Immigration Reform Could Draw More Illegal Workers, Not Fewer

Limiting the number of foreign workers won't necessarily help the economy.

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All sides in the fraught debate over immigration reform want to reduce the flow of illegal workers into the United States. But the framework for a deal that's forming could ultimately draw more illegal workers, especially if the economy improves.

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One key goal of immigration reform is generating the right flow of legal, low-skilled workers from other countries without costing ordinary Americans their jobs. Businesses want a steady supply of workers willing to harvest food, clean hotel rooms, man meat-processing plants or pound nails. Labor groups want to make sure low-skilled immigrants only take jobs when there are no "natives" available, so they don't undercut ordinary Americans by working for less.

The deal that's forming would set limits on the number of temporary work visas that could be granted in a given year, ranging from 20,000 to 200,000, depending on how healthy the economy is. When the economy is weak and jobs scarce, fewer visas would be granted. The number would rise as employment picks up and worker shortages develop in some fields.

But the targets that are emerging may be so strict that during an economic boom, they contribute to labor shortages, which is the very thing that draws illegal workers to the United States in the first place.

Business groups have said in the past they'd like temporary work visas granted to 400,000 people per year. But in negotiations with the AFL-CIO, they agreed to the smaller upper limit of 200,000. "In a boom, 200,000 is not enough," says Madeline Zavodny, a labor economist at Agnes Scott College in Decatur, Ga. and a visiting scholar at the American Enterprise Institute. "That's a really, really low number."

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Some context explains why. There are roughly 135 million working Americans, so 200,000 immigrants per year would amount to a tiny fraction of the total labor force. Construction alone employs about 5.8 million people, with peak employment hitting 7.7 million in 2007.

During a boom, labor shortages don't appear everywhere, but they can be acute in some regions or industries. Even now, for example, in the currently weak economy, it's hard to find farm workers in some areas. And there aren't enough workers in some parts of North Dakota due to that state's energy boom. If limits on foreign immigrants left many jobs unfilled during a boom, it would be an invitation for foreigners to illegally sneak in, and for understaffed companies to hire them.

In a way, that's what happened during the late 1990s, when somewhere between 350,000 and 500,000 illegal immigrants per year came to the United States. Complaints were muted then, because there were plenty of jobs to go around. But when a recession inevitably hits, those illegal workers don't just get up and leave. They tend to stay in communities where they've grown roots and do, in fact, compete more directly with natives for work. That's why there are an estimated 11 million illegal immigrants in the United States now who are intent on staying.

The new limits on legal immigrants might somewhat help the overall economy if they make it easier for those with work visas to go where jobs are available, instead of tying them to a single job or employer, as is generally the case now. It's not clear yet if that kind of flexibility would be included in a big reform proposal, which is still being drafted on Capitol Hill.

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What the new agreement between business and labor groups may ultimately accomplish is providing political cover for both. Economists generally believe that immigration boosts growth and makes the U.S. economy more productive, and that complaints about low-skilled foreigners taking the jobs of hard-working Americans are overstated. By forcing down the number of work visas granted in a given year, labor groups can claim to be protecting American jobs, even if the evidence of that is sketchy. That might also boost the ranks of union members if more foreigners end up working here legally.

Business groups such as the U.S. Chamber of Commerce will probably continue to lobby for looser rules that allow foreign workers to move from job to job, and for fewer regulatory hoops that businesses hiring immigrants must jump through. That might make hiring easier, but it will be a long time before we can tell whether it does any good for the overall economy.

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.