<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
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S. Hrg. 109-536
IMMIGRATION: ECONOMIC IMPACTS
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HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
APRIL 25, 2006
__________
Serial No. J-109-69
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
ARLEN SPECTER, Pennsylvania, Chairman
ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
JOHN CORNYN, Texas CHARLES E. SCHUMER, New York
SAM BROWNBACK, Kansas RICHARD J. DURBIN, Illinois
TOM COBURN, Oklahoma
Michael O'Neill, Chief Counsel and Staff Director
Bruce A. Cohen, Democratic Chief Counsel and Staff Director
C O N T E N T S
----------
STATEMENTS OF COMMITTEE MEMBERS
Page
Cornyn, Hon. John, a U.S. Senator from the State of Texas........ 2
prepared statement........................................... 46
Kennedy, Hon. Edward M., a U.S. Senator from the State of
Massachusetts.................................................. 4
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont,
prepared statement and letter.................................. 58
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 1
WITNESSES
Chiswick, Barry R., UIC Distinguished Professor, Department of
Economics, University of Illinois at Chicago, Chicago, Illinois 9
Freeman, Richard B., Professor of Economics, Harvard University,
and Program Director of Labor Studies, National Bureau of
Economic Research, Cambridge, Massachusetts.................... 5
Holzer, Harry J., Professor of Public Policy, Georgetown
University, Washington, D.C.................................... 11
Siciliano, Dan, Executive Director, Program in Law, Economics,
and Business, Stanford Law School, Stanford, California........ 7
SUBMISSIONS FOR THE RECORD
Chiswick, Barry R., UIC Distinguished Professor, Department of
Economics, University of Illinois at Chicago, Chicago,
Illinois, prepared statement................................... 33
Freeman, Richard B., Professor of Economics, Harvard University,
and Program Director of Labor Studies, National Bureau of
Economic Research, Cambridge, Massachusetts, prepared statement 48
Holzer, Harry J., Professor of Public Policy, Georgetown
University, Washington, D.C., prepared statement............... 53
Siciliano, Dan, Executive Director, Program in Law, Economics,
and Business, Stanford Law School, Stanford, California,
prepared statement............................................. 63
Small Business California, Scott Hauge, President, San Francisco,
California, prepared statement................................. 69
IMMIGRATION: ECONOMIC IMPACTS
----------
TUESDAY, APRIL 25, 2006
U.S. Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 9:32 a.m., in
room SD-226, Dirksen Senate Office Building, Hon. Arlen
Specter, Chairman of the Committee, presiding.
Present: Senators Specter, Kyl, Sessions, Cornyn, Kennedy,
and Feinstein.
OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM
THE STATE OF PENNSYLVANIA
Chairman Specter. Good morning, ladies and gentlemen. It is
9:30, so the Committee on the Judiciary will now proceed with
our hearing today on the economic impact of immigration, a
matter of considerable importance on a far-ranging line of
issues as to what effect immigrants have on our economy. That
is only one of many considerations which are before us in our
deliberations on immigration reform.
We are concerned with the humanitarian aspects of the
United States as a beacon of hope, as it has been for the
centuries of our existence, even before the adoption of the
Constitution, a beacon of hope which brought my parents to this
country. The issue has very far-ranging foreign policy
considerations. Senator Sessions and I spent some time over the
recent recess in South American countries--in Colombia and Peru
and Brazil--and then briefly in the Dominican Republic, and our
immigration bill is being very closely watched, with our
Southern neighbors realizing that we have a right to protect
our borders, but also being very concerned about how we will
treat many people from those countries who are in the United
States, recognizing that many of them are here illegally.
We face a situation with 11 million undocumented
immigrants. Nobody is sure of the exact number. We recognize
the needs for guest workers. The President has proposed a guest
worker program, as has Speaker Hastert, as have the Senators
who structured the Committee bill to have a guest worker
program.
Today we are going to be looking at a number of complex
questions about what is the economic impact of immigration. Are
the immigrants taking jobs that Americans are prepared to fill?
There is considerable debate on that subject. Most people say
that the immigrant workers take on jobs that Americans will not
fill. Perhaps that is largely true, but perhaps there are jobs
taken which Americans would fill. The panel of experts can shed
some light on that.
There are questions as to whether if they do not take jobs
that Americans can fill, by and large, do the immigrants
depress the wage scales generally? What is the cost of the
immigrant with respect to taxes to State and local on health
care and schools contrasted with their contribution? Certainly
not an overriding factor, but one which has raised some serious
issues. Do the immigrants contribute more to the gross national
product than they take by way of wages? Another serious issue.
We have met the deadline of the Majority Leader, coming
forward with legislation which we reported out of this
Committee, but we have realized that there remain some serious
issues to be analyzed, which we will be continuing to do as the
bill makes its way back to the floor, and I think it will come
back. We know that we were unable to get it concluded before
the last recess. A question arose as to how many amendments
there would be. Questions arise as to what is going to happen
in conference.
I am pleased to see that the President has invited a group
of Senators to the White House this afternoon to talk about
immigration. It is my personal hope that the President will
intervene and take a position.
There is concern in the Senate about taking some hard votes
and not knowing what will come out of conference and concern
that there will be a conference report which will render those
tough votes virtually meaningless. These are all issues which
are before us, and today we will be taking a close look at the
economic impact.
We have been joined by the distinguished Senator from
Texas--one of the distinguished Senators from Texas. Senator
Cornyn, would you care to make an opening statement?
STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM THE STATE OF
TEXAS
Senator Cornyn. Thank you very much. Thank you, Mr.
Chairman, for the opportunity. I do have just a brief opening
statement.
I want to first of all thank you for calling the hearing
because I think it is very important that Congress have at its
hands and disposal the facts on immigration reform, and there
is no more controversial area than the costs associated with
illegal immigration. And I think it is important that we get a
factual basis to go forward.
I would also say that we cannot explore the economic impact
of immigration without considering how various reform proposals
will impact the Federal deficit. The Congressional Budget
Office estimates that the current Senate compromise bill that
is on the floor will result in $27 billion in mandatory
spending in the first 10 years alone, including $12 billion for
Medicaid, $3 billion for food stamps, and $12 billion in earned
income tax credits.
Of greater concern is a proposal that would create a
balloon payment in the second decade when millions of currently
undocumented immigrants would be granted the full benefits of
American citizenship and would become eligible for the panoply
of Federal benefits. That also does not include the additional
family members that those individuals would then be able to
petition to bring into the country with them.
The current CBO estimate does not account for that dramatic
increase because it falls outside of the usual 10-year budget
projection. What is clear is that a large-scale amnesty would
cost U.S. taxpayers tens of billions of dollars, and the true
impact may not be felt for years.
Our immigration policy must be capable of adapting to
economic conditions, and right now the United States is
enjoying a healthy economy. The economy created 211,000 jobs in
March and has created about 2.1 million jobs over the last 12
months. More than 5.1 million jobs have been created since
August of 2003, and unemployment is 4.7 percent, lower than the
average of the 1960's, 1970's, 1980's, and 1990's. In a climate
of strong job creation, foreign workers are less likely to
compete with U.S. workers for jobs.
But because we will not always enjoy a strong economy, our
immigration policy must strike the appropriate balance between
temporary and permanent workers. A temporary worker program
built around a floating visa cap would allow the number of
foreign workers in the United States to rise and fall based
upon market demand and based on conditions in the economy.
During a slow economic period, fewer visas would be issued, and
U.S. workers would face less competition.
But while the current proposal is described as a temporary
worker program, it is anything but. All unskilled workers,
325,000 a year, would automatically become eligible for green
cards after working in the United States for 4 years. That
model allows for no flexibility when there is a decrease in the
number of jobs in the United States because of a downturn in
the economy.
Moreover, the current proposal does away with the
requirement that an employer establish that there are no
qualified U.S. workers before the company may sponsor an
unskilled worker for a green card. The combination of permanent
status for all unskilled workers and an erosion of U.S. worker
protections will undoubtedly harm or potentially harm American
workers.
Finally, let me just say, so I do not abuse the Chairman's
generous offer to allow an opening statement, let me just say
this Committee must consider the impact of U.S. immigration
policy on sending countries as well. Those countries
increasingly are growing dependent on remittances sent by
workers in the United States. From 2000 to 2001, remittances to
Mexico and Central America grew by 28 percent to $13 billion.
Mexican immigrants will send as much as $20 billion in
remittances in cash this year. No country can buildup a diverse
economy when the majority of its young motivated workers
emigrate to another country. And by placing all unskilled
workers on a direct path to permanent status, the pending
proposal on the floor of the Senate takes us further away from
the pattern of circular migration that would serve the economic
interests of both the United States and those countries that
currently are sending immigrants to America.
Thank you very much, Mr. Chairman, for the opportunity and
for holding this hearing.
Chairman Specter. Thank you, Senator Cornyn.
Senator Kennedy?
STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE
STATE OF MASSACHUSETTS
Senator Kennedy. Thank you very much, Mr. Chairman, for
convening this hearing on the economic implications in terms of
immigration. it is a very important aspect of the issue itself,
and we have some very distinguished, thoughtful students and
professional people on this issue, and I look forward to
hearing from them and thank them all for coming here today.
Since our beginnings as a Nation, the immigrants have
contributed in countless ways to our Nation and our families
and our communities, our religious life, and our economic
growth, and we are here today to learn more about the effects
of immigration on our economy.
As Americans, we know that immigrants bring with them a
commitment to hard work and a deep desire for the American
dream, and that is why they came to America, and each of us can
tell stories of immigrants who have made a difference in our
communities, if not from our own family histories, then of the
hard-working immigrants in our neighborhoods who established
successful small businesses, have worked in our vital
industries, or cleaned our office buildings. These kinds of
immigrant stories are replayed every day throughout our
economy.
In fact, every census since 1890 has found that immigrants
are more likely than U.S. workers to be self-employed. A third
of all startups in Silicon Valley, for example, were founded by
immigrants. Nearly half the Nobel Prizes awarded to U.S.
researchers in the last century were won by immigrants or
children of immigrants, bringing pride and progress to our
Nation.
The overwhelming majority of immigrants, even those here
illegally, work, pay taxes, pay into Social Security. In fact,
undocumented immigrants pay an estimated $35 billion in taxes
each year. One study reports that the average immigrant family
pays $80,000 more in taxes then they consume in services.
Clearly, in considering the effects of immigration and the
appropriate steps for reform, our first priority is to our own
citizens. We must ensure that the new laws we pursue not only
enhance our National security but also our job security. In too
many cases today, our outdated immigration laws displace
American workers from their jobs or lower their wages. That is
why our reforms are designed to guard against that abuse. They
include support for immigrant wages, legal protections at the
work sites, and the right to organize unions. They level the
playing field by bringing hard-working immigrants out of the
shadows and make it less likely that employers get away with
paying substandard wages.
There are few debates more essential to America than this,
as immigration goes to the heart of what we are as a Nation of
immigrants. We have a solemn obligation to get it right, and I
commend our Chairman for holding the hearing today.
Thank you, Mr. Chairman.
Chairman Specter. Thank you very much, Senator Kennedy.
Senator Feinstein, would you care to make an opening
statement?
Senator Feinstein. No. I am delighted, Mr. Chairman, to
have these gentlemen here and to listen to them. I do have a
statement. I would like to place it in the record, if I might.
Chairman Specter. Without objection, it will be made a part
of the record.
Chairman Specter. We then turn to a very distinguished
panel. Our first witness is Professor Richard Freeman, the
Herbert S. Ascherman Profess or of Economics at Harvard
University, and I pause for a personal note. I know Mr.
Ascherman very well, and I compliment you on having his chair.
Professor Freeman received his bachelor's from Dartmouth
and Ph.D. from Harvard, serves as the faculty co-chair of the
Harvard University Trade Program, is the director of the Labor
Studies Program at the National Bureau of Economic Research,
co-director of the London School of Economics' Centre for
Economic Performance, is the author of 300 articles dealing
with job marketing for a variety of professions, and has
written on restructuring European welfare states and the
Chinese labor markets, written or edited some 25 books. So that
is quite a background, Mr. Freeman. We expect a lot of wisdom
from you in 5 minutes.
[Laughter.]
STATEMENT OF RICHARD B. FREEMAN, PROFESSOR OF ECONOMICS,
HARVARD UNIVERSITY, AND PROGRAM DIRECTOR OF LABOR STUDIES,
NATIONAL BUREAU OF ECONOMIC RESEARCH, CAMBRIDGE, MASSACHUSETTS
Mr. Freeman. First I better make sure the microphone goes
on.
I would like to organize my comments in three areas, and
the first will resonate with some of the comments that have
just been made.
Immigration is one part of the globalization of the world
today, and it is connected to what is going on in foreign
countries, and it affects them. It also affects our trade and
capital flows, and if you remember back when the NAFTA treaty
was being discussed, one of the claims that turned out to be
erroneous was that the trade agreement with NAFTA was going to
reduce immigration, illegal immigration to the U.S. because of
the belief then that there would be a substitution. The
Mexicans would stay home, make goods, and they would come to
the U.S.
It turns out that is much more complicated than we
imagined, the relation between trade and immigration, and
immigration and capital flows. But whatever we do in
immigration is going to have consequences for our trading
position, our trade deficit, and for where businesses will put
their capital in the future. So I think that should be a part
of this.
The second issue, you raised the question of effects on
GDP. I think all economists believe from evidence that
immigration raises not only the GDP in the United States,
because we have more people now to do useful activities, but it
also raises the part of GDP that goes to current residents in
our country. Some people may lose from immigration because they
will be competing with the immigrants in some job markets. But
other people will benefit from the extra products and the lower
prices because of that competition.
If you look at the statistics and the various estimates of
those effects--and there is some debate about them--I think
they are generally--I would say the gains and losses to native
Americans tend to be fairly moderate or modest. So it is very
important to understand that the biggest beneficiaries from
immigration tend to be immigrants, particularly if you are a
low-skill immigrant. If you are a person who is working in
Haiti, which is a disastrous--has been a disaster country for
many years, and you can come and work in Boston, Massachusetts,
the life is immensely raised. If you are a poor Mexican, your
income in the U.S. will be 6 to 8 times what it is in Mexico.
That means that in our deliberations or your deliberations
in thinking about this, remember the big beneficiaries tend to
be these people who are coming. Because they can change their
entire lives, they are going to be trying to come under almost
any possible circumstance, and, you know, the hope that the
NAFTA treaty was going to lower the immigration did not succeed
because Mexico did not succeed that much. But we do have to
worry, as the Senator said, about the situation in these other
countries.
This also means, though, that many of these people are
willing to pay sizable sums of money to be in our country. They
are willing to pay sizable sums of money to become legal in our
country. This is a tremendous change in their lives.
Now I would like to talk a little bit about highly skilled
immigrants, which is the other part of this. The country today
lives on highly skilled, highly educated immigrants coming in
and working in our universities and in our high-tech
industries. We trade in the global economy high-tech goods. Our
universities draw students from around the world. A key input
into that are foreign-born, highly skilled and educate
immigrants. There I think America makes a huge gain, and much
of the gains are to us. Some of the gains are the immigrants,
of course. That is why they come. Let me just give you one
fact.
Over half of the people in the U.S. who are working as
Ph.D. scientists and engineers and are under the age of 45 are
foreign-born. Over half. And the 1990's boom was fueled by
highly skilled immigrants coming into science and engineering
jobs. So that is another part of this.
I assume I am done. I was watching this.
Chairman Specter. You may make your next point, and I
appreciate your being mindful of the clock. But you are right
in the middle of a point you want to make. Go ahead.
Mr. Freeman. OK. Well, there was one other point I did want
to make because one of the concerns when immigrants come in
that they may take some jobs from some Americans or drive down
the wages of some Americans, and obviously, if there are a
large number of immigrants coming in and if they are coming in
at a bad economic time, this is something that is very likely
to happen, and I think there is some evidence for that.
If we talk about the highly skilled people, the concern is
that immigrants come in and they reduce the opportunities and
the incentives for Americans to go on in science and
engineering, and that has been another big issue in Washington
this spring. I do not think we should see this as a conflict in
the following sense: There are a set of policies we can do to
help our own workers, native workers, in this case native young
people who want to go into science and engineering, which does
not require us not to let in or to reduce or to be not so
welcoming to foreign-born immigrant scientists and engineers.
Every country in the world has policies for educating and
training its own citizens. We have the National Science
Foundation graduate research fellowships. We have had National
Defense Education Act fellowships. So I do not want to deny
that having a lot of immigrants coming in at the top--it does
make it more difficult for young Americans to advance in those
fields, but we can recompense the young Americans with separate
policies.
[The prepared statement of Mr. Freeman appears as a
submission for the record.]
Chairman Specter. Thank you very much, Professor Freeman.
Our next witness is Professor Dan Siciliano, Director of
the Program in Law, Economics, and Business at the Stanford Law
School, bachelor's degree from the University of Arizona and
law degree from Stanford University, has practiced immigration
law and has very extensive experience in this field.
Thank you for joining us, Professor, and we look forward to
your testimony.
STATEMENT OF DAN SICILIANO, EXECUTIVE DIRECTOR, PROGRAM IN LAW,
ECONOMICS, AND BUSINESS, STANFORD LAW SCHOOL, STANFORD,
CALIFORNIA
Mr. Siciliano. Thank you, Mr. Chairman and Senators. Thank
you for having me. I am going to focus primarily on the
unskilled labor side of this debate only because I concur that
the high-skilled labor issue is clear and necessary, and I do
not think I have a lot to add.
I am going to try to weave together three basic concepts,
but let me tell you the perspective I am not taking. Though I
am deeply sympathetic to the humanitarian side of immigration,
I think for today's purposes I am going to focus on the
economic side. And I have a deep motivation to do this. I think
what you are about to decide in the coming weeks will have a
profound impact for a generation, maybe two. I have two
children, 4-1/2 and 2-1/2, and I think doing the right thing
here versus doing the wrong thing will make a difference of my
children reaching hopefully the peak of their careers while the
United States is still at the peak of its economic powers. And
to make the mistake of accidentally doing the wrong thing--and
that would be, of course, only accidental, but to do the wrong
thing could mean that my children reach the peak of their
professional lives when we are no longer the dominant economic
power.
I have three main points that I will try to weave together,
and then I hope we will all get to answer questions because
there are so many nuances. If this were easy, you would already
have done it, I think.
First, there is the demographic dilemma that we face as a
fundamental fact. Productivity growth is moderating. We
experienced tremendous productivity growth over the last
several years. I am hopeful we will still have high
productivity growth in the United States, but it is not going
to be like it was. It is moderating. We are going to go back to
our norm of 2 to 3 percent at best.
Labor force participation rates have also likely peaked. We
are among the highest labor force participation rates among all
industrialized countries, above 66 percent. This is a
remarkable and wonderful achievement. People in our country
enjoy working, do work, and are tremendously productive. But we
are not going to have a higher portion of our country actually
be able to work in all likelihood.
Retirement is looming for tens of millions of people, and
our work force, especially the U.S.-born work force, is older
than ever before and aging. Nothing wrong with that, but that
is just the way it is, and this has implications for small
businesses and medium businesses, where I will focus my
thoughts on the impact.
And we are creating a bit of a conundrum because we have
had some success in raising the average skill level of the
U.S.-born worker. This is a great thing, but it does have an
interesting impact, and that is that we have a growing skill
gap misfit, meaning that as our U.S.-born workers become better
educated and more skilled, we have the need for workplace jobs,
jobs that demand less skills. And so there is a mismatch
between our U.S.-born workers' age, skills, and willingness to
work, and the jobs that are being created in the economy, in
part as a function of our own demographics, whether they be
elder care, retail, daycare, or other types of jobs.
So our success, which we should be proud of, in helping
raise the average skill level and education level of U.S.-born
workers has created in turn a challenge which we need to
manage. And if we do not manage it, we create our own problems.
The way this impacts with job growth I think is the second
key point. We have reasonably reliable Bureau of Labor
Statistics data that assumes the presence of the current level
of immigration, both undocumented and documented, and assumes a
continued flow. This data set is for 2002 forecasting into
2012. We assume kind of a trend line 3-percent GDP growth rate,
which turns out to be, it looks like, about right.
If we follow that, we have expected job increases in the
range of 14.6 percent across this time period to 2012. This
means we go from 144 million jobs in the United States to about
165 million jobs. Our current rate of immigration and
population growth implies a growth rate of 11.7 percent during
that time, which means we will go from, you know, to about 162
million available workers for those jobs.
This has many possible implications, many of which can be
debated, but one key take-away point is we know at least if we
are currently utilizing--and I would assume that we would
enforce wage and hour laws and utilize in a fair and equal way.
But if we are utilizing immigrant work, whether documented or
undocumented, to pull that out of the economy has some grave
implications with respect to matching people to the jobs that
we want to fill if we hope to have this growth.
Finally, and I think maybe the most important point is:
Does immigrant labor present in the United States negatively
impact wages? I will concur with Professor Freeman, by and
large, and point you to a most recent study by Giovanni Peri
out of UC-Davis that changes one component of the model, and it
says: Do we believe essentially that small and medium-sized
businesses and business people are smart? Not necessarily book
smart, but street smart. I would say yes. And then we say: If
they have more options in the labor market, are they able to
dynamically alter the way in which they run their business,
open a lunch shift, open another hotel, expand their business
if they have more options? And it looks like Giovanni Peri has
demonstrated that the answer is yes. This means that U.S.-born
workers benefit in large part from the influx of immigrant
labor because one of the hardest things we know small and
medium-sized businesses do is to procure effective and train
effective and retain effective employees in the work force.
It is going to be very hard to predict what will help us
weather this much bigger storm of globalization, and I think
one thing we do not want to do--and this is my concluding
point--is we do not want to inadvertently increase the
uncertainty and increase the challenges to the small and
medium-sized business person because they have largely been the
engine of robust resilience and economic growth through all the
various storms that we have weathered. And if we impair them, I
fear that we may, in fact, impair the economy. And we have the
evidence in front of us that seems to say immigrants,
documented and undocumented, have by and large benefited most
of the economy.
There are some offsetting components, and I think we will
hear the debate. But it is nuanced, and I just do not want us
to inadvertently tie the hands of the small and medium-sized
business people who have been the important part of our
economy.
Thank you.
[The prepared statement of Mr. Siciliano appears as a
submission for the record.]
Chairman Specter. Thank you very much, Professor Siciliano.
We now turn to Dr. Barry Chiswick, head and research
professor at the Department of Economics at the University of
Illinois at Chicago, bachelor's degree from Brooklyn College,
master's from Columbia, and a Ph.D. from Columbia. From 1973 to
1977, he was senior staff economist at the President's Council
of Economic Advisers. He has done extensive research in the
economics of immigration and the economics of minority and
income distribution. Eleven books, 130 journal articles, and
most recent edited volume, ``The Economics of Immigrant Skill
and Adjustment.''
Thank you for joining us, Professor, and we look forward to
your testimony.
STATEMENT OF BARRY R. CHISWICK, UIC DISTINGUISHED PROFESSOR,
DEPARTMENT OF ECONOMICS, UNIVERSITY OF ILLINOIS AT CHICAGO,
CHICAGO, ILLINOIS
Mr. Chiswick. Thank you very much. It is a pleasure to be
here. The issue before Congress is not whether to have a
completely open door nor a completely closed door regarding
immigration, and so the question then comes down to how many
immigrants per year and what are the characteristics of these
immigrants.
I think it is not helpful to talk about immigrants as if
they are an undifferentiated whole. I think it is much more
helpful to understand the issues to think in terms of high-
skilled immigrants and low-skilled immigrants as a simple way
of specifying the issues.
Over the past 20 years, there has been a very large
increase in not only the number of low-skilled immigrants
coming to the United States legally and illegally, but also
their share in the immigrant population. This has come about in
part because of three factors. One was the 1986 amnesty, the
Immigration Reform and Control Act which brought amnesty, but
also brought employer sanctions, which were never effectively
enforced. That amnesty actually encouraged additional low-
skilled illegal migration in the anticipation of future
amnesties.
The regular immigration system, where we issue about 1
million visas per year, focuses on kinship ties. The question
that this policy asks is: To whom are you related? And two-
thirds of the immigrants coming in come in under kinship
criteria, and only about 7 percent are skill-tested. For only
about 7 percent do we ask the question: What are your
contributions to the American economy?
As a result of these factors, we have had a large increase
in low-skilled immigration, and this has had the effect of
decreasing the wages and employment opportunities of low-
skilled workers who are currently resident in the United
States.
Over the past two decades, the real earnings of high-
skilled workers have risen substantially. The real earnings of
low-skilled workers have either stagnated or decreased
somewhat.
Now, low-skilled immigration is not the only cause of this,
but it is a significant factor in this development. Low-skilled
immigrants make greater use of government benefits and transfer
than they pay in taxes. So in terms of the public coffers, they
serve as a net drain; whereas, high-skilled immigrants have the
opposite effect. And the consequences of low-skilled
immigration are pretty much the same whether they are in legal
status or illegal status, although the net effect on the public
coffers is actually more negative for legal immigrants, legal
low-skilled immigrants. In the earned legalization program that
some people are talking about, just a euphemism for amnesty,
these individuals will eventually be getting full benefits from
Government income transfer systems.
The question before Congress is: Will the 21st century be
the American century as the 20th century was the American
century? In order for this to happen, for it to be the American
century, we need to alter our immigration policies to increase
the focus on attracting high-ability, high-skilled immigrants,
the ones that Senator Kennedy referred to who did the startups
in Silicon Valley, who won the Nobel Prizes.
But we also need to look at the other end of the income
distribution and provide greater assistance to low-skilled
Americans in their quest for better jobs, for higher wages. And
one of the ways that we can help them in this regard is by
reducing the very substantial competition that they are facing
from this very large and uncontrolled low-skilled immigration
that is the result both of our legal immigration system and the
absence of enforcement of immigration law.
I urge Congress to think not in terms of piecemeal reform
of immigration law, but to think in terms of a comprehensive
reform of immigration law.
Thank you very much.
[The prepared statement of Mr. Chiswick appears as a
submission for the record.]
Chairman Specter. Thank you, Professor Chiswick.
Our final witness on the panel is Professor Harry Holzer,
Associate Dean and Professor of Public Policy at Georgetown,
summa cum laude, Phi Beta Kappa, undergrad at Harvard, and a
Ph.D. from Harvard. He served as chief economist for the United
States Department of Labor, and his research has focused
primarily on labor market problems of low-wage workers and
other disadvantaged groups. His books include ``The Black Youth
Employment Crisis,'' ``What Employers Want: Job Prospects for
Less-Educated Workers,'' and ``Employers and Welfare
Recipients: The Effects of Welfare Reform in the Workplace.''
We appreciate your being with us, Professor Holzer, and the
floor is yours for 5 minutes.
STATEMENT OF HARRY J. HOLZER, PROFESSOR OF PUBLIC POLICY,
GEORGETOWN UNIVERSITY, WASHINGTON, D.C.
Mr. Holzer. Thank you, Mr. Chairman. Good morning.
I want to once again associate myself with the point of
view that most economists believe that, on average, immigration
is a good thing for the overall economy. It does lower costs.
It lowers prices. It enables us to produce more goods and
services and to produce them more efficiently, and I share that
view. At the same time, there are at least some potential
losers in this process. There are some costs as well as
benefits. We need to consider the whole range of costs and
benefits and to whom they accrue as we make our policy choices.
So let me start by looking at this issue of the labor market
and competition, especially at the low end of the market.
Now, there is one view, Mr. Chairman, that you expressed
earlier that maybe immigrants mostly take the jobs that other
native-born workers do not want. The prototypical case of that
would be jobs in agriculture, in which very few native-born
workers are interested. On the other hand, there are jobs in
industries like construction that I think are more appealing to
native-born workers, and many native-born low-income men might
be interested in more of those jobs, although employers often
prefer the immigrants, especially in residential construction.
Then there is a range of sectors in between those examples--
janitorial work, landscaping, food preparation, where the wages
and benefits are generally low and the appeal is very limited
to native-born workers.
Now, absent the immigrants, employers might need to raise
those wages and improve those conditions of work to entice
native-born workers into those jobs. On the other hand, as that
process starts, employers would have other options to consider.
They might well substitute capital for labor, which simply
means they would substitute machines and equipment for workers
and their jobs as wages started to rise. Or they might move
their resources to other lines of business, more productive
lines of business. So businesses would have other options
besides simply raising wages if the immigrants were not here,
and I think they would exercise those options.
The statistical studies generally show, on net, there might
be some modest negative effect of immigration on the earnings
of high school dropouts. There might be some modest negative
effect, mostly in the short run. Over the long run, as capital
flows adjust to the presence of workers, most of these negative
effects disappear, and certainly we see little evidence of
negative effects for anyone except high school dropouts. And
even for them the effects seem modest.
Two other points: as stated earlier, the amount of
competition really does depend on the state of the economy.
With the very strong economy in the late 1990's, no one really
worried much about competition from immigrants. Maybe those
days will return. But it also does depend on the legal status
of the immigrants, and I believe that when immigrants are
illegal, they do more to undercut the wages of native-born
workers because the playing field is not level, and employers
do not have to pay them market wages. So legalization might
reduce the extent of competition these workers face.
Now, there are other economic issues, the most important of
which is reducing the prices of a wide range of consumer goods.
Some of those lower prices do benefit mostly high-income
consumers. When they hire gardeners, domestics, when they go to
restaurants where the food is prepared by immigrants, the
benefits mostly accrue to higher-income consumers. On the other
hand, when immigrants work in construction, they reduce the
price of housing. When they work in agriculture, they reduce
the price of food. When they work in health care and elder
care, they reduce the price of those services, and those will
disproportionately benefit lower- to middle-income consumers.
And I think those are important benefits.
We have heard about the baby-boomers retiring. I think
there will be many ways in which labor markets will adjust to
the retirement of baby-boomers, but immigration is one
adjustment mechanism. I think the presence of immigrants will
be important in some key sectors during that time period. One
is the science and engineering sector that Richard Freeman has
already talked about, but there are other sectors where the
less educated immigrants could really matter as well.
For instance, take the health care sector. The demand for
health care workers and elder care workers will be enormous
when the baby-boomers retire and as they live longer. That is a
sector where, because of caps on third-party reimbursements,
expenditures are limited. The normal market forces will have
trouble clearing those markets. And I think the presence of
immigrants to help take those jobs will matter and will make
those services more available.
Finally, there are a range of fiscal issues that have
already been alluded to. There are fiscal costs in the short
run for schooling and a range of other services for immigrants,
but I believe as time goes on, the fiscal balance becomes more
positive. I believe that over time immigrants, their children,
their grandchildren, will be working, contributing to the
Social Security and Medicare systems. I believe, on net, their
impact on those fiscal balances will be positive, largely--
probably not massively positive, but more positive than
negative, and I think that is a good thing.
So, finally, what does all this mean about policy? I agree
with Professor Chiswick, we are not ready to open the
floodgates on immigration. We will continue to have controls on
immigration, and we need to find cost-effective and humane ways
to limit those immigrants. I am not exactly sure what those
methods are. I am not sure anyone knows, but we will continue
to seek them. But I think paths to legalization for those who
are here and those who will remain here make sense. Keeping
them illegal hurts the immigrants themselves. It certainly
hurts their children, many of whom are already American
citizens and will stay here under any circumstances. And
legalizing these immigrants, I believe, will reduce some of the
competition that they provide to native-born workers by
leveling the playing field and allowing them to earn market
wages.
I do not believe these paths to legalization will create
dramatic increases in the flows of illegal immigrants. The
flows have been fairly constant now over many years, despite
various changes in policy. I think the incentives for them to
emigrate will be large either way, so I do not expect massive
new flows in response to any paths to legalization.
Finally, I would say less educated workers in the U.S. have
taken a beating in recent years, for many different reasons. I
think immigration is one of the smaller reasons. If we want to
help less educated native-born workers, there are a whole
variety of things we could do to improve education and
training, improve child care and health care, provide wage
insurance to those displaced, and maybe even start to fix some
of the broken laws and institutions that used to protect those
workers more than they do now. I think these things would help
native-born workers a good deal more than limiting immigration
flows.
Thank you.
[The prepared statement of Mr. Holzer appears as a
submission for the record.]
Chairman Specter. Thank you, Professor Holzer.
We will now go to the panel of Senators for 5-minute rounds
of questioning. As a matter of scheduling, the Senate is in
morning business until 10:45, and then there is going to be 10
minutes before a vote starts, which will be shortly before 11
o'clock, if the projections of time are accurate. So we will
keep that in mind as we proceed with the round of questions.
Professor Holzer, you eloquently articulate a large number
of problems, and then you said you are not sure you know the
answers. And then you added to that you are not sure anybody
knows the answers.
Well, we have got to make some judgments. Nobody could ever
accuse Congress of knowing the answers or coming up with the
answers, but we do have to legislate and we do have to figure
out, as best we can--and I have been to a few of these
hearings, and I cannot recall four witnesses who have more in
their pedigree lines, more books, more titles, than you four.
We do not want to take jobs away from Americans, although to
the extent that it may be minimal, you cannot avoid it. But
overall we want to direct our efforts to not taking jobs from
Americans. And, also, to the extent we can, we do not want to
lower wages.
Now, we are trying to figure out what kind of a guest
worker program to have. With the experience you professors have
had, what methodology should the Judiciary Committee have in
recommending to the Senate the structuring of the number of
guest workers? Professor Holzer, you profess not to know the
answers, but we need your best estimate here.
Mr. Holzer. Senator, I have some skepticism about guest
worker programs because there is at least a concern and I think
some evidence--
Chairman Specter. You have some skepticism? Now, wait a
minute. Does that mean you would not have them? There is
nothing we do around here without some skepticism, but the
question is--
[Laughter.]
Mr. Holzer. I understand that.
Chairman Specter. The question is: Will we have them?
Mr. Holzer. I think they have limitations relative to my
first choice, which is creating pathways to permanent legal
status.
Chairman Specter. They have limitations. Do they have
advantages?
Mr. Holzer. They also have some advantages for meeting
demand, certainly in the short run, in those sectors where--
Chairman Specter. How do we assess the demand?
Mr. Holzer. I think one can look at a variety of measures:
job vacancy rates in certain sectors, in certain occupations
and industries, wage pressures, things of that nature.
Chairman Specter. Could you take a look at those factors
and others? You probably cannot do it in the 2 minutes and 38
seconds remaining, but could you take a look at those factors
and give us a professional projection as to what we ought to do
by way of guest workers? Let me apply that question to the
entire panel. We are really searching, and you men have written
extensively and have studied this extensively. And without
taking the time now to identify them, if you could do two
things, identify the factors which are in play and assess for
us how you would structure a guest worker program and what we
ought to look for, we would be deeply indebted to you.
Professor Chiswick, you say the last century was the
century for the American economy, and we face a lot of
challenges on the next century. The head of China was just
here, and we are looking at very complex competition from
China, perhaps from India and other sources. Is a guest worker
program an indispensable item to have the 21st century an
American economic century?
Mr. Chiswick. Well, actually, I would say that the best
guest worker program is no guest worker program. One of the
maxims in the immigration research field is that there is no
such thing as a temporary worker. The issue arises when the
temporary contract, when the guest worker period is over. How
does one get them to leave the country?
Chairman Specter. Well, how about recognizing that they are
not temporary but they are going to be permanent? How do we
assess the contribution of the immigrant to the economy? Does
the immigrant produce more by way of gross national product
contribution to the economy than the immigrant is paid?
Mr. Chiswick. Well, I think we have substantial research on
that issue, and what we find is that high-skilled immigrants
have a significant positive contribution and that low-skilled--
Chairman Specter. Positive over what they are paid.
Mr. Chiswick. In terms of the American economy, in terms of
what they pay in taxes versus what they take in benefits, in
terms of their increasing the productive capacity of the
economy, in terms of their increasing productivity.
Chairman Specter. I only have a few seconds left, and I see
Professor Freeman nodding vigorously in the affirmative. You
have got the balance of my time.
Mr. Freeman. I wanted to make a comment more favorable to
the guest worker programs, actually. I think it is very
complicated. People are going to come in, and they are coming
in, and they are working illegally. That would be the natural
place where you would want guest workers if you want to reduce
the illegal immigration.
We know that Americans are hiring them, and Americans would
get very upset if they were forced out. Business people would
get very upset. So they are clearly contributing something that
is showing up in the profits and the lower prices that
Americans benefit.
So I would think of the guest worker program or something
of that nature is the extent to which it would substitute for a
worse form of guest worker program, namely, an illegal guest
worker program, which is what we are running today. So I do not
think the comparison is between no guest worker or a guest
worker. It is between a legalized program and an illegal
program.
Chairman Specter. Thank you, Professor Freeman.
Senator Kennedy?
Senator Kennedy. Thank you, and I think you put your finger
right on it, Professor Freeman. We know at least 400,000 are
coming in here. Ten years ago it was 40,000; now it is 400,000,
sometimes 600,000 or 700,000. In the legislation it is 400,000
to try and have those that are going to come in here come in in
an orderly, legal way with labor protections in this country.
Let me get to this point that the Chairman has made, Dan,
with your analysis. You gave us some projections. You talked
about the limitations in terms of productivity, the numbers in
the labor force, retirement issues, and then the job growth.
And you talked about GDP, 14 percent and 11 percent. You talked
about legal and the illegal. Maybe you could just flesh those
figures out a little bit. What you appear to be saying is that
if you consider the numbers of both legal and illegal, you get
a certain rate of growth, and without them you get another
different rate of growth. And that is what I would be
interested in.
Maybe we cannot parse between the legal numbers the
Chairman talked about, whether that is 500,000 or we are
looking at just the general range of numbers now. Could you
expand on that?
Mr. Siciliano. Sure. Thank you, Senator Kennedy. I think
this also answers Chairman Specter's question in part, which
is: What is the true net economic contribution and where does
it come from and why? And so from my viewpoint, and in light of
the demographic numbers, it appears that our economy is on the
trend growth rate, we hope, at 3 percent or better. Now, that
growth rate of GDP is reliant on many factors. One of the key
factors is available workers to fill the jobs that are created.
So even while at the high-skill level you have Nobel Prize
winners and other people inventing companies, somebody needs to
build the buildings, clean the buildings, you know, service the
lavatories in which these people are operating. And this is a
part of the capacity for GDP to grow.
So to put a finer point on it, if you look at the fiscal
economic impact, which is the Government coffers impact, it
might be true that lower-skilled workers, just like all of us
on average, actually, at the moment because of deficit
spending, have a negative impact on the fiscal bottom line. But
that should not be confused--and this would be a mistake to
confuse this. That should not be confused with the economic
impact. It is a little like my younger sister who recently
said, ``I am earning more, but look at all the taxes I am
paying. I am paying more taxes.'' I said, `` Yes, but you are
earning more.''
And so we may have a modest net negative fiscal impact for
all low-wage workers in the United States, not just immigrants.
That is not unique to immigrants, documented or undocumented,
but what we do know is it helps us achieve a higher rate of
growth and national income goes up, which benefits everybody.
It becomes your challenge, I think, to talk about how to, you
know, work that out at who shares and how at the pie level. But
it is clear that this divide between available workers and the
demand for workers will slow down economic growth if we do not
manage it appropriately.
Senator Kennedy. Let me just get to the high-skilled/low-
skilled. I think most of us would like to believe that we are
going to train our own people to be able to take these high-
skilled jobs. And we have under our current programs training
resources that are paid into the fund to try to continue to
upgrade skills for Americans. But we are not able to get quite
there at the present time.
Other countries, industrial countries, have required
training programs. They pay--what is it?--in European countries
a percent and a half, other countries, so that they have
required training programs, which we do not have, continuing
training programs which we do not have.
So how are we going to adjust? What is your sense about how
we are going to--we have seen a significant--actually, we are
getting the skills, but where people that are going to into
these high-skilled programs, but how are we going to get
Americans up to speed so that those Nobel laureates are going
to be the sons of native workers rather than foreign workers?
What can you comment on that?
Mr. Siciliano. I think there are two issues. One, you know,
the expanded H-1B program with the continued diversion of
moneys into special training programs is a good start, so we
need the talent in the first place. We need that high-skilled
talent to maintain our competitive edge, which gives us some
runway into which to develop and train native talent. It cannot
happen overnight. So the first question is: What do we do to
make sure over the next 20 years we still get the world's
absolute best and brightest, lure them to our best
universities, have them pay for that education, make them
enamored of the United States, and then they stay here and then
have children.
Now, you divert that money and you direct it into targeted
training, and that is a bigger issue, I think, to entice U.S.-
born workers into the difficult and long-term training that
will prepare them for a modern, very knowledge-based economy.
But the start is to make sure we keep the industries here
because we lure the right talent here, and then we do something
over the next 20 years so that the 5-year-olds right now do end
up getting the double Ph.D., electrical engineering and applied
physics, and go on to win the Nobel Prize. But you are talking
about the 5-year-olds, not the 25-year-olds. We need the 25-
year-old to get an H-1B, have their own Government pay to go to
Stanford University, get that Ph.D. there, and then work at
Google, stay here. Good deal for us.
Senator Kennedy. My time is up, but, Professor, you talk
about the more comprehensive. What we are not dealing with is
the underlying immigration bill where you talked about the
disparity between kinship and skills with only a smaller
percentage in terms of skills and the other emphasis on
kinship. Those are policy issues about reunification of family
members here rather than just having the skills. So that is a
broader kind of issue. I think it is obviously related to it,
but as you correctly point out, that is not part of the current
debate, but it is something we ought to think about.
Thank you, Mr. Chairman.
Chairman Specter. Thank you, Senator Kennedy.
Under the early bird rule, we turn to Senator Cornyn.
Senator Cornyn. Thank you, Mr. Chairman.
I would like to turn to the issue of a guest or temporary
worker program, and one of the things I would just note is that
the choice of descriptions I think is a problem when it comes
to talking about immigration because I do not know of any guest
that you would invite into your home that would permanently
move in and refuse to leave. And I am intrigued by the concept
that there is no such thing as a temporary worker program
because people will not leave.
But let me talk just a bit, Professor Freeman, starting
with you. We have heard, of course, the huge attraction that
the American economy and the opportunity here for immigrants
provides, but you seem to agree with at least some of what I
said earlier on in talking about the benefits both to--assuming
we can have a temporary worker program, people come and work
temporarily and then return to their country of origin with
savings and skills that they have acquired in the United
States, perhaps to return again later, that there would be
perhaps an advantage to the United States to be able to have
people come when we need them, when the economy is doing well,
when we need those workers, but then not come during times when
they would be competing with American workers. And so it would
be of some benefit to American workers not to have that
competition when the economy is doing poorly. But, second, the
importance of helping those economies which are now basically
seeing a mass exodus of their young work force to the United
States and the difficulty they will have of ever establishing
jobs and an opportunity for their own people.
So do you see some benefit to trying to figure out a policy
that will restore this circular migration pattern?
Mr. Freeman. You are clearly right. The circular
migration--we have seen the circular migration pattern occur
for the Koreans and for the Taiwanese, and also they have also
created, you know, businesses that compete with ours, and they
learned their skills here. At one point we are going to see the
Chinese high-level immigrants begin to go back to China, and
that will be a great sign for China and will be more
competition for some American businesses.
But I do not think we should be afraid of competition, and
I think it is much better to build the skills in these other
countries.
I think obviously if we could control the flows, we would
have the guest or temporary workers come in when we have a
shortage and leave when we have a surplus. But people have
their own lives, obviously, and there is a huge advantage to
living in the U.S. than living elsewhere.
Senator Cornyn. Let me ask you, Professor Chiswick, because
you said there is no--I am paraphrasing. You said there is no
such thing as a temporary worker because people will not leave,
and Professor Freeman seems to agree that that is a challenge.
But if we have incentives built into a program, let's say the
money that you would ordinarily pay, the employer and employee
pay for Medicare and Social Security would be put into an
account that they would receive upon their return to their
country of origin when their temporary visa expires, if we
would be serious about worksite verification so that only
authorized visa holders could legally work in the United
States, would you see those as possibly some ways that we could
make sure that we could actually enforce the term of those
temporary visas?
Mr. Chiswick. Well, I think you have pointed to a very
important issue. The 1986 Immigration Reform and Control Act
brought in employer sanctions, but there has really been no
political will to enforce employer sanctions. Employers need a
fool-proof way of identifying who has a legal right to work in
this country and we have the technology to provide them with
that information. And I would urge Congress to act speedily in
terms of developing or authorizing the Government to develop
such a system.
But you also need to have the resources to enforce the law
in terms of the inspectors and the inspections. We have relied
on border control to enforce immigration law. The border is a
sieve. Even if one strengthens border enforcement, there will
still be ways of penetrating the border. Border enforcement by
itself cannot effectively stem the flow of illegal aliens. It
needs to be complemented by stringent enforcement of employer
sanctions.
Senator Cornyn. Let me ask you to explain just in
conclusion your statement that amnesties encourage future
illegal immigration. That will be my last question. Can you
explain what you mean by that?
Mr. Chiswick. Sure, because an amnesty sends the signal
that when the pressure gets strong enough, there will be
another amnesty forthcoming. So amnesties set the stage for
future illegal migration, and actually the more talk there is
of pending amnesty legislation--whether it is called amnesty or
earned legalization, it is really the same thing--the more talk
there is, the greater the incentive for people to enter the
United States illegally so that when the amnesty has passed,
they are physically present in the United States.
Chairman Specter. Thank you, Senator Cornyn.
Senator Feinstein.
Senator Feinstein. Thank you very much, Mr. Chairman. May I
enter into the record, please, a statement by the Small
Business California Group?
Chairman Specter. Without objection, it will be made a part
of the record.
Senator Feinstein. Thank you very much.
I approach this, gentlemen, mainly from the California
approach. The Department of Finance of the State has just done
a report which shows that the number of illegal aliens in
California is 2.4 million and that the entry rate is about
73,000 a year.
As I talk to individuals in the State, what becomes very
clear to me is that the problem is the lack of opportunity in
Mexico, and that is devastating that there is no hope, no jobs,
no opportunity for people. Therefore, coming to the United
States for many, most, really becomes a question of survival.
Is there anything as economists you can recommend that the
United States could do to help, or the people or the Government
of Mexico could do to turn that around?
Mr. Chiswick. I would be happy to take a stab at that
question.
Senator Feinstein. Please, quickly, if you could.
Mr. Chiswick. I think NAFTA in the long run will have
strong beneficial effects on the Mexican economy. But I think
we also have to encourage the Mexican government to free up
their economy, to reduce the extent of Government ownership and
control of various sectors of the economy, to encourage private
investment in the Mexican economy, to invest more resources in
the educational system for the young people in Mexico.
One of the negatives of the large low-skilled immigration
from Mexico to the U.S. is that some of the most enterprising
of people are leaving Mexico. So in some sense, we are hurting
Mexican economic development by draining off some of their
entrepreneurial talent.
Senator Feinstein. Let me mention another point. I happen
to believe that the weakest part of the bills that I have
supported is the guest worker program. From a California
perspective, it is impossible to say to somebody you can come
here for at least 6 years by renewing your guest worker permit,
but at the end of 6 years you have to go home. The experience
we have had is quite simply people do not go home. Therefore,
it seems to me that the H-2A program, where you bring someone
for a limited period of time, has a much better opportunity to
work because then they do go back and forth across the border.
What do you believe is the optimum amount of time that an
individual will come as a guest worker and then actually go
home at the end of that period of time?
Mr. Siciliano. Senator Feinstein, I think one thing to
consider is that by limiting the amount of time that and
employer may utilize a guest worker, it alters their behavior
in terms of their incentives to invest even in a low-skilled
guest worker. So even a low-skilled worker will require a
certain amount of training and investment, and the shorter the
duration of that opportunity for employment, the less
investment there is, which is bad for everyone.
I think one of the possible alternative views here is to
recognize some of the limitations that occur if you create a
temporary guest worker program and then instead try to identify
those lesser-skilled individuals who, in the long run--if you
created boundaries of wage and hour rules, allowable behavior
on the part of businesses, and then screened up front for who
you would allow to enter on that basis and create some path,
assuming continuing employment, and a very high bar for
behavior and civic behavior, then perhaps you can solve both
problems, because I believe the evidence demonstrates and I
think a lot of the arguments assume that the economy will work
it out. If there are no opportunities, people will go back.
Senator Feinstein. But that is difficult to do. Therefore,
if you take the 10 to 12 million people that are here already
that work in agriculture, construction, landscaping,
housekeeping, et cetera, and provide a steady stream of
employment and enable them to have a pathway to legalization,
are you not really doing the best thing possible economically
to see that there is economic upward mobility?
Mr. Siciliano. I see. With that subset, yes, I would argue
that that is the right path, and then on the other question I
would defer. I am sorry that I don't have a solution.
Senator Feinstein. Anybody else, quickly, 7 seconds?
Mr. Chiswick. Well, I think that we can learn a lot from
the European experience. They have their guest worker programs
in most of the European countries and what they have found is
that although some go back as the natural course of events--
there is always some return migration--they had a very
difficult time in encouraging them to go back. The riots that
we saw a number of months ago in the immigrant communities in
France are an example of the consequence of failed guest worker
policies, and I would not like to see the United States fall
into that same trap.
Senator Feinstein. Thank you very much. Thank you, Mr.
Chairman.
Chairman Specter. Thank you, Senator Feinstein.
Professor Holzer, did you want to make a comment?
Mr. Holzer. Just one small comment. It seems to me that
there is probably no single optimal duration for guest worker
policies. Following up on Professor Siciliano's point, it is
going to vary a lot when you compare H-2A workers to H-1B
workers. It seems to me to make a lot more sense to have
perhaps longer durations for the H-1B workers because to get
those individuals to come here, those individuals who want to
make more investments, the kind of work they do requires
greater startup, greater training. And at the end of the day,
if those workers decide to stay, I think we all agree that the
economy would benefit certainly from increasing the permanent
presence of highly skilled workers.
Senator Feinstein. Would you confine a guest worker program
to those two programs?
Mr. Holzer. Not necessarily. I think I am relatively more
sympathetic to the H-1B program because, number one, certainly
in the late 1990's it was so clear that the short-term demand
in science and engineering was so strong, in the short run
there was no way that we were going to meet that demand
domestically.
I also very much like the political compromise of taking
the fees that we generated by raising the caps and investing
those in the training of domestic workers. So to me, that was a
very nice compromise that I think benefited all involved.
Senator Feinstein. Thank you. I appreciate it. Thank you,
Mr. Chairman.
Chairman Specter. Thank you, Senator Feinstein.
Senator Kyl.
Senator Kyl. Thank you, Mr. Chairman. Thank you, panel. One
of the arguments for not being as tough in enforcing the law
especially at the border is that in the years past there was a
lot of circular migration especially from Mexico and Central
America, people who came here, worked for a while and then went
back home. It wasn't hard for them to continue that process,
but once we began strong border enforcement, then they were
stuck and stayed.
I don't know that there is any evidence to support that or
refute it, but it has been the basis for a lot of people
talking about this concept of circularity, and I want to get
back to that concept and also ask you this question in view of
the fact that at least a couple of you are very skeptical that
a temporary worker program really ends up being temporary
because people don't want to go home. I mean, what I just said
may to some extent refute that, but clearly there are people
that probably fall into both categories.
What we haven't talked about here is the differentiation
between a time like today when we are at very high employment
and a time when in the future we will have a recession and we
will have high unemployment. And let me stipulate for a moment,
even though there is a little bit of argument about
mechanization, and so on, that in the lettuce fields of Yuma
County, it has always been hard to get Americans to do that
work. It has been traditionally work done, by the way, by
people who live in Mexico and come across everyday and go back
home by and large, although there are some that stay longer.
In Arizona, we can't find enough people to build houses
today. Under the bill that Senator Cornyn and I have, we would
be issuing lots of temporary visas right now. But we have also
seen many economic downturns when you can't get a job in
construction, no matter how skilled an American citizen you
are. In that case, under our bill we wouldn't be issuing
temporary visas. We would let the ones that are here expire; we
wouldn't issue any more.
I am troubled by the fact that all of you seem to be so
skeptical that people would return. One concept was that, well,
when there is not work, they will return. But isn't it just as
likely that what they will do is under-bid Americans for those
same jobs?
I have gone through enough political times when we were in
that high employment situation where Americans were looking for
work. It is not a pleasant thing. So I am concerned about a
program that lets people come in under today's circumstances,
but who may not have a job, or at least there won't be enough
jobs for everybody in tomorrow's circumstances.
Given that fact, doesn't it make sense to consider the
economic realities in how many permits you issue, and
especially if you are saying folks won't go home, to be very
careful about the number of visas that you issue for these low-
skilled workers because you have to consider tomorrow's lack of
employment opportunity as well as today's full employment
opportunity?
I have sort of posited several different thoughts and
questions inferred there. If you could just each give me your
general take on what I have said.
Mr. Freeman. You gave this model for the optimal
determination of how many of these to give. What you are really
suggesting--and I think it makes good sense--is that if you are
giving these temporary worker permits or whatever, you don't
want to do them to the amount you need at the boom. What you
may want to do is figure out how many you would have at a
recession. You can up that a certain amount, but that would be
the more conservative, careful mechanism.
As long as Mexico is right next door to us and their
economy is not doing well, we are just going to continually
face this pressure. One of the reasons they are not doing well
is that we have had China and India come into the global
economy and take up some of the businesses that we would have
hoped the NAFTA was going to encourage in Mexico.
Senator Kyl. Excuse me for interrupting, but let me give
each of the panelists time to respond.
Mr. Siciliano. Let me throw in one item, as well, to
clarify. For all we know about business cycles, we still don't
know a lot. One of the things, I think, to observe is that as
we go into a down business cycle, we make macro adjustments to
the cost of capital as a way of spurring the economy
potentially and creating jobs and creating businesses through
capital formation.
It is worth thinking about--and I don't think it is a
conclusive answer for you, but it is worth thinking about the
fact that available labor supplies during a downturn is its own
form of self-corrective mechanism. And I would fear second-
guessing at a micro level the small and medium-size businesses
who might be reformulating strategies to alter their response
to global competition and need the liquidity that is provided
by available work force. And we do suffer through a terrible
time which is short and hence has changed, but it might be akin
to cost of capital.
Labor is one of the critical inputs to all of economic
development and we tinker with it at a micro level, we might
inadvertently prevent ourselves from emerging as quickly as we
might otherwise have from a recession.
Senator Kyl. But it is also true that for the laborer who
is without a job for a year and the taxpayer subsidizing that
individual's life, this represents a real cost both to them
individually and to the government side of things even though
for the economy in the long run--but as you know, in the long
run we are all dead.
Let me get each of the--
Mr. Chiswick. I have two reactions to the questions that
you pose.
Senator Kyl. Was it Galbreath, Professor Siciliano, that
said in the long run we are all dead?
Mr. Chiswick. Keynes, John Maynard Keynes.
Mr. Siciliano. Yes.
Senator Kyl. Of course. I am sorry.
Mr. Chiswick. Both economists.
Cyclical targeting in terms of labor markets is very, very
difficult to do. In the post-war period, our downturns have
been relatively short. So cyclical targeting would probably
mean that it would be counterproductive because by the time the
bureaucracy changes the number of visas, you will be in a
different phase of the business cycle.
I am glad you brought up the Arizona lettuce farms because
actually ``Nightline'' earlier this month devoted a segment to
that very issue and the same county that you made reference to.
I was struck that the farmer said that if he didn't have these
low-skilled workers who were picking lettuce by hand, he would
mechanize; that there are mechanical lettuce pickers and that
the only reason he is not mechanizing and employing more highly
skilled American workers is the availability of such low-wage
labor. So in a very real sense, the use of low-skilled
immigrant labor is retarding further mechanization of
agriculture.
Mr. Holzer. I share the view that the cyclical use of the
guest worker program sounds great in theory and it is hard to
implement. I think about the long-run costs. Take your
construction contractors in Arizona. Even when they hire these
immigrants, there is some expectation that this employment
relationship is going to last a while. There are costs of
training them even for the low-end jobs to be dry-wallers and
things like that.
Once those investments have been made, I hesitate to force
those employees to leave for a temporary downturn that might
last who knows how long and then might come back. I think given
these long-term employment relationships, we ought to focus
more on the long-term issues involved in immigration and maybe
less on the short-term fluctuation.
Senator Kyl. I appreciate that. In view of the fact that
there is only one more to question, might I just offer a
comment? All of that is fine in economic theory. As I said, I
have had to stand in town hall meetings with 3 or 400 Americans
that don't have jobs.
I appreciate what each of you are saying, but I do think we
have got to be sensitive to the fact that there are costs to
taking care of Americans who don't have jobs temporarily
because there are folks here who will under-bid them in those
jobs because we haven't been willing to restrict their entry
here. It is a problem I would like each of you to think about
for the next round.
Chairman Specter. Thank you very much, Senator Kyl.
We have developed quite a number of people standing in the
back. There are a few chairs up front. You are welcome to come
and sit there.
Senator Sessions.
Senator Sessions. Thank you, Mr. Chairman, for having this
hearing. I think it is important that the American people
engage in the debate. I think there are a number of strawman
arguments out there that we need to dispense with.
The first is that there is any support in Congress for
stopping immigration. There is no support in Congress for that,
and this Congress will act sooner or later to deal fairly and
generously with people who have come here illegally. The 11, 12
million, 20 million, whatever is here--they are going to be
treated fairly and justly.
But I do think it is important for us to ask ourselves what
is the limit to our immigration, what is the right number, and
it ought to be in our National interest, not whether somebody
would like to be here.
I had the great pleasure of traveling with Senator Specter
last week to South America, and in State Department clips was a
poll from Nicaragua that said that 60 percent of the people
would emigrate to the United States if they could. That was a
stunning poll. I mentioned it to the Ambassador in peru and he
said, well, they just had a poll here 2 months ago that 70
percent of the people in Peru would emigrate to the United
States. Well, I am not sure how accurate those polls are, but
it just points out that the numbers on an open border system do
not make good sense to me. We obviously need to ask ourselves
who and what numbers are relevant.
I am not sure who to ask this question to, but if anybody
would speak up and give me a thought on it, I would appreciate
it. Is there a difference economically in the effect of a
temporary or a permanent worker? Does anybody have any thought
about that?
Mr. Siciliano. Senator Sessions, I will address one small
part so that others can comment, and that is I think we know
intuitively that renters and owners treat their properties
differently. Renting to own may be a compromise, but I would
say that we have recent evidence citing Giovanni Peri's paper
out of UC-Davis in November that we know that the
entrepreneurial behavior of those immigrants who feel that they
have some possibility of being here in the long term is
increased because they are more likely to invest their capital
here in the United States to engage in skill-building that
resonates better in the United States and they get better
returns on.
So my one comment would be we know we sometimes get very
efficient and good behaviors for our National interest from
immigrants of all skill levels if they think they may have a
long-term role to play here both about themselves and their
children.
Senator Sessions. Would it be in our interest, therefore,
to attempt to identify the people that bring the most skill
sets and the most ability to the country when we allow whatever
limited number we have to come here legally?
Mr. Siciliano. At both ends, yes.
Mr. Chiswick. Absolutely. What we want to do is attract
those immigrants who would have the largest positive
contribution to the American economy, and they will be highly
skilled immigrants, immigrants with high skills in literacy,
numeracy, scientific knowledge, technical training. Current
immigration law pays very, very little attention to the skills
that immigrants bring to the United States.
Senator Sessions. Let me point out that when we visited the
Dominican Republic, the person in charge of issuing the visas
told us, I think, 95 percent of the visas are chain migration,
family visas. So, obviously, we are asking no questions about
what skill or capacity they bring to our country. It is just
automatic based on your relative connection.
Professor Freeman.
Mr. Freeman. The Canadians and the Australians both use
much more occupational qualifications, the Australians have a
very interesting system which we could think about because they
also get a lot of people who come as students to the
universities. We have a huge international student flow. We are
able to judge how good they are. Our companies will offer jobs
to them. Our universities will offer them fellowships and
scholarships, and so on.
What the Australians do is give those people a leg up in
getting citizenship, so on a point system they get extra
points. We certainly could think of something like that to all
of these foreign students who come here who are learning the
latest and best technologies and who are generally among the
best in the world. We tend to keep a lot of them in any case
through whatever mechanism the firms do keep them here, but
that could be regularized and made much more attractive. We are
competing with these other countries for these very bright,
young people.
Mr. Chiswick. The only aspect of public policy in the
United States that I am aware of in which we encourage nepotism
is in our immigration policy.
Senator Sessions. Otherwise, we are a meritocracy. That is
our American ideal. Is that not correct?
Mr. Chiswick. Yes.
Mr. Holzer. If I could add something to that, I think what
we sometimes call nepotism in labor markets is really the
efficient working of flows of information through informal
networks. I think even for less educated workers--and we all
share the view that it would be positive thing to increase the
flow of skilled immigrants, scientists and engineers.
I want to emphasize again that there are benefits to the
American economy that even some of these less-educated
immigrants provide, and I think what we are calling nepotism--
really, in many cases employers, having hired one or two
immigrants and being very, very pleased with their performance
and their work ethic, then encourage them to bring in their
relatives, their friends, their cousins because they are so
pleased. In many cases, that is an efficient way for many of
these lower-wage labor markets to operate.
Senator Sessions. Well, let me just make one thing clear to
anybody who is listening. Essentially, the so-called compromise
legislation that is on the floor--nothing about it is temporary
or guest workers. They all get to come here and they all get to
stay as long as they want to and on a path to citizenship,
virtually every one of them. That is what it does.
The cap on green cards goes from 140,000 to 450,000, and
family members don't count against the cap. Almost one million
workers a year come in and they can apply for the green card,
their employer can, the first day they arrive in the country.
So these are not temporary workers. We need to get straight
about the language of this legislation when people discuss
that.
I would note for the record a study by the Center for
Immigration Studies. There is a deficit today of more than $10
billion a year based on the calculated benefit in taxes paid,
plus the cost on the social system of our economy today for the
average immigrant. I don't think that matter is real clear.
Mr. Chairman, my time has expired. I am sorry to run over.
Mr. Freeman. Can I make a comment on the--
Chairman Specter. Go ahead, Professor Freeman.
Mr. Freeman. I was on the special academy panel that looked
at immigration on particularly fiscal cost things and what we
found was that is incredibly variable over time. And as long as
we are running a huge deficit, the immigrants are going to be
negative-contributing.
If we began to run a surplus, suddenly they would be
contributing more taxes and would therefore be reducing our
deficit. So it is less what they are doing than what our
overall fiscal stance is. If we had a more balanced budget and
we ran a surplus, they would be paying more in taxes.
Senator Sessions. Why is that? I don't want to interrupt.
Chairman Specter. Go ahead.
Senator Sessions. Why would it make a difference? First,
project for me when we are going to have a surplus. Second, why
does it make a difference?
Mr. Freeman. I will do the surplus first because at the
time we did our calculations, no one dreamed there would be a
surplus. I do believe we had one four or 5 years ago, so these
come through magic, if I can phrase it right, sudden economic
boom.
When we are running a surplus, the government is taking in
more taxes than the money they are putting out. And just assume
that an immigrant is also paying more taxes than he or she is
consuming in government funds. Therefore, in that situation,
having another worker come in who pays more in taxes than they
are taking out means we can reduce our National debt. So it is
just very dependent upon what the overall fiscal stance is.
Mr. Siciliano. Mr. Chairman, I am familiar with the study.
I can answer the specific question, if I may.
Chairman Specter. Go ahead, Professor Siciliano.
Mr. Siciliano. Thank you. That particular study has two
types of expenditures--direct payments to immigrants and
immigrant households, so it includes sometimes U.S. citizen
children, and indirect attributive costs which are the general
expenses by the government divided by the number of households
in the United States.
The study is actually dominated by the general government
expenditures component of those costs. So, in other words, you
take the government expenditures, you divide it by the number
of households, and then you take that number. And that number
is a large number right now because we have high levels of
expenditures relative to tax collections.
That is why it is driven by our fiscal state as a Federal
Government, as opposed to simply the behavior of the
immigrants. The direct payments are an important component, but
they are actually dominated by and outweighed by the general
expenditures share, which is interesting, but I think it
overstates the interest of that particular number that you have
cited. It is not irrelevant.
Mr. Chiswick. But those statements are based on the average
immigrant, and if you do the analysis separately for high-
skilled and low-skilled immigrants, what you would find is that
even in a period of surplus, low-skilled immigrants would be
paying less in taxes than the burdens that they would be
putting on the government expenditures.
Mr. Siciliano. Just like low-skilled U.S. workers.
Mr. Chiswick. Just like low-skilled natives, yes.
Mr. Siciliano. Yes, in no different way than low-skilled
U.S. workers.
Mr. Chiswick. But low-skilled natives are here and low-
skilled immigrants--do we want them in the country or not?
Senator Sessions. Thank you.
Chairman Specter. Thank you very much, Senator Sessions.
Senator Sessions and I just made a trip to South America
and had a good deal of conversations with officials about a
variety of aspects on immigration. In both Colombia and the
Dominican Republic, we were told of governmental programs there
which sought to keep track of guest workers. President Uribe, a
very impressive man, told us that they had arrangements with
both Spain and Canada, so that when their workers went there,
they were kept track of by the Colombian officials, and their
ability to go back depended on complying with the legalism of
returning when their stay was up.
Professor Freeman, do you think that is a realistic way to
bring them back?
Mr. Freeman. It is easier if they are far away. So if you
are going to Colombian to Spain where you have airplane trips,
I think it would be more difficult to do this with a border
with Mexico.
Chairman Specter. The President of the Dominican Republic
was very interested in the money coming back to the Dominican
Republic. The estimates are the immigrants in the United States
send home about $39 billion a year in remittances. So on one
hand, there is a concern about what that does to our economy.
That purchasing power is not being used in the United States.
The other aspect is that our foreign relations are very
complicated. We heard a great deal about the difficulties with
Venezuela and President Chavez. A vote of the Andean countries
on protecting property rights was three-to-two, with the United
States winning. We have trade there to try to strengthen our
foreign relations. We heard a lot of talk about their
recognizing the leaders of the foreign governments, recognizing
our rights to control our borders, but also looking for a
humanitarian approach that we have.
How big an impact is it, Professor Siciliano, if $39
billion is remitted from the United States to the home
countries?
Mr. Siciliano. Well, as a component of the overall economy,
I actually think it is a fairly small number, but it obviously
has tremendous impact for the countries who receive the
remittances.
Two points. One, the transmission of that money actually
generates substantial revenue and profits for U.S.-based
business, primarily financial institutions who serve as the
intermediaries to make that happen. I don't think we want to
forget that.
The second issue is that the money lands in the hands of
individuals who are nationals of obviously that country and
some of it recycles as demand for our goods and services, hence
jump-starting, we hope, the ongoing trade relations which may
mitigate some of the foreign national risks you have
identified. So I think it is a small piece in a big global
economy and one that shouldn't dominate the thinking about how
we decide to move forward on the immigration debate.
Chairman Specter. Professor Freeman, you have suggested a
policy of considering auctioning immigrant visas and to use
those excess funds to redistribute the gains. Do you think that
is really a good idea to engage in an auction for people who
want to come to this country and the highest bidder wins?
Mr. Freeman. Let me give the place where it would make the
most sense, which is the H-1B visas. Where companies are saying
there is a shortage of people and they want to bring more
people, we charge them some amount of money.
Chairman Specter. So you are going to have Bill Gates pay
for the auction price?
Mr. Freeman. Exactly right.
Senator Sessions. They pay now.
Mr. Freeman. They pay something now. That is right.
Senator Sessions. I don't know what it is, but--
Mr. Freeman. They pay $1,000--or $2,000, he says.
Chairman Specter. Well, that puts it in a different light
if Bill Gates is going to pay, as contrasted with the
immigrant.
Mr. Freeman. Yes. There, the notion of an auction just was
the $2,000 got established for some unknown reason and this
would establish a market mechanism that would say if we are
going to give out 100,000 H-1B visas, the employers who want
them the most would bid money for them, the same way we auction
off the rights to pollution and things like that. I wouldn't be
putting this as a major cornerstone of our immigration
policies.
Chairman Specter. Professor Chiswick, you have made a
suggestion in your writing about prioritizing immigrants based
on the economic benefits they are likely to confer on the
United States. That is an interesting concept. Would you do
that at the expense of family unification? Would you exclude
family unification and maintain that priority before taking up
the issue of analyzing the economic benefit so that we look to
specific immigrants who can add to our productivity?
Mr. Chiswick. I wouldn't totally exclude family
unification. I think in terms of the spouses and minor children
and aged parents of U.S. citizens, I would permit that to exist
as it does under current law. But I would recommend removing
all of the other family categories and I would recommend three
changes in allocating visas.
One would be to move away from the current targeted
employment policy and move toward a Canadian-Australian style
point system for valuating skills. I would also move in the
direction of the auctioning or large visa fee system that we
have just spoken about, and this would be a way for family
members, friends, to express their preference to bring over a
particular individual.
Chairman Specter. You would auction family reunification
visas?
Mr. Chiswick. No. I would auction visas and people who want
to bring their relatives here would have an incentive to
contribute to the price of the visa that is auctioned off. So
it doesn't have to be Bill Gates who is paying for the visa. It
could be the person's brothers, sisters, cousins, aunts,
uncles, nieces and nephews.
Chairman Specter. It sounds like a pretty tough way to
raise public funds to me.
You are lucky, gentlemen, that we are about to vote.
Otherwise, we would keep you here well into the afternoon.
Mr. Chiswick. We are enjoying this.
Mr. Siciliano. Absolutely.
Chairman Specter. Senator Sessions, anything further?
Senator Sessions. Well, it is a most fascinating subject. I
asked that we do some hearings like this because we are just
moving pieces of legislation through and we have hardly had any
real discussion of the incredible size and scope of what we are
doing and the impact it may have on us.
I was just with the president of the University of Alabama-
Huntsville. Kit Bond spoke and referred to his amendment that
would allow a college graduate from a foreign country to stay
in the country. Now, they have to leave the country.
Professor Freeman, do you have any thoughts about--to my
knowledge, there is nothing in this bill that fixes that, but
do you think that is a good policy to change that rule?
Mr. Freeman. Yes, and I think it is one of the silly things
that we do is if you are a foreign student and you want to come
to the U.S. to study, you have to tell the State Department
person that you are not remotely thinking about working in the
U.S.
I talked to the State Department people and I said that do
you know that for the Chinese 90 percent of them will stay
here? So you realize, of course, they are lying to you when
they say no. And the State Department person said we don't pay
attention to statistics; we just trust people.
But making entry to the country of these kinds of people
sort of a bit of a white lie at the beginning when everyone
understands we want them and they want to come to work here--we
should just be forthright about that the way the Australians
and the Canadians are.
Senator Sessions. Well, I was in Russia in the early 1990's
and we had a guide who spoke perfect English. She was a very
attractive young lady and she wanted to have a visa to come to
the United States, and they said, no, she would never get it.
We said why? Well, she will probably get married, you know, and
she probably won't return.
What kind of rule is that when we have people who say we
have got to have somebody to put a piece of chocolate on your
bed every night, and this lady could have contributed in any
number of ways to the good of the United States?
Let me just raise an issue. I just want to raise this
because I know it is anecdotal, but I think it is worth talking
about. Jared Bernstein of the liberal Economic Policy Institute
said, ``Of course, there are jobs that few Americans will take
because wages and working conditions have been degraded by
employers. But there is nothing about landscaping, food
processing, meat-cutting or construction that would preclude
someone from doing these jobs on the basis of their nativity.
Nothing would keep anyone, immigrant or native-born, from doing
them if they were paid better or had better conditions.''
In my hometown of Mobile, there was a recent need after
Hurricane Katrina, which is the classic thing I think you would
need a temporary worker for. I mean, you have got roofs all
over town that need to be replaced--a classic need for a
temporary worker. So we had a lot of Hispanic workers.
There was a recent article in the Washington Times entitled
``Arrival of Aliens Ousts U.S. Workers,'' and the article
describes how 70 laborers and construction workers were working
for $10 an hour in the aftermath of Hurricane Katrina, but were
told they were no longer needed when the Hispanic workers
showed up.
This is a quote from the article: ``Linda Swope, who
operates Complete Employment Services in Mobile, told the
Washington Times last week that the workers, whom she described
as U.S. citizens, residents of Alabama and predominantly black,
had been urgently requested by contractors hired to rebuild and
clear devastated areas of the State, but were told to leave
three job sites when foreign workers showed up.''
``After Katrina, our company had 70 workers on the job the
first day, but the companies decided they didn't need them
anymore because the Mexicans had arrived, Ms. Swope said. I
assure that it is not true that Americans don't want to work.
We had been told that 270 jobs might be available and we could
have filled every one of them with men from this area, most of
whom lost jobs because of the hurricane. When we told the guys
they would not be needed, they actually cried and we cried with
them. This is a shame.''
Does anyone want to comment on that?
Mr. Chiswick. I agree with that statement that there is a
competition in the labor market and the large increase in low-
skilled immigration that we have seen over the last 20 years
has had a substantial negative effect on the employment and
earning opportunities of low-skilled Americans.
On the other end of the skill distribution, the high-
skilled immigrants, we are in intense international competition
not just with Canada and Australia, but now also with Western
European countries that are all developing immigration policies
to attract high-skilled immigrants. And we are essentially
subsidizing Canada and Australia by our immigration policies
which make it that much more difficult for high-skilled
immigrants to come to the United States permanently.
Chairman Specter. The vote has just started, so you may
comment, Professor Holzer, but if you would make it brief,
Professor Siciliano wants to comment and I wouldn't be
surprised if Professor Freeman wants the last word. Just be
brief.
Mr. Holzer. Senator, I don't share the view that has been
expressed that low-skilled immigrants have really dramatically
depressed or reduced opportunities for native-born workers. I
did say earlier that I thought construction was a sector where
a lot of native-born workers would be interested.
I think in this particular case of Katrina, this is an
example where we could be doing more not necessarily to drive
the immigrants out of America, but to level the playing field
and increase the opportunities for native-born workers to
improve the networks and the skills that they get.
I think, for instance, if public funds are being expended
on the rebuilding of Katrina, it would be fairly easy to
generate some requirements that contractors look first and make
some efforts to bring in native-born workers. I would favor
those kinds of attempts to level the playing field and
increasing the opportunities for the native-born workers. And
in the case of Katrina, I think there is a strong case to be
made.
Chairman Specter. Professor Siciliano, do you have a brief
comment?
Mr. Siciliano. Yes, two key points. I think anecdote in the
hands of the economist is a dangerous weapon, so let me just
give two kind of actual points of data. First, in the 1960's we
know that roughly half of the U.S. work force lacked a high
school diploma, and now about 12 percent of the native-born
work force lacks a high school diploma.
This skill set difference is driving the comment that I
think is true, which is it is not the case that immigrant labor
is displacing by and large U.S. labor or depressing wages, and
there are two key points to highlight that. Nevada and
Kentucky, arguably similar in cost of living in many ways--7.5
percent of the population of Nevada right now is estimated to
be undocumented. The average high school drop-out wage is $10
per hour. In Kentucky, less than 1 percent of the population is
estimated to be undocumented, and yet the high school drop-out
wage is $8.73 per hour.
It can't be simplified into simply saying immigrant labor
shows up and it hurts U.S.-born labor. It is much more complex
than that. I think, net, it clearly benefits U.S. labor.
Chairman Specter. Professor Freeman, do you have a brief
concluding comment?
Mr. Freeman. I want to give a speech, but I guess I am not
allowed to. The fact is that in no single occupation in this
country, including the worst occupations that we can think of
in terms of wages, are immigrants the majority. I think 30 to
40 percent is about the most we get in any occupation.
So there are parts of the country where the jobs that we
might think of now as for low-level immigrant workers--they are
being filled in parts of the country where there aren't
immigrants by Americans. That means that Americans are willing
to work at these jobs. They may not be willing to compete with
an immigrant at very low wages, particularly when the immigrant
may be getting paid illegally off the books, and so on.
Chairman Specter. Gentlemen, thank you all very much for
coming. If you would respond to my inquiry within 2 weeks, it
would be greatly appreciated because we expect the immigration
bill back on the floor shortly; that is, to give us your
projection as to how you would structure a guest worker
program, considering the economic factors of not taking or
minimizing the taking of jobs, and not lowering or minimizing
the lowering of wages. But recog-
nizing that, as Professor Holzer says, these are very difficult
issues and nobody knows the answers with precision, your projections
would be enormously helpful to the Committee and to the Senate.
Thank you all very much and that concludes our hearing.
[Whereupon, at 11:17 a.m., the Committee was adjourned.]
[Submissions for the record follow.]
[Additional material is being retained in the Committee
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