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A Few Thoughts on Immigration Reform

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Here are a few observations on the new immigration reform proposal, with an emphasis on a part that I think is particularly important and largely overlooked given the emphasis on citizenship: the consideration of labor market impacts and the introduction of mechanisms to control them.

Before getting into some policy analysis, let's consider why the reform of our immigration policies is even happening at all, at least in the Senate... there's this little matter of the House of Republicans.

Still, in a Senate that is demonstrably and seriously out-of-sync with the public (gun control), how is this legislation advancing?

To state the obvious, it all comes down to one number: 27 percent, the share of the Latino vote claimed by Mitt Romney. That's not a bad thing -- it's democracy at work, again, unlike guns.

-- The path to citizenship in the proposed bill sounds more like an obstacle course, which is, I guess, expected given the competing politics. Here's the WaPo's useful primer, but it's basically a 13-year process with lots of hurdles (and charges, amounting to about $2,000) along the way. One condition is that "provisional residents" be continuously employed. But what about downturns? Is there a provision for involuntary unemployment? How do we track this?

I'm not surprised that advocates are raising concerns about the conditions for citizenship, but the fact that it's in there at all is clearly a milestone.

-- One part that interests me has to do with labor market impacts. There's some fundamental confusion about this. Many critics claim that the citizenship path, which they deride as "amnesty," will increase the supply of labor and thus lower wages. But putting aside the fairly complex economics literature on this phenomenon (where wage impacts come down to whether immigrants are substitutes or complements to native workers) that's far less obvious than it sounds.

First, these folks are already here. They're within our borders, in the labor force (or outside it trying to get in); they're not net new additions. To the contrary, giving them legal status -- making them provisional residents -- should decrease their exploitability, improve their bargaining clout a bit, and thus help on the wage side (marginally, I'm sure, but that's the right "sign").

-- Second, the critics better point would be that granting a path increases new migration, which would add new immigrants, undocumented and otherwise, to the labor supply. Here, a few things to consider. The question of whether legislation like this is a magnet for increased immigrant flows is less conclusive than you might think, in part because there are few natural experiments. Opening up legal immigration does increase flows, but that's conditional on a) job opportunities, and b) the points or quota systems in receiving countries.

Here, the new legislation reflects some clear consideration of this issue of labor market impacts. The citizen path itself is closely tied to border security. We'll see if that sticks--the failure to secure our southern border undermined the 1986 reform. In fact, absent border control, immigration reform is pretty meaningless.

-- The proposed legislation includes requirements that employers use verification systems to ensure against hiring undocumented applicants, something that is only spottily applied now. Importantly, many advocates of reform now accept this condition as part of the deal.

-- And while I've worried, and continue to worry, about guest-worker programs, especially H-1B (temporary visas for high-skilled workers; a system rife with abuse), the legislation takes a solid stab at reform here as well. From WaPo primer:

Employers who count H1-B holders as more than 75 percent of their workforce would be banned from hiring more foreign workers starting in 2014. That percentage cutoff would drop to 65 percent in 2015 and 50 percent in 2016.

Re lower-skilled immigrants, the proposal includes a good idea touted by former labor secretary Ray Marshall re adjusting guest-worker caps based on observed labor shortages:

A new "W-visa" program for low-skilled guest workers, capped at 20,000, would start in 2015. The cap would rise to 75,000 by 2019...The workers must be paid the prevailing wage and cannot be employed in metropolitan areas where unemployment is above 8.5 percent barring special exemptions from the Secretary of Homeland Security. Employers cannot fire American workers 90 days before or after the hiring of guest workers.

A new federal bureau, the Immigration and Labor Market Research Bureau, would be charged with determining worker shortages and adjusting those caps accordingly to align with the state of the national labor market, but would not be able to increase the cap above 200,000 a year...

Again, this doesn't work absent border control.

So, there will be critics on both sides of this, and many of their critiques will be valid. But it looks to me like a case where politics and demographic change have generated some true democratic change... oh, yeah... we still have to contend with the House. Stay tuned.

This post originally appeared at Jared Bernstein's On The Economy blog.