Flawed Assumptions Underlying Guestworker Programs (Testimony)

Testimony before the U.S. House of Representatives Committee on the Judiciary Subcommittee on Immigration, Border Security, and Claims

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Thank you, Mr. Chairman and members of the subcommittee, for the opportunity to speak before you. Rather than discuss the many specific guestworker proposals that have been introduced in this Congress, I’d like to take this opportunity to examine some of the premises underlying guestworker programs in general. In other words, what things must be true in order for a guestworker program to be advisable? If those things are not true, then the adoption of a guestworker program would be a mistake.

There are many premises or assumptions behind support for a guestworker program, but I will examine only three of the more important ones. I will not examine the assumption that guestworkers will actually return home; every example in human history has shown that to be false, because there is nothing more permanent than a temporary worker. It is perhaps for that reason that none of the guestworker programs before Congress even pretends to be a temporary worker program; instead, all of them provide for permanent immigration.

The assumptions I will examine are three: 1) Immigration is an unstoppable force that we have to accommodate one way or another; 2) Foreign workers are essential because there is work that simply cannot be done without them; and 3) The federal government has the capacity to manage a guestworker program properly.

Is Immigration Inevitable? The bedrock assumption underlying the debate of the last several years over guestworker programs is that the flow of workers from Mexico and elsewhere is unstoppable – a natural phenomenon like the weather or the tides, which we are powerless to stop. Therefore, it is said, managing the flow in an orderly and lawful manner is preferable to the alternative. As one observer recently said, “The mission to Mars is probably easier than the attempt to control the border.”

On the surface, the flow of Mexican immigration, in particular, may indeed seem inevitable; it is very large, rapidly growing, and spreading throughout the country. But a longer view shows that this flow has been created in large part by government policies, both in the United States and Mexico. And, government policy having created the migration flows, government policy can interrupt the flows, though a social phenomenon like this is naturally more difficult to stop than to start.

Migration is often discussed in terms of pushes and pulls – poverty, corruption, oppression, and general societal dysfunction impel people to leave their homelands, while liberty, high wages, and expanded economic and social opportunities attract people to this country. While true, this analysis is incomplete because it overlooks the connection between the sending country and the receiving country.

No one wakes up in Timbuktu and says, “Today I will move to Buffalo!” – migration takes place by way of networks of relatives, friends, acquaintances, and fellow countrymen, and few people immigrate to a place where these connections are absent. Consider two countries on the other side of the planet – the Philippines and Indonesia. Both have large, poor populations, they are neighbors and share many cultural similarities, yet there are more than one million Filipino immigrants in the United States and only a handful of Indonesians, and annual immigration from the Philippines is routinely 40-50 times greater than immigration from Indonesia. Why? Because the ties between the United States and the Philippines are numerous and deep, our having colonized the country for 50 years and maintained an extensive military presence there for another 50 years. On the other hand, the United States has very few ties to Indonesia, whose people tend to migrate to the Netherlands, its former colonial ruler.

At the end of the Mexican War in 1848, there were only a small number of Mexican colonists living in the Southwest, many of whom soon returned to Mexico with the Mexican government’s assistance. The migration of Mexican workers began in a small way with the construction of the railroads beginning in the 1870s and later with the expansion of other industries. But the process of mass migration northward to the United States, and the development of the networks which made further immigration possible, began in earnest during the Mexican Revolution of 1910-1920. The Cristero rebellion of the late 1920s was the last major armed conflict in Mexico and was centered in the states of west-central Mexico; partly to prevent further trouble, the newly consolidated Mexican regime adopted a policy of encouraging emigration from these very states. The power of government-fostered migration networks is clear from the fact that even today these same states account for a disproportionate share of Mexican immigrants to the United States.

On the U.S. side, federal policies that established migration networks between the United States and Mexico arguably began in the 1920s, when Congress specifically excluded the Western Hemisphere from the newly enacted immigration caps so as not to limit the flow of Mexican immigrants. Then in 1942, the Bracero Program to import Mexican farmworkers was started under the cover of World War II, and it continued until 1964. About 4.6 million contracts were issued to Mexican workers (many were repeat contracts for workers who returned several times, so that an estimated one to two million individuals participated). By creating vast new networks connecting the United States and Mexico, the Bracero Program launched the mass illegal immigration we are still experiencing today. Illegal immigration networks were reinforced by the IRCA amnesty of 1986, which granted legal status to nearly three million illegal aliens, at least two-thirds of whom were Mexican. This new legal status conferred by the federal government generated even more immigration, legal and illegal, as confirmed by a 2000 INS report. And the federal government’s effective abandonment of the ban on hiring illegal aliens has served to further promote immigration from Mexico.

As a result of this series of government decisions, the flow of Mexican immigration to the United States is quite large. The total Mexican immigrant population (legal and illegal) ballooned from less than 800,000 in 1970 to nearly eight million in 2000, and is around 10 million today, most having arrived since 1990. This rapid growth has created a snowball effect through the reinforcement of old networks and the establishment of new ones. If present trends continue, within a few years Mexico will have sent more immigrants to the United States in 100 years than Germany (currently the leading historical source of immigrants) has in more than 200 years.

So, far from being an inevitable process with deep historical roots, mass immigration from Mexico is a relatively recent phenomenon created by government policies. This is even more true for other sources of immigration to the United States, such as Cuba, India, Central America, Russia, Vietnam, and elsewhere.

Even though the federal government is responsible for creating the illegal immigration wave, perhaps the toothpaste is out of the tube, perhaps it is too late to do anything about it now. There is no question that interrupting migration networks is harder than creating them. It is not, however, impossible – after all, the trans-Atlantic immigration networks from the turn of the last century were successfully interrupted, and atrophied completely. And, to move beyond theory, the few times we actually tried to enforce the immigration law, it has worked – until we gave up for political reasons.

During the first several years after the passage of the IRCA, illegal crossings from Mexico fell precipitously, as prospective illegals waited to see if we were serious. Apprehensions of aliens by the Border Patrol – an imperfect measure but the only one available – fell from more than 1.7 million in FY 1986 to under a million in 1989. But then the flow began to increase again as the deterrent effect of the hiring ban dissipated, when word got back that we were not serious about enforcement and that the system could be easily evaded through the use of inexpensive phony documents.

After 9/11, the immigration authorities conducted a “Special Registration” program for visitors from Islamic countries. The affected nation with the largest illegal-alien population was Pakistan, with an estimated 26,000 illegals here in 2000. Once it became clear that the government was actually serious about enforcing the immigration law – at least with regard to Middle Easterners – Pakistani illegals started leaving in droves on their own. The Pakistani embassy estimated that more than 15,000 of its illegal aliens left the U.S., and the Washington Post reported last year the “disquieting” fact that in Brooklyn’s Little Pakistan the mosque is one-third empty, business is down, there are fewer want ads in the local Urdu-language paper, and “For Rent” signs are sprouting everywhere.

And in an inadvertent enforcement initiative, the Social Security Administration in 2002 sent out almost a million “no-match” letters to employers who filed W-2s with information that was inconsistent with SSA’s records. The intention was to clear up misspellings, name changes, and other mistakes that had caused a large amount of money paid into the system to go uncredited. But, of course, most of the problem was caused by illegal aliens lying to their employers, and thousands of illegals quit or were fired when their lies were exposed. The effort was so successful at denying work to illegals that business and immigrant-rights groups organized to stop it and won a 90 percent reduction in the number of letters to be sent out.

Immigration control is not a pipe dream, or achievable only with machine guns and land mines on the border. We need only the political will to uphold the law using ordinary law-enforcement tools, and to resist measures that make things worse, such as new guest-worker programs. Once the message gets out that it’s no longer business as usual, the illegal population will shrink through attrition, reducing the problem over several years to a manageable nuisance rather than a crisis.

Jobs Americans won’t do? A second premise of a guestworker program is that there are essential jobs Americans simply won’t do, and foreigners, either as illegal aliens or as guestworkers, must be imported to do them.

It is indeed likely that middle-class Americans would not be interested in most of the jobs held by Mexican immigrants, because they are generally low-paying jobs done by unskilled workers. However, it is also clear that there are millions of Americans who are already doing precisely these kinds of jobs. In March 2003, there were 8.8 million native-born adults without a high-school education who were employed, 1.3 million native-born dropouts unemployed, and a further 6.8 million not even in the work force. There is a good deal of evidence that these Americans – nearly 17 million people – are in direct competition with Mexican immigrants – i.e., these are jobs that Americans will do and are doing already.

With the exception of agricultural labor, Mexican-born workers and unskilled native-born workers have a similar distribution across occupations. Thus, natives who lack a high school education and Mexican immigrants appear to be doing the same kind of jobs and are therefore in competition with one another. Another way to think about whether Mexican immigrants compete with unskilled native-born workers is to look at their median wages. If Mexican immigrants were employed in jobs that offered a very different level of pay than native-born dropouts, then it would imply that the two groups do very different kinds of work. But, in fact, the median wage of Mexican immigrants and native-born high school dropouts is very similar; the median weekly wage for native-born high school dropouts who work full time is $350, while the median weekly wage for full-time Mexican immigrants is $326. Like their distribution across occupations, the wages of the two groups seem to indicate that they hold similar jobs. Indeed, a 1995 report by the Bureau of Labor Statistics concluded that native-born and immigrant high school dropouts are almost perfect substitutes for one another in the labor market.

The idea, then, that there are “jobs Americans won’t do” is simply false. But what would be the result of reducing illegal immigration without replacing it with a guestworker program? In other words, what would happen if there were fewer of the people industry lobbyists have labeled “essential workers”?

Elementary economics gives us the answer. Employers would respond in two ways to a tighter labor market; first, they would raise wages, increase non-cash benefits, and change working conditions in order to recruit and retain a sufficient workforce. And second, they would look for ways of making their available workers more productive so as to make up for some of the jobs previously done by foreign labor. The result would be a smaller number of unskilled workers, each earning higher wages.

As to the first part of the employer response: The employment prospects of the 17 million working-age native-born high-school dropouts mentioned above would improve dramatically. In fact, employers would begin to look more favorably upon any potential worker not currently in the mainstream of the economy – former welfare recipients, teenagers, young mothers looking for part-time work, the handicapped, ex-convicts, the elderly, et al. Adam Smith expressed it with an 18th-century candor unlikely to be heard today: “The scarcity of hands occasions a competition among masters, who bid against one another, in order to get workmen, and thus voluntarily break through the natural combination of masters not to raise wages.”

There would clearly appear to be a need for this first part of the employer response. The inflation-adjusted wages of full-time workers with less than a high school education actually declined more than 7 percent during the booming 1990s. The drop in wages was even more pronounced among the subset of the low-skilled workforce which would be most immediately affected by a guestworker program – farmworkers. According to a March 2000 report from the Department of Labor, the real wages of farmworkers fell from $6.89 per hour in 1989 to $6.18 per hour in 1998 – a drop of more than 10 percent.

Nor would higher wages for the unskilled fuel inflation to any significant degree. Since all unskilled labor – from Americans and foreigners, in all industries – accounts for such a small part of our economy, perhaps four percent of GDP, we can tighten the labor market without any fear of sparking meaningful inflation. Agricultural economist Philip Martin has pointed out that labor accounts for only about ten percent of the retail price of a head of lettuce, for instance, so even doubling the wages of pickers would have little noticeable effect on consumers.

So the first part of the employer response to a tighter labor market would be that the poor would see their wages increase due to the natural workings of the free market. The second part of the employer response would be to find ways of doing the same work as before with fewer workers, thus making each worker more productive. Again, this is elementary economics. In a sense, a reduction in illegal immigration (absent a guestworker program) would serve as the free-market equivalent of increasing the minimum wage through legislative fiat. And, as the Cato Institute has written, “higher minimum wages go hand-in-hand with substantial declines in the employment of low-productivity workers.” Unlike minimum wage laws, however, which may price low-productivity American workers out of the market, tighter immigration laws would simply eliminate the unnecessary jobs that we are now importing foreign workers to fill.

Conversely, instituting a guestworker program would lower wages, increase the employment of low-productivity workers (whom we would import), and thus slow the process of technological innovation and increased productivity. A 2001 report by the Federal Reserve Bank of Boston highlights this problem by warning that a new wave of low-skilled immigrants over the course of this century may slow growth in U.S. productivity.

That this is so should not be a surprise. Julian Simon, in his 1981 classic, The Ultimate Resource, wrote about how scarcity leads to innovation:

It is all-important to recognize that discoveries of improved methods and of substitute products are not just luck. They happen in response to scarcity – a rise in cost. Even after a discovery is made, there is a good chance that it will not be put into operation until there is need for it due to rising cost. This point is important: Scarcity and technological advance are not two unrelated competitors in a Malthusian race; rather, each influences the other.

This is true not only for copper or oil, but also for labor; as wages have risen over time, innovators have devised ways of substituting capital for labor, increasing productivity to the benefit of all.

For instance, the period from 1960 to 1975 (roughly from the end of the Bracero Program to the beginning of today’s mass illegal immigration) saw considerable mechanization in agriculture. Despite claims by California farmers that “the use of braceros is absolutely essential to the survival of the tomato industry,” the end of the program created the incentives that caused a quintupling of production for tomatoes grown for processing, an 89 percent drop in demand for harvest labor, and a fall in real prices.

But a continuing increase in the acreage and number of crops harvested mechanically did not materialize as expected, in large part because the supply of workers was artificially large (and thus wages artificially low) due to growing illegal immigration – the functional equivalent of a guestworker program.

An example of a productivity improvement that “will not be put into operation until there is need for it due to rising cost,” as Simon said, is in raisin harvesting. The production of raisins in California’s Central Valley is one of the most labor-intensive activities in North America. Conventional methods require bunches of grapes to be cut by hand, manually placed in a tray for drying, manually turned, manually collected.

But starting in the 1950s in Australia (where there was no large supply of foreign farm labor), farmers were compelled by circumstances to develop a laborsaving method called “dried-on-the-vine” production. This involves growing the grapevines on trellises, then, when the grapes are ready, cutting the base of the vine instead of cutting each bunch of grapes individually. This new method radically reduces labor demand at harvest time and increases yield per acre by up to 200 percent. But this high-productivity, innovative method of production has spread very slowly in the United States because the mass availability of foreign workers has served as a disincentive to farmers to make the necessary capital investment.

And, despite the protestations of employers, a tight low-skilled labor market can spur modernization even in the service sector: automated switches have replaced most telephone operators, continuous-batch washing machines reduce labor demand for hotels, and “fast-casual” restaurants need much less staff than full-service ones. Unlikely as it might seem, many veterans’ hospitals are now using mobile robots to ferry medicines from their pharmacies to various nurse’s stations, eliminating the need for a worker to perform that task. And devices like automatic vacuum cleaners, lawn mowers, and pool cleaners are increasingly available to consumers. Keeping down low-skilled labor costs through a guestworker program would stifle this ongoing modernization process.

Administrative Feasibility In any large government program, plans on paper must translate into policies on the ground. Any guestworker program would require extensive background checks of prospective workers as well as simple management of the program – checking arrivals, tracking whether a worker is still employed, enforcing the departure of those who are supposed to leave. Supporters of guestworker programs seldom address this question but assume implicitly that the government has the administrative capacity to carry out whatever plans they can devise.

But it is not explained how the immigration bureaus within the Department of Homeland Security are supposed to be able to accomplish these goals. The service and enforcement bureaus are already groaning under enormous workloads. The General Accounting Office reported recently that the backlog of pending immigration applications of various kinds was at 6.2 million at the end of FY 2003, up 59 percent from the beginning of FY 2001.

What’s more, the immigration bureaus are implementing vast new tracking systems for foreign students and visitors. The crush of work has been so severe, that many important deadlines established by Congress have already been missed.

And the context for all this is a newly created Department of Homeland Security, which incorporates pieces of the old Immigration and Naturalization Service and many other agencies in various combinations. The reorganization process is still very new (the department having coalesced only in March 2003), and it is extremely unlikely that any new guestworker program could be effectively managed in the midst of a thoroughgoing institutional overhaul.

Another aspect of inadequate administrative capacity is in the Labor Department. Any guestworker plan that would actually be passed by Congress would inevitably contain some kind of nominal protections for American workers, though none exist in the current proposals. But such protections would mirror the current labor certification process, whereby certain categories of permanent and temporary visas have prevailing-wage and labor-market tests. The problem is that the Labor Department can’t carry out these duties adequately now, let alone when millions of additional assignments a year are added to the heap. What’s more, the very idea carries a whiff of the command economy about it; I mean no disrespect toward federal employees, but if it were possible for bureaucrats to determine prevailing wages and labor-market conditions in an accurate and timely fashion, then the Soviet Union would never have collapsed.

The result of overloading administrative agencies with the vast and varied new responsibilities of a guestworker program would be massive fraud, as overworked bureaucrats start hurrying people through the system, usually with political encouragement. A January 2002 GAO report addressed the consequences of such administrative overload. It found that the crush of work has created an organizational culture in the immigration services bureau where “staff are rewarded for the timely handling of petitions rather than for careful scrutiny of their merits.” The pressure to move things through the system has led to “rampant” and “pervasive” fraud, with one official estimating that 20 to 30 percent of all applications involve fraud. The GAO concluded that “the goal of providing immigration benefits in a timely manner to those who are legally entitled to them may conflict with the goal of preserving the integrity of the legal immigration system.”

Although we are not discussing amnesty programs, the amnesty included in the Immigration Reform and Control Act (IRCA) of 1986 is a case study of how administrative overload leads to massive fraud. The part of the amnesty called the Special Agricultural Worker (SAW) program was especially outrageous in this regard. There were nearly 1.3 million applications for the SAW amnesty – double the total number of foreign farm workers usually employed in the United States in any given year, and up to six times as many applicants as congressional sponsors of the scheme assured skeptics would apply. INS officials told The New York Times that the majority of applicants in certain offices were clearly fraudulent, but that they were approved anyway, since the INS didn’t have the administrative wherewithal to prove the fraud. Some women came to interviews with long, painted nails, while others claimed to have picked strawberries off trees. One woman in New Jersey who owned a five-acre garden plot certified that more than 1,000 illegal aliens had worked on her land.

Such fraud is a problem not just because it offends our sensibilities but because any large guestworker program would enable ineligible people to get legal status – people like Mahmud “the Red” Abouhalima, an Egyptian illegal-alien cabbie in New York, who got amnesty as a farmworker under the 1986 law and went on to help lead the first World Trade Center attack. Having an illegal-alien terrorist in your country is bad; having one with legal status, even as a temporary worker, is far worse, since he can work and travel freely, as Abouhalima did, going to Afghanistan to receive terrorist training only after he got amnesty.

Nor can we assume that guestworkers from Mexico would necessarily be harmless, and therefore not need to be scrutinized closely. Iraqi-born alien smuggler George Tajirian, for instance, pled guilty in 2001 to forging an alliance with a Mexican immigration officer to smuggle Middle Eastern illegals into the United States via Mexico. And late last year the former Mexican consul in Beirut was arrested for her involvement in a similar enterprise. It is, therefore, certain – certain – that terrorists would successfully sneak operatives into the United States by way of a guestworker program managed by our overwhelmed bureaucracy.

To sum up: None of the commonly held assumptions underlying support for a guestworker program is valid. There may well be other reasons to support such a program – a desire by employers to force down the wages of their employees and prevent unionization, for instance, or a desire by immigrant-rights groups to increase the size of their ostensible constituencies. But none of the reasons usually presented by proponents is grounded in fact.

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The tack this expert witness has taken is to demolish assumptions.

Having done research for a year, I am too well aware that any framework or assumptions are ultimately false. They are set up to simplify and used in decision making. Perhaps that is why financial concepts such as CAPM, EVA and etc can all be destroyed. Yet, people have continued to use them because we lack something better.

That is, if this expert witness were to turn around and examine the assumptions behind anti-terrorism policies, he would be able to find assumptions that are false.

What does that mean? It mean that we can take any policy and we still would not know how it might turn out. Do scarcity necessarily lead to innovation? If you look at Japan, Australia and etc, yes.

If you look at other poor countries that also faced scare resources, no.

I'm a baby-boomer who had it beat into my head back in the '70's that there were too many people on the planet, too many people in the U.S. for our ecology to support, and that it was my "duty" to limit the number of kids I had.

Now I'm told there's a labor shortage, essentially a population shortage, and we need to import foreign laborers.

So I limited my family size to make room for wetbacks?
I've been lied to, and I'm p!ssed!

Sorry to hear about the crap they told you, I was too young to have gone through that. Besides if they had it would not have mattered, nature has a tendency to control me so I still would have had lots of kids.

... in other words, allowing in illegal aliens and "guest workers" lowers the wage base and available employment for American citizens competing for the "unskilled" jobs available in America.

I wonder what the change would be in our unemployment numbers and societal costs?

Stopping illegal immigration and the flood of illegal workers and welfare queens would be a huge electoral plus for Republicans. But they won't do it. They are too afraid of offending the Hispanic panderers, corporate donors and the PC mavens.

So, I guess we'll all just have to learn to speak Spanish, pony up more tax dollars and allow our less skilled to keep becoming welfare shlumpfs while illegals continue to take over the job base and send their billions back to Mexico or wherever they came from!

"They are too afraid of offending the Hispanic panderers, corporate donors and the PC mavens."

And yet in http://www.miami.com/mld/miamiherald/8356575.htm?template=contentModules/printstory.jsp hispanics "support the idea of prohibiting undocumented immigrants from receiving government aid such as food stamps and Medicaid."

"So, I guess we will have to learn how to speak Spanish, pony up more tax dollars and allow our less skilled to keep becoming welfare shlumpfs while illegals continue to take over the job base and send their billions back to Mexico or wherever they came from!"

I have a better idea....let's start electing politicians who are going to carry out the will of the people.

"To sum up: None of the commonly held assumptions underlying support for a guestworker program is valid."
"none of the reasons usually presented by proponents is grounded in fact."

Why don't American voters mind being LIED to by their political heroes?

“The masses live by, and are ruled by, subconscious and emotional thought process. The crowd has never thirsted for the truth. It turns aside from evidence that is not to its taste, preferring to glorify and to follow error, if the way of error appears attractive enough, and seduces them. Whoever can supply the crowd with attractive emotional illusions may easily become their master; and whoever attempts to destroy such firmly entrenched illusions of the crowd is almost sure to be rejected.”

Is it just me or does anyone else find it amazing that our government can track a cow born in Canada almost three years ago, right to the stall where she sleeps in the state of Washington. Also our excellent FDA detectives can track her calves to their different farms and milk stalls. But the ICE agents are unable to locate 11 million illegal aliens wandering around our country.

The solution is to give every illegal alien a Mad cow. Then turn the search over to the FDA.

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