Immigration Reform 2013: Free Markets Are OK, But Free People Are Even Better

The recent Senate vote to continue debate on immigration reform highlights the partisan divide on this contentious issue, with public polling also suggesting partisan division. As debate continues, it is important to consider the many factors that comprise this issue in order to take the practical steps needed to both resolve the symptoms of current immigration policy and prevent the emergence of a new crisis.  

The World Trade Organization evolved out of earlier trade agreements established after the close of WWII, which sought to encourage greater international cooperation after almost a decade of global conflict and a generation of reciprocal protectionism. Current Doha round negotiations have proved contentious over multilateral liberalization. Studies conducted over the last 20 or so years have listed gains from the elimination of all policy barriers to merchandise trade and the flow of capital to around 1% to 4% of global GDP. In contrast, elimination of all barriers to labor mobility has been estimated to produce global GDP gains of 67% to 147.3% of global GDP! Although the reduction of all barriers to labor mobility is a nearly impossible task, the significant effects migration policies have on the potential for global economic growth warrant careful consideration of the impacts of reform.

Michael A. Clemens, senior fellow for the Washington, D.C. based Center for Global Development, published a paper in 2011 detailing his findings on the effects of emigration on the global economy. Clemens’ analysis suggests policy barriers to emigration, including those imposed by destination countries, prevent global GDP gains that are magnitudes larger than the effects of relaxing restrictions on the international flow of capital and goods. One assumption underlying this finding that is particularly pertinent to the ongoing debate over immigration reform is the effect of low-skilled workers migrating into developed economies such the U.S. Clemens’ literature review found no noticeable negative impact on wages when low-wage workers migrated en masse to higher-wage-earning countries. He notes that even when low-wage immigrants moderately depress wages at their new destination, similar wage declines occur when there is movement from one city to another or when women enter into the labor force, conditions that economists would agree do not signify a negative externality that reduces social welfare and requires adjustment through taxation on those who move between cities or on women entering the workforce. Clemens is careful to mention he is not in opposition to policies aimed at helping low-wage workers, but believes these policies should be more geared towards issues concerning equity and human capital that will bring about more long-term impacts to people working in low-wage industries.

A 2012 report published by the McKinsey Global Institute argued that countries and businesses alike must find ways to cultivate high-skill labor. With the demand for high-skill labor growing faster than supply, constraints to sustained growth become obvious. It should therefore come as no surprise that highly-skilled labor intensive industries have been lobbying lawmakers to increase the number of H-1B visa allowances that will allow them to more easily meet their labor demands. Opponents believe these companies are trying to bring in foreign workers to depress wages. However, noting static graduation numbers for certain key industries overlooks the increasing number of foreign students graduating from American universities. With an increasing number of foreigners graduating from American universities, the push to keep these highly skilled workers in the country to meet business needs must work hand in hand with getting more Americans qualified to fill these positions, which will decrease the demand for foreign labor.

Border security has also been a key component of the immigration debate, with lawmakers from opposing parties disagreeing on how to best achieve stronger control of our southern border. While it is important to secure international borders, it is also important to work on other ways of reducing the flow of illegal immigrants. Ben Rhodes’, deputy national security adviser for strategic communications at the White House, made a statement prior to President Obama’s recent trip to Mexico that reinforces this belief: "Economic development in Mexico will also ultimately get at the root cause of illegal immigration to the United States, so that's another benefit of the economic growth underway in Mexico.” It is also important for lawmakers to consider how dependent certain key domestic industries such as agriculture are on immigrant labor when deciding how to handle the legal status of undocumented workers.

Labor mobility is an important factor in economic growth. While complete abolition of migration restrictions worldwide is unrealistic for a number of reasons, real economic benefit can arise from allowing for the freer flow of labor if it is conducted in a sustainable way. Allowing workers whose output would be constrained by circumstances in their home country to migrate and put their skills to more efficient use increases global GDP. As recent events show, instability in a source nation can lead to mass dislocations to other countries. It is important to thoughtfully consider all the factors surrounding the need for immigration reform and work with all parties involved to find a solution that ensures our country’s safety and prosperity.