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December 31, 2006

From the Economist: government policies to attract the highly talented worker.

In its special report on the search for the talented worker, the Economist noted: “Two economists, Frédéric Docquier and Hillel Rapoport, estimate that average emigration rates worldwide are 0.9% for the low-skilled, 1.6% for the medium-skilled and 5.5% for the high-skilled. These rates have been accelerating far faster for the high-skilled group than for the rest. Skilled immigrants accounted for more than half of all admissions in Australia, Canada and New Zealand in 2001.”


Germany has made it easier for skilled workers to get visas.

Britain has offered more work permits for skilled migrants.

France has introduced a “scientist visa”.

Many countries are making it easier for foreign students to stay on after graduating.

France is aiming to push up its proportion of foreign students from about 7% now to 20% over time.

Germany is trying to create a Teutonic Ivy League and wants to “internationalise studies in Germany”.

A survey of Indian executives living in America found that 68% were actively looking for opportunities to return home, and 12% had already decided to do so; and a survey of graduates of the elite All India Institute of Medical Sciences who were living abroad found that 40% were ready to go home.

Beijing has an office in Silicon Valley

The section of the special report on government policies, in full:

IMMIGRANTS tend to get a bad press. In reality, though, many economies would be lost without them, and many governments are desperate to attract them. The most mobile people are not the poor but the educated, and they are sought after as never before.

Most governments are easing restrictions on the entry of skilled workers. Some are going further and offering incentives. Germany has made it easier for skilled workers to get visas. Britain has offered more work permits for skilled migrants. France has introduced a “scientist visa”. Many countries are making it easier for foreign students to stay on after graduating. Canada and Australia have not only tilted their long-established points systems further towards the skilled, they have also introduced more incentives. Canada experimented with a tax holiday for citizens returning from the United States before realising that this encouraged temporary emigration. Ireland's government works hard to recruit overseas talent.

The most ambitious programme for drawing in brains from abroad is—where else?—in Singapore. Lee Kuan Yew, the city-state's elder statesman, has long argued that “trained talent is the yeast that transforms a society and makes it rise.” At first Singapore focused on wooing its émigrés. Now it is going out of its way to import foreign talent. Only 3% of companies experienced problems with the immigration authorities, compared with 24% in China and 46% in the United States. Singapore is particularly keen to attract scientific talent, mainly in biotechnology. Of the 170 staff working in the country's Genome Institute, about 120 are foreigners. Alan Colman, a member of the Scottish team that cloned Dolly the sheep, is also based in Singapore now.

Enroll here

Many countries regard universities as ideal talent-catching machines, not only because they select students on the basis of ability but also because those students bring all sorts of other benefits, from spending money to providing cheap research labour. France is aiming to push up its proportion of foreign students from about 7% now to 20% over time. Germany is trying to create a Teutonic Ivy League and wants to “internationalise studies in Germany”. Both countries are offering lots of courses in English. In Singapore a fifth of the students at public universities are foreign, thanks in part to heavy subsidies. Australia and New Zealand have created a ladder leading from universities to the workforce and then to permanent residence. China, which temporarily dispensed with entrance examinations during the Cultural Revolution, is focusing resources on its elite universities.

But government schemes can make much of a difference only if they are backed up by a vibrant economy, and only if cultural resistance can be overcome. No matter how much Japan speeds up the processing of scientific visas, it will not attract more foreigners unless Japanese firms are prepared to give them senior jobs.

Still, a combination of sensible government policies and economic liberalisation can work wonders, as Ireland has demonstrated. A country that has exported people for centuries is now a net importer. Britain has also seen a surge in the number of skilled people arriving from both the rich and the developing world, thanks to the Labour government's more immigrant-friendly policies since taking office in 1997. The share of skilled people in total immigrant arrivals increased from 7% in 1991 to 32% in 2001.

Some of the best prospects in the competition for talent are émigrés—people who have gone abroad to make their fortune but still feel the tug of their home country. Both China and India are now trying to emulate Ireland's success in wooing back the diaspora, but China is trying harder. In 1987 the Communist Party's general secretary, Zhao Ziyang, described China's brain drain as “storing brain power overseas”. Officials from every level of government have been raiding the store since, as part of a policy of “strengthening the country through human talent”.

They have introduced a mind-boggling range of enticements, from bigger apartments to access to the best schools, from chauffeur-driven cars to fancy titles. The Chinese Academy of Sciences has established a programme of generous fellowships for expats—the “hundred talents programme”. Beijing has an office in Silicon Valley, and Shanghai has established a “human talent market”. China is littered with shiny new edifices labelled “returning-student entrepreneurial building”.

All this coincides with a change in the flow of people. For decades returnees were rare. The numbers began to shoot up in 2000, when the bursting of the Silicon Valley bubble coincided with rapid growth in China. Despite doubts about the quality of some of these people, there is growing evidence that China is going in the same direction as South Korea and Taiwan—first tempting back the diaspora (see chart 4) and then beginning to compete for global talent.

India has taken a different approach. The government has relied as much on the goodwill of prominent businesspeople as it has on the wisdom of bureaucrats; it has also cast its net wider, focusing not just on luring back expats but also on putting the wealth and wisdom of the diaspora to work on behalf of the mother country. There are an estimated 20m Indians living abroad, generating an annual income equal to 35% of India's gross domestic product. The Indian government is doing what it can, in its haphazard way, to let them participate in the Indian boom, making it easier for them to invest back home and streamlining visa procedures. There is a special visa for “people of Indian origin”.

Come back, all is forgiven

Again, government policy has coincided with a change in the flow of people. NASSCOM estimates that in 2001-04 some 25,000 Indian techies returned home, and the number is rising rapidly. A survey of Indian executives living in America found that 68% were actively looking for opportunities to return home, and 12% had already decided to do so; and a survey of graduates of the elite All India Institute of Medical Sciences who were living abroad found that 40% were ready to go home.

For years, discussion of the cross-border flow of talent has sounded a sombre note. For some critics it is nothing less than a new form of colonialism. The rich world, they say, is not only appropriating the developing world's best brains but getting them on the cheap, with their education paid for by someone else. One study of 55 developing countries found that a third of them lost more than 15% of their graduates to migration. Turkey and Morocco lose 40% and the Caribbean countries 50%. But in recent years some of the gloom has lifted.

In fact, it was always overdone. Migrants sent huge amounts of money home in remittances: $126 billion in 2004, according to the International Monetary Fund. They also transferred knowledge and connections. The current Indian boom owes much to successful Indians who emigrated in the 1960s and 1970s and who are now determined to modernise their home country. They have formed support groups such as Indus Entrepreneurs, steered multinational contracts to India, established venture-capital funds and helped found business schools.

But what has recently helped to change the mood is that the flow is no longer one way. The brain drain is giving way to brain circulation, and returning émigrés are turning into economic dynamos. One example is Dr Prathap Reddy, a returnee from America, who established the Apollo Hospitals Group, one of Asia's largest and the first to attract foreign investment.

Refreshing effect

Returnees seem to have a spring in their step. In Ireland they enjoy a 10% wage premium over their stay-at-home compatriots. In China they receive more grants and fellowships than their domestic competitors. A third of Taiwan's companies were founded by returnees from America.

What the talent elite everywhere has in common is that it is more mobile than the rest. Two economists, Frédéric Docquier and Hillel Rapoport, estimate that average emigration rates worldwide are 0.9% for the low-skilled, 1.6% for the medium-skilled and 5.5% for the high-skilled. These rates have been accelerating far faster for the high-skilled group than for the rest. Skilled immigrants accounted for more than half of all admissions in Australia, Canada and New Zealand in 2001.

The global war for talent is likely to intensify. Most developed countries are already struggling to find enough doctors and teachers, and are wondering how they will manage when the baby-boomer generation retires. Developing countries, for their part, realise that they will not be able to plug into the global knowledge economy unless they give their people the freedom to move around. A powerful array of interests, from multinationals to city politicians, supports the idea of a global market for the best people. Countries cut themselves off from it at their peril

Capitol Hill analysis of immigration reform prospects for 2007

Rachel Swarns of the New York Times reviews the variables for immigration reform in early 2007:

WASHINGTON, Dec. 25 — Counting on the support of the new Democratic majority in Congress, Democratic lawmakers and their Republican allies are working on measures that could place millions of illegal immigrants on a more direct path to citizenship than would a bill that the Senate passed in the spring.

The Senate plans to introduce its immigration bill next month with an eye toward passage in March or April, officials said. The House is expected to consider its version later. President Bush said last week that he hoped to sign an immigration bill next year.

The major lawmakers drafting the legislation include Senators Edward M. Kennedy, Democrat of Massachusetts, and John McCain, Republican of Arizona, along with Representatives Jeff Flake, Republican of Arizona, and Luis V. Gutierrez, Democrat of Illinois. The four met this month, and their staffs have begun working on a bill.

Hispanic voters, a swing constituency that Republicans covet, abandoned the party in large numbers. Several Republican hardliners, including Representatives John Hostettler of Indiana and J. D. Hayworth of Arizona, lost their seats. After the dismal showing, House Republicans denied F. James Sensenbrenner Jr. of Wisconsin, the departing chairman of the Judiciary Committee and an architect of the House immigration approach, a senior position on any major committee in the new Congress.

Domestic security officials have voiced support for important elements of the framework under consideration. Homeland Security Secretary Michael Chertoff has repeatedly raised doubts about the effectiveness of border fencing in remote desert areas. Mr. Bush signed the fence bill this year, but Congress did not appropriate enough money for it. Officials say they would also prefer a less burdensome process than the original Senate bill outlined.

That bill divided the estimated 12 million illegal immigrants into three groups, those living here for five years or more, those here for two to five years and those here for less than two years.

All but the illegal immigrants living here for five years or more, roughly seven million, would have to leave the country briefly to be eligible for legal status. Those here for fewer than two years would have to leave the country and would not even be guaranteed a slot in a guest worker plan.

Domestic security officials said the original plan would have been enormously difficult to administer because many illegal immigrants lacked documentation to prove how long they had been in the United States. The officials said it would have fueled a market in fraudulent documents as illegal immigrants scrambled to offer proof of residency. The three-tiered approach would also discourage millions of illegal immigrants from registering, driving millions deeper underground.

“We do have concerns over breaking it down into that tiered system,” said a domestic security official who insisted on anonymity. “When you do that, you run the risk of people trying to create false documentation that would get them the highest benefits.”

Also expected to have prominent roles in the debate are Representatives Zoe Lofgren, the California Democrat who is likely to head the House Immigration, Border Security and Claims Subcommittee; Howard L. Berman, a California Democrat who has followed immigration issues closely for many years; and Bennie Thompson, the Mississippi Democrat who is set to lead the House Homeland Security Committee and has said he plans to re-evaluate the 700-mile fence.

The percentage of Hispanics who voted for Republicans fell to 29 percent, from 44 percent in 2004, and some Republicans say passing immigration bills is a crucial part of the effort to win them back.

The House Democrats are concerned about protecting newly elected moderate and conservative Democrats, some of whom had campaigned against legalizing illegal immigrants.

In the Senate, Mr. Kennedy’s bill certainly has the backing of the Democratic leadership, Congressional aides said.

Senator John Cornyn, Republican of Texas, argued that expanding citizenship eligibility and abandoning financing for the fence would alienate moderates in both parties. The three-tier legalization system, a hard-fought compromise, was critical for moderate Republican support for the original bill.

The plan under consideration would allow 10 million or 11 million illegal immigrants to become eligible to apply for citizenship without returning home, up from 7 million in the original Senate bill. To be granted citizenship, they would have to remain employed, pass background checks, pay fines and back taxes, and enroll in English classes.

“I think it’s a nonstarter,” said Mr. Cornyn, who opposes a path to citizenship for illegal workers, but supports a plan for temporary workers that would let foreigners work here temporarily before returning home.

Congressional aides and lawyers familiar with the proposed bills emphasize that it will be very difficult for a smaller group of illegal immigrants, those who arrived after a certain date, perhaps 2004, to become citizens. The aides said the bill might include incentives for illegal immigrants to leave the country. While they hope such elements may ease concerns, many challenges remain.

Some powerful unions, which expect to exert more leverage in the new Congress, remain deeply opposed to the temporary worker program in the Senate bill. The unions say it threatens American jobs.

December 29, 2006

A case of sex work coercion of illegal immigrants in the U.S.

Luring illegal immigrants into a country for the purpose of coerced sex work is widely reported elsewhere but rarely reported in the U. S. Surely it happens. How bad is the problem? Several years ago I tried to find a pattern in San Francisco and found none, after talking with people informed about the sex work trade.

This Los Angeles Times article starts with: “Four women from Guatemala have been arrested as part of a scheme in which young women were lured into the U.S. with promises of good jobs and forced to become prostitutes in Los Angeles.”

Charged with importing and harboring undocumented immigrants as well as harboring them for prostitution were Gladys Vasquez Valenzuela, 36; her sisters, Jeanette, 25, and Albertina, 48; and Albertina's daughter, Maria Vicente de los Angeles, 27. Another relative, Maribel Vasquez Valenzuela, is being sought by authorities.

The investigation began three months ago when two alleged victims of the ring escaped with the help of a male customer and contacted authorities, according to the U.S. attorney's office. Two other victims were rescued by investigators last month. Ten women at the locations raided Wednesday were also believed to have been working as prostitutes and were being interviewed by authorities to determine if they also were victims.

The story continues….

In a sworn affidavit used for the arrests and searches, FBI Agent Tricia Whitehill provided a harrowing account of how the young women were duped into coming to the U.S., forced into prostitution and held against their will, often beaten when they complained.

One victim, identified only by the initials I.C., told the agent she was first approached in Guatemala about coming to the U.S. by a man named "Chepe." According to the affidavit, he told the woman he had children in the U.S. who needed help with their restaurant business and that she could make plenty of money that she could send back to her daughter in Guatemala.

Agreeing to the offer, I.C. traveled for 20 days by foot and bus, crossing the Mexican border into Texas in February. There, she met a man and woman who drove her from Houston to Los Angeles.

Gladys Vasquez Valenzuela and her niece, Maribel, met the van and paid the smugglers $1,600 for I.C. and another woman, according to the affidavit.

Returning to Vasquez Valenzuela's apartment, I.C. said, she was told by the woman that she owed $10,000 for the trip and would have to work as a prostitute if she did not have the money.

Never left alone long enough to escape, I.C. told the FBI, she was soon forced into prostitution at Vasquez Valenzuela's apartment. On occasion, she said, a van would take her and other victims to Alvarado Street, where they would pick up male customers and go to one of the many apartments used by the suspects for prostitution.

For months, I.C. said, she witnessed other women being beaten if they talked back to their captors or tried to escape. I.C. alleged that she was once beaten by Vasquez Valenzuela.

Then, on April 30, I.C. said, she and another woman, identified in the affidavit only as L.B., managed to escape with the help of a male customer who gave them money, bought them clothes and let them live with him.

Furious about the escape, Vasquez Valenzuela repeatedly called I.C.'s cellphone threatening to kill her and her family, according to the affidavit.

The victim identified as L.B said she was only 17 years old when "Chepe" came to her house in Guatemala last October and asked if she was interested in a $20-an-hour job at his daughter's jewelry store in Los Angeles, the affidavit says.

Smuggled into the U.S., the teenager said, she was picked up by Jeanette Vasquez Valenzuela, also known as "Miriam," and forced into prostitution in Los Angeles, charging men $70 for sex.

"L.B. cried and said she did not want to do that kind of work," the affidavit says. "Miriam told her that she did not have any other options because L.B. owed her $10,000."

Three months later, the affidavit says, L.B. was told it would cost $20,000 to buy her freedom.

Three months after that, L.B. told the agent, she unsuccessfully tried to escape with a male client and was beaten by three of the suspects and an accomplice. "The four women took turns kicking her and hitting her in the face," the affidavit says. "The next day, L.B. had to go to work with bruises all over her body."

Like the others, L.B. said, she also was threatened if she tried to escape, recalling how Jeanette Vasquez Valenzuela allegedly said she would "send someone to kill L.B.'s family and that she would cut L.B.'s legs off or sell her to a pimp" if she again tried to flee.

But one Sunday, she and I.C. did escape with a male customer, only because Gladys Vasquez Valenzuela was drinking and left them unsupervised.

The suspects were expected to enter pleas next month after an indictment is issued. The U.S. attorney's office said each count carries a maximum prison sentence of 10 years.


December 26, 2006

DREAM Act proposal: citizenship through military service

What is the Development, Relief, and Education for Alien Minors Act? This proposed federal legislation will incent immigrants, legal and illegal, to enroll in the U.S. military. Simply stated, “Immigrant students who have grown up in the U.S., graduated from high school here, and can demonstrate good moral character would initially qualify for "conditional lawful permanent resident" status, which would normally last for six years. During the conditional period, the immigrant would be required to go to college, join the military, or work a significant number of hours of community service. At the end of the conditional period, those who meet at least one of these requirements would be eligible for regular lawful permanent resident status.” (From here.)

I have posted before on legal immigrant enrollment in the military. A summary of the legislation (as of April 2006), analysis, list of supporters, etc., is found at The National Immigration Law Center.

Max Boot, of the Council of Foreign Relations, has the most articulate advocate of such a program, such as in this
2005 op-ed piece for the Los Angeles Times. He would open up the program for all foreigners:

The DREAM Act is a great idea, but I would go further and offer citizenship to anyone, anywhere on the planet, willing to serve a set term in the U.S. military. We could model a Freedom Legion after the French Foreign Legion. Or we could allow foreigners to join regular units after a period of English-language instruction, if necessary…..

In the past, the U.S. military had many more foreigners than we do today. (During the Civil War, at least 20% were immigrants. Now it's 7%.) The British army, among many others, has also made good use of noncitizens. Nepalese Gurkhas still fight and die for the Union Jack despite not being "culturally bonded" to it. No doubt they would do the same for the Stars and Stripes.

December 25, 2006

Economics of remittances from U.S. to Brazil

Bendixen Associate's website posted a study presented in March, 2006, drawing from a survey of Brazilians done in 2004. here are a just a few items in the presentation:

When was survey done? April - May 2004
Who received remittance? female 65% male 35%
Age of recipient: 52% are 35 or younger
How often are remittances received: at least once a month 44%; between 2 and 6 months 23%, once a year 35%
For how long: less than a year 20%, 1 - 3 years 42%, 3 -5 14%, 5 or more year 24%
Average household income of recipient: 69% under $10,000
From where? 50% US, 31% Europe, 17% Japan

December 22, 2006

New Texas study says illegal immigrants are net benefit to economy

The Texas Controller, Carolyn Strayhorn, issued on 12/9 what she calls the first comprehensive financial analysis by a state of the impact of undocumented immigrants on a state's budget and economy, looking at gross state product, revenues generated, taxes paid and the cost of state services. Thanks to Cliff Treese for alerting me to it.

A supporter of a guest worker program, Stayhorn concludes that the absence of the estimated 1.4 million undocumented immigrants in Texas in fiscal 2005 would have been a loss to our gross state product of $17.7 billion. Undocumented immigrants produced $1.58 billion in state revenues, which exceeded the $1.16 billion in state services they received. However, local governments bore the burden of $1.44 billion in uncompensated health care costs and local law enforcement costs not paid for by the state.

You can find the report here. I have not yet analyzed it.

The Washington Post ran a story on the study. One thing the Post reporter noted was that since Texas does not have an income tax (I didn’t know that) the Texas analysis did not have to deal with unreported cash wages.

I have posted below section VI, the economics benefits analysis

VI. Economic Benefits

This section analyzes two issues:

* the economic impact of undocumented immigrants in Texas, including their contributions to state employment, wages and revenues over a 20-year period (2005 through 2025); and
* the contributions of undocumented immigrants on Texas government revenues.

Economic Impact

The Pew Hispanic Center estimates that between 1.4 million and 1.6 million undocumented immigrants resided in Texas in March 2005.[58] To achieve a conservative estimate, this analysis relies on the lower boundary of this range.

Using 2000 Census data for the number of foreign-born residents in Texas counties, it is possible to estimate how many undocumented immigrants reside in each of Texas’ 24 Council of Government regions, based on the assumption that immigrants are distributed in the same proportion as the foreign-born. Based on an age profile of foreign-born immigrants into the U.S. from Mexico, it is possible to further disaggregate the estimates into age and gender groups.[59]

These data then can be put into the Comptroller’s Regional Economic Model, Inc. (REMI) model to investigate the impact of undocumented immigrants on the Texas economy. This is accomplished by instructing REMI to act as if these immigrants were to suddenly vanish from Texas and then to examine the degree to which the underlying economic forecast for the state and for each region would be affected. The implicit assumption is 1.4 million undocumented immigrants have employment and spending patterns consistent with Hispanics in Texas with similar age and gender profiles.

To gauge the economic impact of undocumented immigrants, one additional change must be made in the REMI model. Because REMI is a general equilibrium model, it tries to compensate for changes in a variety of ways. In the case of workers eliminated from a region, the model assumes new workers will be recruited to make up for their loss.

While this is an expected “real-world” result, a true test of the effects of unauthorized immigrants would be seen only if the REMI model were prevented from importing additional workers into the state in compensation. The model eliminates the impact of all undocumented immigrants on the Texas economy. Some in-migration was allowed, but drawing in new Hispanic in-migrants in numbers disproportionate to their share of the indigenous population in the U.S. was prohibited. Effectively, this shut off return in-migration from Mexico and other Latin-American countries.
Model Results

Probably the easiest way to summarize the contribution of undocumented immigrants to the Texas economy is to consider the percentage changes that might occur in various economic indicators as a result of their removal. (As a yardstick, it should be noted that 1.4 million people account for slightly more than 6 percent of the total Texas population.)

Exhibit 14 and 15 summarize the changes in key economic indicators, and summarize the economic impact.

Without the undocumented immigrant population, Texas’ work force would decrease by 6.3 percent. This decline is actually somewhat lower than the percentage of the work force actually accounted for by undocumented immigrants, since REMI assumes some additional immigration would occur to replace the workers lost. The most significant economic impact of losing undocumented workers would be a noticeable tightening in labor markets.
Estimated Effects of the Loss of 1.4 Million Undocumented Immigrants from Texas in 2005 [ 2010 only – PFR]
(Percent Change from Baseline Forecast)

Total Employment -2.1%
Total Gross State Product -1.8%
Personal Income -2.0%
Real Disposable Personal Income -2.2%
Relative Cost of Production 0.3%
Relative Labor Intensity -0.1%
Exports to Rest of World -0.3%
Average Annual Compensation Rate 1.0%
Population -4.2%
Labor Force -3.6% [in 2005, 6.3% - PFR]

This tightening would induce increases in wages, as indicated by a rise in average annual compensation rate. Wage rates would rise by 0.6 percent in the first year and stay above the forecast rate throughout the entire 20-year period.

While pay increases can be viewed as a positive social and economic development, when they rise due to labor shortages they affect economic competitiveness. In this case, it would be expressed as a modest decline in the value of Texas’ exports.

The remaining broad economic measures all point to an initial impact of undocumented immigrants of about 2.5 percent in terms of the value of production and wages in the Texas economy. Eliminating 1.4 million immigrants would have resulted in a 2.3 percent decline in employment, a 2.6 percent decline in personal income and a 2.8 percent decline in disposable personal income in 2005. This change also would generate a 2.1 percent decline in the gross state product (GSP), the broadest measure of the value of all goods and services produced in Texas.

While none of these changes are surprising, the one finding that may appear unusual is the persistence of the decline. If no in-migration were possible other than from natives or authorized immigrants, employment would remain 2 percent below the baseline forecast 20 years later. The impact lessens over time, but remains sizable throughout the 20-year forecast period.

The primary adjustment the model makes to compensate for the loss of these undocumented migrants is initially a rise in the wage rate, which would induce some new in-migration into Texas and some additional participation in the labor force from current residents. Moreover, with wages rising relative to capital, there would be some substitution of capital for employees so the need for additional workers is lessened through productivity increases. But the fact that the Texas economy cannot adjust completely to the loss of this labor through these changes and retain its competitiveness ultimately means that relative to the rest of the world the cost of production in Texas is higher, making our goods less competitive in the international marketplace and decreasing the size of the Texas economy.
Regional Distribution

Assuming that the current distribution of unauthorized immigrants is similar to the distribution of the foreign-born population in Texas from Central America and Mexico, as detailed in the 2000 Census, the economic impact of unauthorized immigrants varies substantially across Texas. As detailed in Exhibit 16, the loss of 1.4 million undocumented immigrants from the work force would produce work force declines ranging from 22.7 percent in the South Texas COG region (the Brownsville-McAllen area) to 1.7 percent

December 18, 2006

NY Times editorial on Swift Company raids

Today, 12/18. Here it is:

December 18, 2006
Swift Raids

When federal immigration officials raided six plants owned by Swift & Company, the world’s second largest beef and pork processor, last Tuesday, they brought Spanish translators. They knew exactly what kind of worker is found in low-paying, strenuous jobs in this country: recent Latino arrivals with limited skills and, in many cases, no legal papers. Nearly 1,300 people — almost 10 percent of Swift’s work force — were taken away in what the government said was the largest but not the last assault on the underground immigrant economy.

The raids have led some people to heap scorn on Swift and, of course, on the illegal immigrants, particularly the dozens of detainees who have been charged with identity theft and other crimes. But doing so misses the bigger picture. Swift and its workers are merely Exhibit A in an immigration system that is failing in all of its parts.

It is a system that rewards illegality and pays lip service to lawfulness and order.

Swift insists that it is a model corporate citizen. It obeyed the rules, which require it to check workers’ identity papers and file so-called I-9 forms attesting to that. And it went further, participating in the federal Basic Pilot program, a system of checking Social Security numbers that President Bush has touted as a way to crack down on immigration fraud. The company says that prying any more aggressively into workers’ legal status would leave it open to civil rights lawsuits.

The Swift raids are powerful evidence that I-9’s and Basic Pilot are ineffective and disingenuous, a nod to by-the-books technical lawfulness that allows a far vaster world of illegality to flourish. Swift and other large-scale employers of immigrants, like farms and hotels, may insist that they never knowingly hire people illegally. But as long as the jobs they offer are the kinds whose pay and conditions consistently fail to attract native-born Americans, their protests will ring hollow. This system is brilliantly efficient at bringing lots of cheap products and services to market, which is great unless you mind its essential lawlessness, anonymity and reliance on an enormous work force of silent, compliant, frightened people whose bitter choice is to stay here illegally or go home and be desperately poor.

Swift, by its lights, was doing the right thing. The federal government was doing the right thing, waking up, belatedly, to workplace enforcement. And yet it’s impossible to see how this will work over the long term. Immigration reform built on piecemeal enforcement — factory raids and border walls — won’t solve the problem of the 12 million illegal immigrants already here. The American economy wouldn’t stand the shock if the Swift raids were multiplied to levels beyond the merely symbolic.

The system needs what Mr. Bush and Congress have refused to give it: a way to end the sham. Comprehensive immigration reform is good for the economy, giving companies access to a secure and stable work force. It is good for national security, allowing law enforcement to go after real criminals and leave honest working people alone. And it is good for the immigrant workers across the country, terrorized by Tuesday’s raids, who just want to keep doing their jobs, no matter how hard and distasteful.

December 14, 2006

Things are heating up for a reform bill

Two items: the possible fallout from ICE raids of meat processing plants, and a comment on my posting of a Wall Street Journal story about immigrant workers on Hilton Head Island. In my view, the ICE raids, as reported in the Los Angeles Times and commented on in the Seattle Times, will have a net effect of spurring a reform bill. An anti-reform advocate has it right: these kinds of raids provide a kind of cover for White House / Congress collaboration on a reform bill. (It should be clear that I strongly favor a bill with a good guest worker program in it).

But this is more than just about immigration workers: it has to do with low wage workers. As commentor James Albers notes, employer abuses to lower its costs of doing business adversely impacts legal and illegal workers. We have here not a 7.5 million worker problem (the number of illegal workers) but more like a 30 million worker problem, exacerbated by exploitation of illegal labor.

James Albers' comment:

Some observations. First, any contractor can gain a competitive advantage by not complying with required labor standards, be they workers' comp, social security, or health and safety compliance. This is not exclusively an 'illegal' worker problem, though it may be exacerbated (i.e., more exploited) when workers don't have legal status. Second, Mr. Hairston comments regarding his assuming the "moral and ethical high ground" with his proposed ordinance are hollow. He didn't have a problem subcontracting work to undocumented workers as long as he could sit back and make an easy profit paying just 25% of the contract. (Guess he needed more time to enjoy the 'luxury' home he built.)

I don't believe this type of cut-throat competition is desirable, as it can lead to a dilution of labor standards. However, hiring workers' "off the books" is pervasive in certain types of construction work, especially small residential and remodeling projects. Illegally designating workers as 'idependent contractors' is another way builders and contractors reduce their costs and gain a competitve advantage. In general, there should be stronger enforcement of labor standards that reduce the opportunities for contractors to dilute standards to reap a competitive advantage. But it's not fair to characterize this problem as an 'illegal' worker issue.


December 13, 2006

Case study of immigrant workers in Hilton Head

The Wall Street Journal (subscription required) ran a story on Wednesday of how a black couple built a roaring business in dry wall work in Hilton Head Island, using Hispanic labor, only to see it wither in the face the competition from former employees. This is a good case study of how immigrant labor has been cutting the cost of residential construction and creating havoc among sub-contractors.

Per the WSJ:

In 1997 the stucco business made $971,000, according to the Hairstons' tax return. To handle his blossoming business, Mr. Hairston rented a large office with four rooms, two restrooms and warehouse space behind it. He bought a condominium and a plot of land as investments. Flush with success, the Hairstons broke ground on a 7,600-square-foot, three-story house with an ornate gold-and-black gate, a cherub fountain in the front and a large swimming pool in the back.

As Hilton Head prospered, more and more Mexican immigrants flocked there. From 1% of the population in 1995, Latinos accounted for 11% of Hilton Head's 34,000 residents in 2000, according to census figures. Officials peg the current Latino population at about 15%.

One immigrant who prospered was Fidel Serrano.

After eking out a living as a baker at a doughnut shop in Houston for five years, Mr. Serrano moved to Hilton Head Island in 1994, joining two brothers who had recently settled there. "There was plenty of work and life was calmer here for the kids," recalls Mr. Serrano, a native of Mexico. Mr. Serrano, his wife, two sons and two brothers rented a rundown two-room trailer, for which they collectively paid $600 a month.

Mr. Serrano began to work in stucco, perfecting his skills as an employee of Mr. Hairston's Pro Plastering & Stucco. He says he earned $8 to $10 an hour during the two-and-a-half years he worked for Mr. Hairston. In the beginning, Mr. Serrano recalls, Mr. Hairston still employed several black workers. But gradually Mr. Hairston came to rely more on Mr. Serrano and other Mexican immigrants. "We showed up for work every day and we were dedicated," Mr. Serrano recalls.

Around 2000, Mr. Serrano struck out on his own, working as a subcontractor to Mr. Hairston. He supplied Mr. Hairston with crews for several jobs. "I was able to train the workers," who were all Spanish speakers, he recalls. Mr. Hairston typically paid him about 25% of the value of the contract for the job, he says. Mr. Serrano says that he pays taxes on all his workers, as well as workman's compensation.

….further down in the article:

Mr. Serrano received his green card last year and bought a three-bedroom house. Most of his jobs are in luxurious gated communities, some of the same ones where Mr. Hairston thrived a decade ago. "Work is the only thing you can do to better yourself," Mr. Serrano says. "We aren't expecting the government or anyone to support us." He says that Mr. Hairston does good work and declines to comment about his former boss's financial difficulties.

In addition to facing competition from former workers, Mr. Hairston says he also faced competition from subcontractors hiring illegal immigrants and paying them under the table. Mr. Hairston says that while he hired undocumented workers he paid payroll taxes and workman's compensation for them which added about 20% to his labor costs.

Other subcontractors agree they are being undercut by competitors who hire illegal immigrants off the books. Danny Miller, who runs a stucco business called Two Brothers, says that "on a weekly" basis, his company loses bids for jobs to contractors who hire illegal immigrants. "That pretty much explains it all," says Mr. Miller.

At Sea Island Supply, owner Ron Sandlin remembers when mainly blacks and whites came in to buy brick, stucco and masonry materials. Now, his clientele is 85% Hispanic. He and his staff are taking Spanish lessons at a local college.

Though construction in Hilton Head continued to boom, Mr. Hairston closed his business office in 2002. He began to seek jobs in other markets. By 2003, revenue from Mr. Hairston's stucco business had fallen to $182,000 from $971,000 six years earlier.

Ms. Hairston was elected to the County Council…

In September, Mrs. Hairston presented a draft of an "illegal immigration relief ordinance" to the County Council. Under the ordinance, companies that knowingly hire undocumented laborers could have their business licenses revoked. The ordinance would require that all businesses volunteer to participate in a federal government pilot program that verifies whether a Social Security number matches an individual's name. It would bar illegal immigrants from getting a business license.

If the ordinance passes, "costs for yard service, green fees and house painting might escalate marginally for a while," Mrs. Hairston says, but "we will hold the moral and ethical high ground."

The County Council voted overwhelmingly to move the proposal forward in the first and second readings. But after loud opposition from Hispanic residents and many employers, the council instead approved on Monday a watered-down version called "lawful employment ordinance," which is less controversial and mainly reinforces existing federal and county employment codes. The council is to take its final vote on Dec. 27.

December 8, 2006

Remittances from U.S. to Mexico, 1995 – 2005

has a well developed entry on illegal immigration to the United States. One of its tables tracks the growth of remittances to Mexico. They grew at a phenomenal rate in the past ten years, from a little under $4 billion to over $20 billion, according to Mexican banking officials. I have entered below by year the amount of remittances and the annual percentage of increase. I surmise the growth rate was spurred mostly by increases in per capita earnings of Mexican workers here – legal and illegal, for the scale of the growth cannot be accounted for by the increase in population. As I have posted before, the number of Mexican households earning more than $100,000 increased by 65% between 2000 and 2005.

The Mexican study which presented the data is found here.

year, dollars in millions, % change over prior year

1995 3.673
1996 4.224 15.0%
1997 4.865 15.2%
1998 4.744 -2.5%
1999 5.910 24.6%
2000 6.573 11.2%
2001 8.895 35.3%
2002 9.814 10.3%
2003 13.396 36.5%
2004 16.613 24.0%
2005 20.035 20.6%

December 3, 2006

MA Governor Romney’s foot caught in illegal worker raccoon trap

Last Spring his Lt Governor, Kathleeen Marie Antoinette Healey, opined that if the children of illegal households wanted to go to college, they should just pony up the money to enroll in Wellesley or another private college rather than ask for in-state tuition rates at the U. of Massachusetts. A few weeks ago, her gubernatorial campaign flat as a dime, she darkly warned against giving illegal workers driver licenses because they might “get onto airplanes”. Now the outgoing prexy-aspiring / business whiz Mitt Romney found himself on the front page of the Boston Globe with evidence that he was using using illegal workers to work on his house. He issued an immediate see-no-evil reply. According to today’s Globe, he is dressing up the State Troopers, the guys with the funny hats, to chase after illegals:

“Troopers can detain people they determine are illegal immigrants during regular police duties….This authority will be given to two dozen or three dozen troopers who undergo 4 1/2 weeks of training in immigration laws, civil rights, and ways to avoid racial profiling, he said. The troopers will probably be members of special units that pursue violent fugitives or combat street gangs.”

See below for the text of “Troopers can arrest illegal immigrants in Romney deal, Critics warn of profiling, police mistrust”

By Michael Levenson and Jonathan Saltzman, Globe Staff | December 3, 2006

Governor Mitt Romney has reached an agreement with federal authorities that allows the Massachusetts State Police to arrest immigrants who are in the state illegally, his spokesman said.

Currently, state troopers have no power to detain people for violations of their immigration status alone, said the spokesman, Eric Fehrnstrom. If troopers stop people who they suspect are illegal immigrants, they can call a US Immigration and Customs Enforcement office in Vermont to check on their status and detain them if federal officials request it, he said.

Under the deal, brokered after months of negotiations, troopers can detain people they determine are illegal immigrants during regular police duties, Fehrnstrom said. This authority will be given to two dozen or three dozen troopers who undergo 4 1/2 weeks of training in immigration laws, civil rights, and ways to avoid racial profiling, he said. The troopers will probably be members of special units that pursue violent fugitives or combat street gangs.

Ferhnstrom said the troopers would not go on patrols aimed at rounding up illegal immigrants. But they will be able to arrest, for example, a motorist they stop for a broken tail light if they determine the motorist has violated immigration law. Fehrnstrom, speaking Friday, said the pact would be announced publicly this week. He declined to provide more details yesterday.

Immigration advocates and civil libertarians blasted the agreement yesterday, saying it would lead to racial profiling and foster mistrust of the police in communities with large numbers of immigrants. The deal, reached in the final days of Romney's administration, also sets up a potential conflict with Governor-elect Deval L. Patrick, who has expressed strong opposition to granting the State Police such powers.

Through a spokesman, Patrick declined to say yesterday whether he might rescind the agreement when he takes office in January.

"This is another last-minute move by Governor Romney that is more about his presidential campaign than about sound public policy for the people of Massachusetts," said Richard Chacon, Patrick's spokesman. "The last election showed that people can tell the difference between the two."

During the campaign, Patrick dismissed as a political gimmick the idea of granting State Police such powers.

"I think the State Police has a lot to do already right now . . . and I think asking the State Police to take on a federal responsibility is not their job," Patrick said on WGBH-TV in June. In September, he told the Globe a "more constructive" approach would be to support federal legislation proposed by US senators John McCain and Edward M. Kennedy that would toughen border enforcement and allow some illegal immigrants to apply for legal status.

Romney's new agreement with Immigration and Customs Enforcement comes at a sensitive time for the governor, who has been sharpening his views on immigration as he prepares a probable run for the presidency in 2008. In September, Romney told Fox TV's "The O'Reilly Factor" that the border must be secured, and affirmed his support for the construction of a fence along the Mexican border.

Last week, however, the Globe reported that illegal immigrants had maintained the grounds around Romney's home in Belmont, as workers for a lawn service company Romney had employed. Romney said after the report that he had dealt only with the owner of the company, Ricardo Saenz, a legal immigrant from Colombia.

In approving the new powers for State Police troopers, Massachusetts joins a handful of states and localities that have entered into such pacts since they were first authorized in 1996. The list includes Florida, Alabama, and a few counties in California and North Carolina, where a limited number of officers have been trained to enforce immigration laws.

Ali Noorani , executive director of the Massachusetts Immigrant and Refugee Advocacy Coalition, yesterday called the pact a "gross mismanagement of public safety resources."

"Now, if you look or sound like an immigrant and are pulled over for any type of minor infraction, you're going to be profiled; there's no way around that," Noorani said. "This will have an incredibly chilling effect on the relationship between all law enforcement -- whether it's Boston police or State Police -- and the immigrant community. Most people don't see the difference between a state trooper and a local officer. A cop is a cop."

State Senator Jarrett T. Barrios , a Cambridge Democrat who is cochairman of the Public Safety and Homeland Security Committee, predicted the plan would add millions to the costs to train troopers and to jail detainees. He said the deal seemed calculated to help Romney's presidential ambitions.

In June, when Romney announced he was seeking the deal, he said it would give the State Police a way of "finding and detaining illegal aliens in the ordinary course of business."

Noorani made clear that Patrick would face pressure to rescind the pact. "Patrick was very strong and steadfast in his opposition to this," Noorani said. "We hope that one of his first actions as governor is to terminate this and restore the Commonwealth's public safety."

Levenson can be reached at mlevenson@globe.com.; Saltzman at jsaltzman@globe.com

Why poorer educated Mexican men come work in the U.S.

A columnist in the NY Times says that Mexican men coming to work in the U.S, are relatively poorly educated. “Sixteen percent of the Mexican labor force is working in the United States at any point in time, and, of course, earning higher average wages than laborers in Mexico, so the impact of American policy on Mexico is significant.” Those will more education can get better jobs back home. They are also largely unmarried. Granting legal status to these workers, per the authors, will encourage more Mexican women to come, marry, and create stable, more productive households. The author make me think more carefully about the imbalances in the Mexican and U.S. labor market and the impact on immigration policy.

A better immigration policy would tighten the border, while allowing in more legal immigrants from Mexico and other Latin countries, and require higher levels of education. Young Mexicans would see greater reason to invest in education, to the benefit of all Mexican society, not just those who cross the border. The less educated Mexicans could be some of the biggest winners from immigration reform.

In the United States, employers have a greater incentive to train legal Mexican workers and combine their labors more effectively with capital investment; when the workers are illegal, employers create only the most makeshift of circumstances. The legality and thus physical ease of immigration would also encourage the arrival of more Mexican women, thereby remedying the gender imbalance and encouraging assimilation. In the short run, the greater number of immigrant children would raise costs in the United States for education and health care, but in the longer run those children would produce goods and services and pay taxes.

The column: Economic Scene. "The Immigration Answer? It’s in Mexico’s Classrooms"

Published: November 30, 2006

Poorly functioning Mexican and Latino educational systems are a central problem behind current immigration dilemmas, and the United States is partly responsible. If the United States took in a higher ratio of legal immigrants, and required more education, the entire North American region would be better off.

A high school diploma brings higher wages in Mexico, but in the United States the more educated migrants do not earn noticeably more than those who have less education. Education does not much raise the productivity of hard physical labor. The result is that the least educated Mexicans have the most reason to cross the border. In addition, many Mexicans, knowing they may someday go to the United States, see less reason to invest in education.

Mexican immigrants used to have higher-than-average levels of education, but today the average male Mexican migrant has lower-than-average education by Mexican standards.

David McKenzie of the World Bank, and Hillel Rapoport, a lecturer in economics at Bar-Ilan University in Israel, document this shift and show that extensive social networks of fellow countrymen make it increasingly easy for male migrants with little education to find apartments and jobs in the United. Less-educated migrants are more likely to bring crime and social problems, and they are less likely to assimilate.

In contrast to the men, female arrivals from Mexico still have above-average levels of education for their gender. A woman who migrates is most likely to have eight to nine years of education.

It appears that (relatively) educated Mexican women are more willing to break away from their families. Furthermore, Mexican women are less likely to work in agriculture or at hard labor, so education brings a higher wage in the United States. In other words, the dynamic for female Mexican migration is a more positive one. Nonetheless, illegal Mexican immigrants to the United States are usually male, if only because crossing the border is perilous and physically demanding.

This gender imbalance worsens the problems of immigration. Large numbers of young Mexican men have scant prospects for marriage or family in the United States. Men who marry tend to earn more money, behave more responsibly, commit less crime and assimilate more readily. Much of the so-called “immigration problem” stems from the illegality of immigration rather than from immigration itself.

Unfortunately, we cannot expect a wealthier Mexico to resolve migration problems, at least not within the short- or even medium-run. The evidence suggests that good times in Mexico give the poor the means to leave, while keeping the better-educated males at home in good jobs.

A better immigration policy would tighten the border, while allowing in more legal immigrants from Mexico and other Latin countries, and require higher levels of education. Young Mexicans would see greater reason to invest in education, to the benefit of all Mexican society, not just those who cross the border. Sixteen percent of the Mexican labor force is working in the United States at any point in time, and, of course, earning higher average wages than laborers in Mexico, so the impact of American policy on Mexico is significant. The less educated Mexicans could be some of the biggest winners from immigration reform.

In the United States, employers have a greater incentive to train legal Mexican workers and combine their labors more effectively with capital investment; when the workers are illegal, employers create only the most makeshift of circumstances. The legality and thus physical ease of immigration would also encourage the arrival of more Mexican women, thereby remedying the gender imbalance and encouraging assimilation. In the short run, the greater number of immigrant children would raise costs in the United States for education and health care, but in the longer run those children would produce goods and services and pay taxes.

Taking in a higher proportion of women would relieve the migration-driven gender imbalance of rural Mexico. It is common for villages to have many unmarried young women, but virtually no young men. The women who are married often go without their husbands for years. The remaining men are more likely to treat their women badly, knowing they can always find another partner.

Shutting the Mexican border is probably not possible, and it would paralyze American businesses and agriculture. A guest worker program without restrictions on education might be better than doing nothing, but would not solve the negative educational dynamic. Many guest workers would stay on past the expiration of their visas, again shifting the ratio back toward illegal immigration. Furthermore, workers tied to a single job, as is the case for most guest worker programs, are unlikely to put down roots.

The United States needs the courage to legalize a higher number of immigrant arrivals. The problems with current illegal migration are real. But most Americans benefit from Latino migration, even of the illegal kind, and they could benefit much more from legal and better-educated arrivals.

Tyler Cowen is a professor of economics at George Mason University and co-writes a blog at www.marginalrevolution.com. He can be reached at tcowen@gmu.edu.
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December 1, 2006

Key Democrat tells Homeland Security to back off on new rules about employment of illegal workers

Since June the Bush Administration has sought to beef up surveillance of corporate hiring of illegal workers through more active use of “no match” findings for employee social security numbers. Homeland Security has just issued proposed regulations for a more aggressive approach. And, according to an article in the Washington Times, the Democratic Congressman due to chair the key House committee is yelling about it.

A Mississippi Democrat in line to become chairman of the House Homeland Security Committee has warned the nation's largest uniform supplier it faces criminal charges if it follows a White House proposal to recheck workers with mismatched Social Security numbers and fire those who cannot resolve the discrepancy in 60 days.

Rep. Bennie Thompson said in a letter to Cintas Corp. it could be charged with 'illegal activities in violation of state and federal law' if any of its 32,000 employees are terminated because they gave incorrect Social Security numbers to be hired. Cintas has issued letters to 400 employees in five states telling them they will be indefinitely suspended if they cannot resolve their mismatched Social Security number within 60 days.

As reported in the New Standard on 11/9,

Four years ago, Temple University researchers studied a pilot project that lets companies use databases from Homeland Security and the SSA to verify employment status. Those databases were found to reject one of every five properly documented applicants.

Some legal experts say firing workers based on no-match letters runs afoul of current law. Marielena Hincapié, program director at the National Immigration Law Center, said that because the final regulation has not been issued, employers who follow it could be sued for discrimination and unfair labor practices.

In June, President Bush proposed new guidelines concerning 'no-match' letters from the Social Security Administration, saying he wanted to make it easier for employers to verify workers' eligibility and continue to hold them accountable for those they hire.

The Department of Homeland Security followed up on that announcement yesterday, formally releasing new regulations to help businesses comply with hiring requirements intended to reduce the hiring of illegal aliens -- including setting guidelines for businesses when handling 'no-match' letters from the Social Security Administration.
The proposed regulation is subject to a 60-day public comment period.

'Most businesses want to do the right thing when it comes to employing legal workers,' said Homeland Security Secretary Michael Chertoff. 'These new regulations will give U.S. businesses the necessary tools to increase the likelihood that they are employing workers consistent with our laws.

'They also help us to identify and prosecute employers who are blatantly abusing our immigration system.'

But Mr. Thompson called the 'no-match' letters a threat to workers who fail to reverify their information and called Cintas' actions a 'rash enactment of a proposed DHS regulation.' He said that by implementing 'this incomplete regulation,' Cintas could be in violation of federal immigration law.

The seven-term congressman also said before the proposal becomes law, it must go through a rule-making process, 'which could radically change the regulation or kill it all together.'

Under existing rules, when a Social Security number does not match a name on a tax or employment eligibility document, the government sends a 'no-match' letter asking that the discrepancy be resolved. Of 250 million wage reports the government receives each year, as many as 10 percent belong to employees whose names do not match their Social Security numbers.

'I am deeply troubled by Cintas' recent policy change regarding the Social Security Administration's 'no match' letters,' Mr. Thompson said in the Nov. 2 letter. 'It is my understanding that hundreds of Cintas' immigrant workers have received these letters. I am extremely concerned about any potentially discriminatory actions targeting this community.'