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February 21, 2013

Reforming temporary worker programs

A coalition of worker advocates issued a report this month, The American Dream Up for Sale, an indictment of abuses in temporary worker programs in the United States. Go here for an announcement of the report.

The collation include the International Labor Recruitment Working Group (ILRWG), a diverse coalition that includes the AFL-CIO, AFT, the Centro de los Derechos del Migrante Inc. (CDM), Farmworker Justice, Global Workers Justice Alliance, National Guestworker Alliance, Southern Poverty Law Center and other international and national organizations.

The New York Times ran an editorial about these abuses today.

February 20, 2013

Remittances from the United States: big, getter fairer

Remittances from the U.S. to other countries continue to grow. And new Feb 2013 regulations on remittances, created out of the Dodd-Frank Act, seek to impose better controls to protect the sender.

The Congressional Budget Office estimated in 2011 that in 2009 remittances from the United States to other countries totaled more than $48 billion, nearly 30 percent more in inflation-adjusted terms than they were in 2000. This outflow is over 10% of total worldwide remittances. According to the Economist, remittances from the U.S. make up about 15% of the total GDP of Haiti, El Salvador and Honduras. It appears that about 2% of Mexico’s GDP is remittances from the U.S.

In 2009, such remittances from the United States to other countries totaled more than $48 billion, nearly 30 percent more in inflation-adjusted terms than they were in 2000. People in Mexico receive more of the remittances sent from the United States than do residents of any other country.

CBO 2011 report excerpts:

Of the $48 billion in remittances in 20098, nearly $38 billion of that amount was personal transfers by foreign-born residents in the United States to households abroad. The rest, about $11 billion, reflected the compensation of employees who were in the United States for less than a year.

Here are excerpts from a late 2012 report by the World Bank on remittances, which includes a summary of new U.S. remittance rules effective 2/7/13.

Overview of World Bank report

Officially recorded remittance flows to developing countries are estimated to reach $406 billion in 2012, a growth of 6.5 percent over the previous year. These flows are expected to rise 8% in 2013 and 10% in 2014 to reach $534 billion in 2015.

 Remittance costs are still too high, averaging 7.5% in top 20 remittance corridors; the worldwide average cost is about 9%.

 US Remittance Transfer Rule, to be implemented in February 2013, will increase transparency for consumers and thereby market competition.

Facts about remittance flows

Officially recorded remittances to developing countries are expected to reach $406 billion in 2012, up by 6.5% from $381 billion in 2011(figure 1 and table 1). The true size of remittance flows, including unrecorded flows through formal and informal channels, is believed to be significantly larger. Compared to private capital flows, remittance flows have shown remarkable resilience since the global financial crisis, registering only a modest fall in 2009, followed by a rapid recovery. The size of remittance flows to developing countries is now more than three times that of official development assistance.

The top recipients of remittances in 2012 are India ($70 billion), China ($66 billion), the Philippines ($24 billion), Mexico ($24 billion), and Nigeria ($21 billion).

Cost of remittances

The global average remittance price (i.e., average based on all countries for which price data is available) has declined over the same period from 9.81% in 2008 to 8.96% in the third quarter of 2012. Russia is, by far, the cheapest source country with a weighted average remittance cost of 2%. In many large remittance source countries such as the GCC, the US and the UK, the average cost is around 5%.

New February 7 2013 remittance regulations

Remittance transfer providers are generally subject to State laws and are required to register with the US Department of Treasury’s Financial Crimes Enforcement Network, but are not uniformly covered by Federal consumer protection laws. The new remittance rule aims to implement the consumer protections created by the Dodd-Frank Wall Street Reform and Consumer Protection Act for certain electronic transfers to foreign countries. The new remittance rule, to go into effect on February 7, 2013.

The European Union (EU) has a broadly comparable rule to the US remittance rule, the Payment Service Directive (PSD) implemented in 2009. However, the PSD is primarily limited to transfers in EU member currencies and to intra-EU remittance transfers, although some countries (e.g. Italy) have extended the law to transactions to non-EU countries. The European Commission is studying the impact of the law on competition and entry barriers, and the need and feasibility of extending the law to payments in all currencies and international payments.

The new U.S. regulation is expected to increase transparency in pricing, competition and innovation in the remittance market not only in the US, but also in the rest of the world.

The new remittance rule has three key elements: 14 (a) A remittance transfer provider needs to provide a the sender with a disclosure of key transaction information, such as exchange rate, taxes and fees imposed and the total amount to be collected by the recipient, before and at the time of payment. The final receipt should also contain information on the name and contact details of the recipient, the date the fund is available for collection and the rights of the sender regarding cancellation and refund and error resolutions. (b) The second key component of the law relates to sender’s cancellation and refund right. It allows senders to cancel the transfer within 30 minutes of making the payment and for recurring payments, such as pre-authorized payments, at least three business days before the scheduled date of transfer. (c) The third component of the law relates to error investigation and remedy. A remittance transfer provider is required to investigate and remedy errors arising from an incorrect amount paid by the sender, computational error, and incorrect amount received by the designated recipient; and also errors arising from late delivery, deposit to a wrong account and certain fraudulent pick-up of the fund. A remittance transfer provider is responsible for errors committed by its agents.
The law provides for some exceptions. For example, under certain circumstances, remittance transfer providers are allowed to disclose an estimate, instead of the exact value, of the amount to be received by the recipient.

This sweeping rule will have immense implications for consumers and remittance service providers. It benefits senders by increasing transparency and certainty in the market. It reduces deceptive pricing and enables senders to shop for cheaper deals. Therefore, it may increase competition, potentially reducing remittance costs in the long-run.

In the short-run, however, it is likely to increase costs to remittance transfer providers for maintaining up-to-date information on exchange and tax rates of receiving countries and fees charged by third parties. The error resolution requirement may also expose remittance transfer providers to risks arising from certain fraudulent pick-ups. The cost can be significant for large sized transfers and since it may expose RSPs to litigations. Remittance dispensing agents may, as a result, resort to strict identification requirement, not always good for the poor who may lack access to these documents. Cancellation and refund rights may force remittance transfer providers to delay transfer until the cancellation period expires.

February 16, 2013

Congressional seats: ready to go Red with slight change in Hispanic voting

The Georgetown [University]Public Policy Review carefully analyzed each Congressional district for the potential of gains by Republicans if the percentage of Hispanic voting Republicans went up. It concluded that there are many more competitive races in heavily Hispanic areas for Democrats to lose than to gain. A shift of Hispanics from Dem to Rep would produce a lot more Rep wins than a shift of the same percentage from Rep to Dem would create more Dem wins.

“There are two different lenses through which to consider the Republican perspective. First, most incumbent Republicans will not have a strong incentive to vote for an immigration bill containing a path to citizenship if a significant Hispanic population appears to be lacking in their districts. In fact, many conservatives may be far more concerned about primary challengers than Hispanic backlash.

On the other hand, the Republican Party as a whole has a tremendous opportunity to turn districts in their favor. If they can redefine themselves to the Hispanic population, starting with comprehensive immigration reform, they will be doing more than pouring water on the DCCC’s gunpowder—they will be stealing it for themselves.”

February 11, 2013

The transformation of Mexican farm labor supply to the U.s.

Only 2% of California’s farm labor is U.S.- born. Foreign workers, mainly Mexicans, are essential for California’s production of labor intensive agriculture. (For a list of the major “FVH” farm products, such as avocados, grapes and lettuce, go here.)

Two very recent studies from US Davis and US Sacramento examine the impact of shorter supplies of low wage farm workers from Mexico.

A new study from the University of California at Davis reports on shifts in agriculture in Mexico that may be affecting the supply of Mexican farm workers in the United States.

Mexican food distribution is increasing through large retailers, such as Walmart. These large merchandisers have “strict quality, quantity and timing standards” that small family farms cannot easily meet. This is leading to more industrial farm production.

Supermarkets think cross-border, not locally. Thus Californian food will be sold in Mexican stores in one season, and Mexican food in Californian stores in another season.

The net effect of these and other changes is to tighten the supply of Mexican low wage farm labor to work in either Mexico or the U.S. (Mexico now imports farm labor from Guatemala.)

MPI reports that farm labor costs in the U.S. are rising. When the farm unions rose in California (think Cesar Chaves) in the 1960s, farm worker wages rose by 40%. If farm wages increase significantly, the MPI predicts more mechanization (which is already picking a lot of wine grapes) and shift towards importing farm produce that cannot be easily mechanize.

A study from the University of California in Sacramento (“The End of Farm Labor Abundance”) says that “New data from the Mexico National Rural Household Survey reveal that the same shift out of farm work that characterized U.S. farm labor history is well underway in Mexico. Meanwhile, the demand for farm and non-farm workers in Mexico is rising, and a combination of recession and border enforcement has discouraged new Mexico-to-U.S. migration. The decline in foreign farm labor supply to the United States has far-reaching implications for farm production, immigration policy, and rural poverty in California and other labor-intensive agricultural regions.”

The UC Davis study (see the powerpoint here) says that farm productivity in Mexico has risen by 300% since 2003, leading to a 25% decline in the workforce along more production.

The report quotes Passel of The Pew Hispanic Center: “The supply of Mexican labor available to work in the United States has fallen due to a sharp decrease in Mexico’s total fertility rate and employment growth in Mexico.”

What happens when mechanization comes into California farms? Fewer low skilled workers, more high skilled workers, and hard from low skilled workers to transition up.

February 8, 2013

New facts about unauthorized immigrants

A report, The Number of Unauthorized Immigrants and their Characteristics, was published on January 29 by the Pew Hispanic Center. Here are some important facts about unauthorized immigrants. Three stand out:

Item: Been here a long time. In 2010, nearly two-thirds of unauthorized immigrants had lived in the U.S. for at least a decade.

Item: Many mixed marriages with one citizen adult. Mine million people lived in “mixed-status” families in 2010.

Item: Children of unauthorized immigrants are mostly born here and are U.S. citizens. Nearly half of unauthorized immigrant households (47%) consist of a couple with children. Most children of unauthorized immigrants—73% in 2008—are U.S. citizens by birth. I have seen them estimated elsewhere as 3.2 million children.

Other details:

The Pew Hispanic Center has published a number of reports on the size and characteristics of the nation’s unauthorized immigrant population. The Center’s latest estimate of the number of U.S. unauthorized immigrants was 11.1 million in 2011, a number that did not significantly change from the previous two years (Passel and Cohn, 2012). Other findings from the Center, based on a number of data sources, include:

Trends in unauthorized immigration: The most recent Pew Hispanic Center estimate is that 11.1 million unauthorized immigrants lived in the U.S. in 2011. Unauthorized immigration peaked at 12.0 million in 2007, and fell since then mainly because of less immigration from Mexico, the largest source of U.S. immigration (Passel and Cohn, 2012). In 2010, unauthorized immigrants from Mexico made up 58% of all unauthorized immigrants (Passel and Cohn, 2011).
Unauthorized immigration and children: In 2010, there were 1 million unauthorized immigrants under age 18 in the U.S., as well as 4.5 million U.S.-born children whose parents were unauthorized. These details are included in a report based on 2010 data that also estimates births to unauthorized immigrants; region of origin for unauthorized immigrants; state populations of unauthorized immigrants and unauthorized workers; and overall labor force participation (Passel and Cohn, 2011).

Characteristics of unauthorized immigrants: In 2010, nearly two-thirds of unauthorized immigrants had lived in the U.S. for at least a decade and nearly half (46%) were parents of minor children. This Census Bureau data-based report also includes data comparing the length of U.S. residence for unauthorized immigrants in 2000, 2005 and 2010. It estimates that 9 million people lived in “mixed-status” families (Taylor et al. , 2011).

Migration from Mexico: Immigration from Mexico has declined since 2007, largely because of the first decrease in unauthorized immigration in at least two decades. This report includes Mexican data about the characteristics, experience and future intentions of Mexican migrants handed over to Mexican authorities by U.S. law enforcement agencies; and U.S. data on border enforcement as well as characteristics of Mexican-born immigrants in the U.S. (Passel, Cohn and Gonzalez-Barrera, 2012).

Unauthorized immigrant worker characteristics: Unauthorized immigrants make up 25% of farm workers (not including temporary workers), according to 2008 data in a Pew Hispanic Center report that also includes estimates of unauthorized immigrant shares of other occupations and industries. This report includes details on school enrollment by unauthorized immigrant children and by U.S.-born children of unauthorized immigrants; and estimates of educational attainment, income, poverty rates and health insurance status of unauthorized immigrants (Passel and Cohn, 2009).

February 7, 2013

Do undocumented workers pay taxes? Answer: Most do today.

The Congressional Budget Office addressed this question in a December, 2007 report. It appears that among undocumented workers, which the CBO estimates t 7.2 million, between 50% and 75% pay income, Social Security and Medicare taxes.

A 2005 New York Times article estimates that undocumented workers are “generating $6 billion to $7 billion in Social Security tax revenue and about $1.5 billion in Medicare taxes.”

From the CBO report:

First, how many undocumented workers are there? Using data from the Census Bureau’s March 2005 Current Population Survey (CPS), Pew analysts found that of the approximately 11 million unauthorized immigrants living in the United States in 2005, 5.4 million were adult males, 3.9 million were adult females, and 1.8 million were children under 18 years of age. An additional 3.1 million children of unauthorized immigrants were U.S. citizens, Pew estimated. The unauthorized population included 7.2 million workers, typically employed in lower-wage occupations in the agricultural, construction, and service industries.

Data from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) suggest that some unauthorized immigrants use false or fraudulently obtained Social Security numbers (SSNs) to satisfy paperwork requirements during the hiring process and that employers use those numbers to withhold federal, state, and local income and payroll taxes for employees. Workers who do not qualify for SSNs can use Individual Tax Identification Numbers issued by the IRS to file tax returns, make payments, and apply for refunds. Although there are no reliable data on unauthorized immigrants’ rate of compliance with tax laws, the IRS estimates that about 6 million unauthorized immigrants file individual income tax returns each year.23 Other researchers estimate that between 50 percent and 75 percent of unauthorized immigrants pay federal, state, and local taxes.

For example:

The SSA assumes that about half of unauthorized immigrants pay Social Security taxes.

Several of the states whose estimates CBO reviewed used a model developed by the Institute for Taxation and Economic Policy (ITEP) to determine state and local taxes paid by unauthorized immigrants. ITEP assumes a 50 percent compliance rate for income and payroll taxes.

Researchers from the Urban Institute, the Migration Policy Institute, the Pew Hispanic Center, and the Center for Immigration Studies have assumed a 55 percent compliance rate for income, Social Security, and Medicare taxes.

As part of a larger study on migration, the Center for Comparative Immigration Studies at the University of California at San Diego conducted a survey of unauthorized immigrants and found that, in 2006, 75 percent had taxes withheld from their paychecks, filed tax returns, or both.

February 1, 2013

Is the STEM problem a fiction?

The blog of the Economic Policy Institute questions if the United States needs more foreign science, technology, engineering and math degreed people from abroad, given as two thirds of native born STEM graduates apparently work outside the fields for which they were educated.

The posting:

Fixing a problem that doesn’t exist: Special interest STEM immigration bills are not needed

Business groups and their allies, including New York Mayor Michael Bloomberg and various non-profit advocacy organizations, have been arguing for years—without real evidence—that the United States is losing a race to attract the world’s best and brightest young scientists, engineers, computer techies and mathematicians. In a report entitled, Immigration of Foreign Nationals with Science, Technology, Engineering, and Mathematics (STEM) Degrees, Ruth Wasem of the Congressional Research Service (CRS) recently reviewed the statistics regarding these highly skilled migrants and concluded: “The United States remains the leading host country for international students in science, technology, engineering, or mathematics (STEM) fields.” The United States has been and continues to be extraordinarily welcoming to foreign students, and especially to those in the STEM fields. CRS reports that the number of foreign graduate students in the STEM fields increased by 50 percent since 1990:

“The number of full-time graduate students in science, engineering, and health fields who were foreign students (largely on F-1 nonimmigrant visas) grew from 91,150 in 1990 to 148,923 in 2009, with most of the increase occurring after 1999. Despite the rise in foreign student enrollment, the percentage of STEM graduate students with temporary visas in 2009 (32.7%) was comparable to 1990 (31.1%). Graduate enrollments in engineering fields have exhibited the most growth of the STEM fields in recent years. About 40,000 graduate degrees were awarded to foreign STEM students in 2009, with 10,000 of those going to Ph.D. recipients.”

But Microsoft and the Chamber of Commerce claim that we’re losing those graduates, that our immigration system doesn’t let us keep the talent our universities have trained. That claim is untrue. CRS reports that in the decade from FY 2000 to FY 2009, the U.S. granted legal permanent residence to almost 300,000 STEM workers, in addition to granting temporary work permits (for up to six years) to hundreds of thousands of others.

Even as this increased supply of foreign STEM workers has developed, U.S. nationals have been graduating with STEM degrees in record numbers. But millions have left their fields because of a lack of job opportunities or because of better opportunities elsewhere. According to CRS, “Almost two-thirds of the 9.3 million people in the U.S. labor market who had STEM degrees in 2010 were employed in non-STEM occupations.” A case could be made that the market is so flooded with STEM graduates, both foreign and native-born, that their skills and education are being wasted; the nation has invested in their education but is not getting a commensurate return.

Nevertheless, corporations such as Microsoft that want an oversupply of workers, have kept up a steady drumbeat for more admissions of foreign students, more temporary work visas and more green cards for foreign STEM workers. They argue that we are suddenly at risk of a “reverse brain-drain” and claim that we are losing an investment we’ve made in the education of the foreign STEM students (while they ignore the investment made in the two-thirds of STEM grads working outside their field of study).

Fortunately, this supposed reverse brain-drain has not developed. Research for the National Science Foundation by Michael G. Finn shows that foreign national PhD graduates of U.S. universities are staying in the U.S. at rates as high or higher than ever. As CRS reports:

“According to his latest published analysis, the 2009 stay rate for all foreign doctorate recipients was 64% for those graduating five years earlier and 66% for those graduating 10 years earlier. … Finn concluded that stay rates for temporary foreign nationals receiving science and engineering doctorates overall have never been higher.”

Finn’s most recent work under contract with the U.S. Department of Energy finds that the stay rates for Chinese and Indian students with STEM doctorates are near 90 percent and near 80 percent, respectively. This and other evidence leads Finn to conclude that the calls by Microsoft, the U.S. Chamber, and others for more high-skill visas correct a problem that doesn’t exist:

“However, the public discourse on this topic often assumes or asserts that foreign doctorate recipients are leaving in large numbers because they are not allowed to stay. I think the data presented here on China and India indicates this is simply not the case.”

There is a bigger danger that immigration law changes like the STAPLE Act, the STEM Jobs Act of 2012, and other STEM immigration bills will distort the labor market, worsen the oversupply of STEM workers, and discourage U.S. students from entering the STEM fields than there is that America will lose the race to capture international talent. Rather than create incentives for U.S. schools—regardless of actual labor market conditions—to churn out foreign student STEM PhDs with the lure of permanent residency in the U.S., Congress should establish a commission to gather facts and provide informed advice about the real needs of U.S. students, workers, and businesses alike.