Immigration as random rationing

Alan Reynolds
Posted: Dec 01, 2005 12:05 AM

President Bush has reopened a badly needed discussion about comprehensive immigration reform. Even with the few issues he talked about, however, facts are commonly brushed aside in favor of linguistic confusion.
Critics of the president's proposals would surely have been verbally disarmed if the president had emphasized the need to register illegal aliens, for purposes of security and tax collection, rather than labeling that registration process as a "temporary worker" program. Many of those critics seem to have trouble with the English language, confusing the word "temporary" with permanent. Yet in 2003 alone, "roughly 3 million people were admitted as temporary residents," according to the Congressional Budget Office (CBO). That included 593,000 temporary workers and an even larger number of temporary students. Yet nobody has yet claimed all those temporary guests were granted "amnesty."

 The CBO estimates that "181 million people were (legally) admitted to the United States as non-immigrants in 2003," mostly as tourists -- a figure nearly as large as the entire U.S. adult population. "Closing the borders" is a soundbite, not a serious suggestion.

 The president and his critics discuss only the illegal portion of immigration, and only that portion of illegal immigrants who crossed the Mexican border by land. But illegal immigrants accounted for only 28 percent of the total immigrant population in 2003, according to the Urban Institute. And the bureaucratic way we ration immigration quotas, with arbitrary priorities and multi-year waiting lists, clearly increases the incentive to evade the system.

 The Mexican border accounts for only about half of illegal immigration, or one-sixth of total immigration. Those who focus too exclusively on the Mexican border often cite the Pew Hispanic Center's estimate of 11 million illegal immigrants because it is larger than any official count. Yet that same study says only 6 million of those 11 million came from Mexico -- a share that remained "virtually unchanged for the past decade."

 Roughly half of illegal immigrants, including many Mexicans, arrived here perfectly legally, often by air or sea. But they overstayed their visas. If the institutional incentives to reside in the United States illegally remain unchanged, then tightening the Mexican border would be like putting up a "detour" sign -- diverting a larger share of illegal immigration toward arrival by air, sea or the Canadian border.

 Although immigration policy has usually been left to immigration lawyers, it is entirely a matter of rationing and incentives -- the purview of economics. In April 1998 testimony before the House judiciary subcommittee on immigration, I said: "Immigration policy is about rationing something of great value -- the right to live in the United States. The question boils down to methods and criteria of rationing a relatively small number of spaces among a much larger number of people who would like to live in the United States. There are only four possible rationing methods -- the queue, the lottery, allocation by political or bureaucratic preference, or the price system (a fifth option, of course, is to immigrate illegally). Current policy mainly relies on a mixture of political preference categories and the queue, although the lottery is used, too."

 The problem is not immigration per se, but immigration policy.

 There is no quota for spouses and children of U.S. citizens, so marriage and adoption are two routes by which immigration became much easier and larger than Congress expected in 1990, when it set quotas on every other group except refugees and asylum-seekers (the latter are illegal immigrants with a lawyer). Since Mexico and the Philippines became the two leading sources of U.S. immigrants around 1970, the post-1965 U.S. preference for family members perpetuates that same Mexican and Philippine dominance of immigration queues. To patch over this congressionally mandated favoritism with masking tape, Congress added a ludicrous "diversity lottery" by which up to 50,000 immigrants are admitted by sheer luck, just to give members of the Taliban and Bath Party a fair chance.

 Relatives who are not part of the immediate family, such as siblings and adult children, are limited to 226,000 a year, and no one country can comprise more than 7 percent of that. As a result, the usual waiting period is a dozen years, but it's worse for those from Mexico and the Philippines. "In February 2005," said The Economic Report of the President, "Filipinos who immigrated as siblings of U.S. citizens had waited 22 years for their green cards."

 Such primitive non-price methods of rationing always work badly, partly because they cannot deal with varying intensity of motivation. Using long waiting lists to ration entry encourages frivolous and insincere applications, but discourages the most skilled or affluent people who have other attractive options, such as moving to Canada or Australia, where they are quite welcome.

 It would be easy to make partial use of the price system to alleviate such obvious rationing problems as 22-year waiting lists and lotteries. An auction of available spaces might be ideal. But a big step in that direction would be to simply charge a modest immigration fee, as Canada and others do, while offering a loan if immediate payment poses a hardship.

 Immigrants expect to obtain most of the benefits of immigration, yet taxpayers bear all the costs. U.S. taxpayers make other costly commitments to new immigrants, offering services and benefits, yet immigrants make no commitment to the United States other than the modest cost of transportation to and fro. Hundreds of thousands of legal immigrants return to their home countries each year, after a short stay in the United States.

 A modest one-time fee of $2,000 per immigrant (which could be paid by prospective employers) would significantly shorten the waiting lists by thinning-out those applicants with weak, uncertain motivation. That, in turn, would greatly reduce reliance on such clumsy devices as waiting lists and lotteries.

 Clumsy, politicized non-price rationing would doubtless continue. But the most economically destructive quotas -- those on people with superior education and skills -- could be easily fixed by eliminating them. Fortune's Geoffrey Colvin proposed eliminating the post-1990 cap on H1-B visas. Nobel Laureate Gary Becker, writing in The Wall Street Journal, added that we should welcome skilled workers on a permanent basis, not just for a few years. They're both right.

 The president's plans to register illegal immigrants and stem the flow are sensible, but they don't go far enough. Making at least some use of the price system to ration the right to live in the United States, while minimizing the crude alternatives of family preferences, quotas and queues, would provide a much better safety valve than indiscriminate illegal immigration. It would make immigration policy much more rational and successful, and therefore less controversial.