain citizenship before his interests are validly considered by the political system, in practice the hardship involved in delaying relatives’ applications for five years seems undesirable, especially in the case of minor children of the immigrant. Thus we can reasonably allow an immigrant who is already admitted to bring in one wife lifetime (including, inevitably, gay “wives” if gay marriage has become legal) plus any minors that are legitimate offspring of that union – of course the same privilege would be extended to full citizens. Brothers, sisters, subsequent wives, parents, grandparents, grandchildren and illegitimate children who were genetically the offspring of immigrants could then be brought in for a fee of two years’ support ($34,470) while more distant relatives would receive no special privileges over the general foreign population.
It might then be possible to offer visas completely without condition (other than a health and criminal records check) for a fee double that of skilled or pre-employed applicants, in other words $172,350, the cost of ten years “support.” However the current visa lottery and extended chain family migration would be ended.
Illegal immigrants would similarly be able to obtain visas on an unrestricted basis, at a cost of $172,350, or $86,175 if they could prove employment for a period of perhaps a year.
Overall, such a system would reduce immigration, and refocus it on workers whose skills genuinely enhanced the U.S. economy. For the immigrants, the principal benefit would be in reducing the administrative delays to a minimum on payment of the relevant fee. The very substantial fees paid would pre-pay the welfare and medical costs of those immigrants who fell on hard times, would cover the costs of the immigration system and would reimburse the existing population, through lower taxes, for the costs in wage competition and stressed welfare rolls of admitting new immigrants.
This immigration system would be completely race- sex- and origin- blind, would more than pay for itself, would enable genuine labor shortages to be filled and would cover the costs to the existing population of new arrivals. It is thus greatly superior to any currently proposed and likely to pass Congress – and does not require the delicate flowers employed in Silicon Valley to go the way of the auto workers!
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)