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Why Not an Auction?

Irwin M. Stelzer

At some point, our border will be secure, resistance to deporting felons will collapse, and we will have accepted the fact that Dreamers will be allowed to stay in this country, probably on a path to citizenship. That’s the easy part.

It is easier to decide who we don’t want here than who we do. Here’s a start on a coherent federal immigration policy, one that satisfies the security and economic interests of our nation, but allows for the introduction of humanitarian principles consistent with our values. It is based on a two-step rule.

Rule 1: Set a limit on total immigration. Say, 50,000 per year. Arbitrary? Sure, but it can be reviewed annually, perhaps adjusted in response to changing labor-market conditions—down in periods of rising unemployment, up if tight labor market conditions threaten an inflation upsurge. Such a limit is necessary because things have changed since the days when we welcomed virtually unlimited numbers of Jews, Italians, Irish, and other groups that constituted the huddled masses knocking on our door. There was no welfare state in those days, so people who came were clearly in search of opportunity, willing to take risks and work hard for a better life. That alone skewed the incoming pool in favor of those who would eventually enrich the lives of their hosts. What’s more, the idea of multiculturalism had not taken hold: All pressures were to assimilate, to rise out of the ghetto into broader society by, among other things, learning English and adopting the ways of the New World, preserving only those aspects of the old that did not contradict the mores of the new.

Rule 2: Adopt a system that has the effect of enriching our citizens by filling that annual quota with immigrants who are likely to increase the well-being of the existing citizenry, relying heavily on the market to determine just who those immigrants are.

At the moment, countries that try to restrict the inflow to the most productive applicants rely on bureaucrats to decide which skills are most needed, and assign points to applicants possessed of those skills. If recollection serves, in Australia social workers received more points than economists, a system that is clearly flawed, at least in the view of this practitioner of the dismal science.

But there are a couple of more serious flaws. Issuing permits without charge is an invitation to corruption. Those rich enough to pay a bribe, but not rich enough to be eligible for the special treatment we accord the very rich, will dangle cash before the eyes of bureaucrats who know they are underpaid. Or permits will be used to undermine existing wage scales and employment opportunities for Americans, as a new academic study shows the high-tech H1-B visa program has done. Or they will be used as an incentive to encourage employers to open their wallets when the time for campaign contributions rolls around.

The second flaw is that bureaucrats have no way of knowing which applicants for visas will most enrich our citizens. They cannot react as quickly to the changing demand for labor as can a market-based system of visa issuance, and they have a natural tendency to believe that what a country needs is more people like themselves, or whichever sort of worker a noisy constituent claims is in short supply. I recall once suggesting to a Department of Labor economist in charge of projecting the market for various skills that in addition to tweaking his models he wander around several neighborhoods and look at the help-wanted signs in store windows. He thought that a ludicrous idea.

The Canadian system, which requires bureaucrats to assign points to prospective immigrants, the system that President Trump unthinkingly holds up as a model, just doesn’t work, as the pro-immigration New York Times recently pointed out. “The formula has changed over the years, with points for training and job categories rising or falling as officials’ ideas on job readiness changed. .  .  . Head scratching.” Worse, one province decides it needs long-distance truck drivers, another food and beverage processors. There is no sensible way to balance regional interests to produce a permit allocation that is in the national interest. “I teach this stuff and I find it confusing. It’s inherently confusing, plus it keeps changing,” Professor Audrey Macklin, director of the University of Toronto’s Center for Criminology and Sociolegal Studies, told the New York Times.

There is a better way to decide which immigrants are most likely to raise our per-capita GDP, increasing the wealth of our native-born workers. It has long been a topic of discussion among economists and, enriched or encumbered (you decide) by a few of my own variants, goes something like this. Auction off available permits to import workers, divided into two classes: permanent residents, with a right to work—a green card but no assured path to citizenship—and temporary permits. Employers will reflect in their bids their appraisal of what each worker will add to their output and profits in the long run. Almost by definition, the winning bidders will be bringing in workers who will be adding to the income of the nation, benefiting existing residents.

Employers will be allowed to use any visas they have won by drawing from a pool of “extreme vetted” applicants for entry, which covers the national security question just about as well as it can be covered. And if the firm does not have a health care plan, the employer would be required to provide insurance coverage, so that the immigrant could not impose costs on society, and so that immigrant workers would not be used to derogate the quality of the social net provided native-born workers.

There is an important ancillary benefit of this scheme. By raising the cost of hiring an immigrant, downward pressure on domestic wages would be alleviated, and the relative attractiveness of training a native-born worker would be increased. We do need apprenticeship and other programs to train and retrain our work force, and have learned that most government programs are at the very best marginally useful. Providing an incentive to private-sector employers to take on this role can only result in more effective programs.

In the case of the temporary (e.g., seasonal) permits, the employer would post a bond, refundable upon proof that the worker had left the country when his/her visa had expired. Over time, employers would learn which workers were most efficient and might raise the bids for permits for those workers every year. We would soon learn whether agribusinesses are correct when they say that Americans simply won’t take these sorts of jobs, their alternative being to spend hard cash on temporary visas.

The proceeds of the bidding would go to communities and groups impacted by the new immigrants, with an emphasis on the unskilled Americans who, according to Harvard economist George Borjas, have suffered as much as a 6 percent wage cut from the present system, and will undoubtedly suffer from the new one. Though not as much as under the proposed system, since the employer will have to pay not only the U.S. minimum wage, but the visa fee, making it less likely that he can save significant money by bringing in foreign workers.

What about our values? Is the ability of an employer to pay for a visa for a prospective employee all that should matter? As a son of an immigrant—the phrase we immigration policymakers like to use to demonstrate our sympathy for the sort of immigrants our fathers and mothers were—I would rely on a refugee/asylum policy rather than an immigration policy to meet humanitarian needs of people who cannot be helped by cash and other aid to stay where they are. Tales abound of small towns across the country, abandoned by manufacturing and then by retail and service establishments, losing population, that have been revived by immigrants. There are other communities that do not want to bear the social costs of immigration—more crowded schools, learning slowed by language problems, pressures on hospital emergency rooms. So instead of having the federal government sneak immigrants into states with governors who do not welcome these newcomers, let cities and states that choose to do so ask the federal government to send the immigrants to them as part of programs to revive communities suffering from population shrinkage.

No need to mutter or shout. I can hear “The devil is in the details” hurled at me as you read this. I would prefer the original expression: God is in the details. But either way, details do matter. If anyone can devise a detail-free immigration policy, I would gladly withdraw this suggestion.

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